Dividend investing is quite appealing for those who want to earn regular income on top of the money they earn from working. Of course, Mobile Trader Platform it’s not that simple. Really good deals are seldom very simple.
Another appeal Forex Trading that dividend investing has is that it’s one kind of a passive income, meaning you don’t have to be always on top of the situation of the company. Basically, you just have to find a company that is stable and profitable enough to pay off investors with regular checks.
However, before you rush and search for the top companies that pay dividends, here is a quick guide to investing in dividends.
How does the company pay dividends?
Companies that generate large profits have some choices on what to do with the money. They can hand the profit out to shareholders. They can choose to reinvest the money to the company and make it grow even bigger. Or they can do both at the same time.
When the company chooses to pay a part of its profits to shareholders, the payment, usually in the form of cash but may also take the form of properties, is called dividend.
Declaration Date
Before you can get the dividend, the company must first declare its intention to pay a dividend. During the declaration date, the company writes up a liability on its books, basically saying that it owes the shareholders some money. The declaration date is also when the company announces the date of the payment of the dividend.
Date of Record
Also known as the “ex-dividend date,” the date of record is the day when the stockholders become entitled to the upcoming dividend.
The stock typically starts trading ex-dividend or ex-rights during the fourth business day ahead of the dividend payment date. Put simply, only the shareholders of the shares on or before the ex-dividend date can expect to receive the dividend payment.
To make it even clearer, if you bought the dividend after the ex-dividend day, you wouldn’t be entitled to the dividend payment, but the investor from whom you bought it would.
Payment Date
Quite obviously, this is the day when the dividend payment will actually be delivered to the shareholders of the company.
High Dividend Stocks and the Risks
Most investors gravitate toward companies that pay high dividend stocks. As mentioned, it’s a good way to earn some passive income, particularly when nearing retirement years.
However, investing in ideal high dividend stocks can get tricky. As we have indicated above, great deals are seldom simple. Bear in mind that companies pay out high dividend stocks for huge reasons, and these reasons are not always entirely pleasant.
In many cases, the company pays high dividends because investors aren’t finding the shares appealing, meaning it has low demand in the market or is not performing very well. This happens in part my beliefs that the company is in some sort of risks or dangers. Sometimes, it’s because the company seems as if it would not survive in the longer term.
