A dividend is payment companies make to their shareholders, who own stock in their corporation. The dividend stock label refers to those that historically have paid out reasonable dividends and maintained (or even increased) their payments yearly. The best dividend stocks are companies with an excellent track record with dividend payments, will likely not be changing course any time soon, and can serve as a source of passive income.
The first important thing to understand is that dividend stocks have a yield representing what percent of your investment you can receive as a regular payment. So, for example, if you buy a $100 dividend stock with a 5% yield and the stock price stays the same, you'll receive $5 total in dividends for every year you own the stock. It may be an annual payment or split up into separate ones throughout the year.
An important thing to remember about investing is that no matter what vehicle you choose, investing almost always works better with extended holding periods. Even the best dividend stocks can experience volatility when looking at 12 months.
- Tunnel Vision Regarding Yield - Failing to Consider Tax Implications of Dividends - Letting Emotions Win
- Realty Income (O) - MPLX LP (MPLX) - Magellan Midstream Partners LP (MMP) - Hanesbrands Inc. (HBI) - Walmart - Federal Realty Investment Trust