The Dividend Effect

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Four Money balls showing dividend effect

There are millions of equities on the markets but not all are worth your time, and as such, all dividend stocks are not the same, so here are five tips to keep in mind when choosing dividend stocks:


  1. Consistency Payout

An excellent indicator of a company’s profitability is consistency in paying dividends. Dividends are paid from the company’s earnings so if a company is doing well.


  1. Companies You Know

Think about the bank [NYSE: BNS] you have been saving with since you were a child, your favourite cereal [NYSE: K], or the phone [NYSE: AAPL] you are addicted to, chances are the company is listed on the stock market. Since you trust them to use their products, why not consider them for your portfolio chances?


  1. Diversification

Putting all your money in one security or one industry exposes you to unnecessary risk, and, while you cannot avoid all risk associated with investing, being smart about the risk you take will save you much grief. Remember the saying, don’t put all your eggs in one basket.


  1. Risk – Reward

It is true the greater the risk, the greater the reward but there is also a flip side. The key is to understand your risk tolerance: Are you an aggressive, moderate or conservative investor?


  1.  Reinvest Your Dividends

If you do not need the income immediately, reinvest the dividends, and you will notice how much your portfolio will grow, even without you adding to the principal amount.


There is no one size fits all in investments but understanding the basis is important. Remember no one woke up knowing everything about investing, everyone started with the basics.

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