What are you doing risking your earnings? You’re reading this blog because you are interested in investing your future earnings by trading on the stock market. But for what may I ask? Well dividend yields of course. As you get better acquainted with the stock market, one of the ways in which you can be rewarded for your inclusion is making money through dividend yields on stocks you choose to invest in. Jim Cramer, a popular host on CNBC’s popular show, “Mad Money,” stresses that investors should look for dividends that are growing over time, and not easy money, and that is good advice. Stocks that pay dividends are often larger established companies with a good reputation, but sometimes that is not the case and high dividends can spell trouble. What is a dividend and how is yield from a stock calculated? A dividend is the amount of the share that is paid out in relation to the price of the share. In other words, the dividend yield is the return on the investment of a stock. Not all stocks pay dividends and dividend amounts can change with market fluctuation, so the investor must pay close attention to market research and the stock’s history of dividend payout over a period of years. Being watchful of how much a stock yields in a given company is important to choosing the right stocks to invest in because this determines what is being added to your income. And everyone wants more money right?
Individuals and companies choose dividend-paying stocks for steady income. For example, an individual might see a stock which is reasonably priced and has a dividend yield of 10%. The stock price is $10.00 a share and the stock pays a dividend of $.10 per quarter, which means for every share you own you will receive 40 cents a year. If you have enough stocks that amount could really add up. But is that dividend assured? A stock in unstable company can go from a dividend of 45% to 2% in one year, this drastic slide happened with The Brazilian Oil Company in 2012. This is because the price of crude oil is volatile and a reliable yield from the stock could not be counted on.
If you are like us, then security is a focus but not your main focus. Increasing our cash flow is essential when we desire to keep building and reinvest our burgeoning fortunes. This does not necessarily mean putting our money back in the stock market. Investing wisely in the stock market all comes down to research. As an investor, you want to find stable companies with stable yields so you can reap the rewards of steady dividends over the long run. Life is a marathon, so building a healthy investment portfolio should keep us all hydrated for times to come. One of our founding fathers, Benjamin Franklin, said it best, “By failing to prepare, you are preparing to fail,”