Welcome to Part II of our dividend investing series. If you missed part I, you can check it out here.
Let’s continue…
How Do Payments Work – Real Life Example
Using a real-life example, let’s go with a company like Home Depot (NYSE: HD) which currently pays an annual dividend yield* of 2.43% which translates to $6.00 per share.
NOTE: Dividend yield is another word for “interest” which the company pays YOU for being a shareholder of the stock.
Source: Yahoo! Finance – Chart Date: 05/28/2020
If you owned 10 shares of this company that means you would receive $60 per year in dividend payments (10 shares x $6 per share = $60).
Now, since HD pays dividends every 3 months (quarterly), this means you would receive $15 in your account each time a dividend is paid ($60/4=$15).
Your dividend payments will be a result of how many shares of a company you own and the company’s dividend yield.
This may not sound like much. However, the money does add up significantly as it compounds over time. Most high-quality companies tend to increase dividend payments quite consistently.
The compounding accelerates when you enroll your stock in DRIPS (Dividend Reinvestment Plan). I talk more about this topic and how it works in the dividends course.
Also, the more shares you own from a particular company, the bigger your dividend payment.
Your dividend payments will be a result of how many shares of a company you own and the company’s dividend yield.
Remember that dividend payments are extra money you get regardless of whether the stock price goes up or down. Also, this is completely separate from capital gains – which is the money you make when you stock goes up in price and you sell at a profit.
If you own dividend-paying stocks, the return on your investment is composed of both – capital gains (if the company does well) and dividends.
The topic of dividend is extensive and there are a whole lot more interesting things to learn!
If you’re interested in receiving more “mini-lessons” around this topic, I invite you to join our dividends community. Also, check out the courses and resources below.
And as always, if you have any questions, I am always an email or comment away. Drop your thoughts in the comments below or send me an email at Hello@girlsonthemoney.com.
Cheers to health and profits!
Mabel
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Courses and Resources for Dividend Investing Beginners:
Dividend Investing Guide: 2020 Edition – This is an exclusive guide that includes a list of my TOP 10 favorite Dividend-Paying companies. Click here to invest in this guide.
eBook –The Wonderful World of Dividends: Step by Step Guide for Beginners – This exclusive eBook explains in detail everything you need to know about making EDUCATED decisions when it comes to dividend investments. Click here to invest in this informative resource.
Exclusive Course: The Wonderful World of Dividends – Step by Step Lessons on Dividend Investing for Beginners. For class details and to enroll, click here. **Note: In addition to step by step video lessons on investing and tons of amazing BONUS resources, this course also includes the eBook and Investing Guide shown above.
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Full disclosure: Mabel Nunez is a shareholder of Home Depot (HD). The company has been used as an example for educational purposes only. It is not a recommendation of any kind. NEVER invest or cease to invest simply based on the information shown in our blog or any of our resources. Always do your own due diligence. Investing involves risk.
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