Can Dividend Stocks Make You Rich?
Yes. Dividend stocks are one of the easiest ways to earn passive income from the stock market and become rich in the process.
The only issue with dividend stocks is you need a lot of money to generate a reasonable yield starting out.
Many famous investors like Warren Buffett made an absolute fortune investing in dividend paying stocks and holding them over the long run.
Great companies generate positive net income and pay a percentage of that income to shareholders for holding the shares.
The key to own enough shares so your dividend payments add up to a large amount.
Most companies pay dividends quarterly every 3 months but some companies may pay a monthly dividend or semi-annual dividend.
Getting Started with Dividend Stocks
You need to build the habit of saving money to build your dividend stock portfolio.
When I was broke, I started the habit of “paying myself first” by saving 10% of my paycheck and investing in the stock market.
If you earn $3,000 per month then save $300 and open a brokerage account. Deposit your $300 in the account and start learning about the best dividend paying stocks.
The Dow 30 and S&P 500 are two US stock indexes full of high quality dividend paying companies. That’s a good place to start.
Look for Companies with Rising Dividends
Companies that raise their dividends every year are the best dividend stocks to own because you increase your income every year without doing anything else.
A company must properly manage the company in a healthy way to constantly increase dividends over time. If the company cannot remain profitable then it’s impossible to maintain the dividend.
When a company slashes its dividend, that’s usually a bad sign and you may want to deep dig into the quarterly and annual reports to discover why.
Reinvest Your Dividends If You Don’t Need the Income
When you’re first starting out, you want to own as many shares as possible so the dividend snowball will work.
Stock brokers & apps will give you the option to receive the dividend as a credit into your account or reinvest the dividend back into more shares.
Reinvesting your dividends will purchase more shares, which means more dividend payments in the future.
This is the smartest strategy when starting out and you can start taking dividend payments as cash once you own enough shares and need the passive income.
Best Online Brokers for Investing in Dividend Stocks
Fidelity Investments is my preferred full service broker for buying and selling stocks in a traditional brokerage account and IRA retirement account. $0 stock trades, 24/7 phone customer support, and an easy to use app are just some of the reasons why I use Fidelity.
Robinhood is a popular stock & crypto trading app that's extremely popular with millenials. You can buy and sell stocks, cryptocurrencies, and options for free.