Stock Investing 101: What Are Dividends?

Find out what dividends are and how you can use them to make you wealthy!

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Stock analysts talk about them often and investors love them, yet what exactly are they? Let’s have a crash course on what dividends are and how they can help you and your stock portfolio.

A dividend is a specific amount of money paid to you on an annual or quarterly basis from the company’s profits. Think of it as…well, sharing the wealth.

Types

Though there are several types of dividends, the two most common uses in the stock market are cash dividends and stock dividends.


Cash Dividends

  • A cash dividend is when the company pays their shareholders in the form of cash payments (most common).

Stock Dividends

  • A stock dividend is given to the shareholder by the company increasing the current amount of shares by percentage.

Find more details about cash and stock dividends here.


Dividends are paid to investors on a quarterly basis (four times a year). Yet, depending on the company’s board of directors they can be scheduled to be paid once a month, semi-annually (twice a year), or annually (once a year). There are also times when a company may choose to not set a particular schedule and may randomly, this is also known as “irregular dividends”.

But Wait…There’s More

Dividends within a company are managed at the discretion of the board of directors and may be increased, decreased or eliminated at a time of their choosing. Dividends are also taxed at long-term capital gain rates.

Please see a certified tax consultant for additional information on taxes and if your dividends are “qualified or “non-qualified”. View more tax information here.

Dividends to some investors are a sign of “financial health” for a company. Investors can create a customized dividend schedule or algorithm to support their current income or support their income for retirement. This schedule is customized to receive dividend payments from companies in a systematic fashion (payments made daily).

If you want to buy a stock in time to catch their dividend payment, you must buy before the company’s ex-dividend date. Find more information here.

Related: 5 High-Yield Dividend Stocks You Might Love

Not For Everyone

Though most investors enjoy dividends, not every investor concentrates on having a dividend portfolio. It’s also not common for startups and higher-growth companies to have dividends. Startup companies are in their “new years” and revenue will fluctuate from quarter-to-quarter. This may be a time when these new businesses need to keep their profits to reinvest. And higher-growth companies (big corporations) may not use dividends so they can reinvest and use the extra cash flow to fund new projects.

Dividends are a wonderful tool and when used responsibly, they can make you very wealthy. Be wise about all of your investments and enjoy the wealth.

Please see About Me & Disclaimer for additional information about Black Tea.

Information Attainted:

Dividend.com, Investopedia.com, USANews.com, Intuit.com

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How Entrepreneurs Can Stay Ahead Of A Slow Growing Economy

It has been said that our United States economy is growing less than 2%. And along with the “tariff wars” and talk of inflation happening, things seem a little scary. However, there are a few ways you can stay ahead from the harsh economy waves.

Save More, Spend Less

It’s pretty simple to stash away a few dollars, but in the midst of vacation season it’s not easy. Find a budget that works for you and create way to tighten your budget to put save more money. Buy what you need, don’t be tempted to buy what you want or what looks nice- I promise you there will always be something “nice” waiting for you.

Tip: The next time you go shopping, don’t mind the expensive fashion labels or popular food brands. Buy what you need. These billionaires don’t seem to be bothered by popular fashion brands.

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No better guy to eat with at @dairyqueen

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Side Job

In my opinion, a side job is needed to stay ahead (financially) nowadays. But if you’re looking to make an extra $100 a month, find a side job that interests you. Find a hobby that you can make money from. Many entrepreneurs work a side job from their business. They will use the extra money to fund their expenses.

Example: If you enjoy watching YouTube, consider starting your own channel and monetize your page. Perhaps you enjoy crafts? Create what you like to make and sell them on Etsy.

Taxes

If you have a side business, be responsible and take advantage of the tax breaks. It may be tedious bookkeeping, but the daily habits will keep you accountable and you can take advantage of the tax breaks you deserve (please see your CPA or tax consultant for extended information and business tax benefits).

Be Bold and Be You

In this day, only the bold entrepreneurs will make it in their business. You can’t be scared or fearful of stepping outside of your comfort zone. The best way to stay ahead of all the turmoil is to mind your own business. Concentrate on you and what you can do today for your business or future.

It’s never too late to be what you might have been.

George Eliot

The Rise of ETFs

ETFs are very popular and some investors use them for day trading. And ETF is abbreviated for Exchange Traded Fund. Similar to Index funds, it’s a diversified collection of assets that trade on an exchange (like a common stock). ETFs were made to simplify investing- giving the option to invest in a fund instead of choosing multiple common stocks. There are managers behind the scenes doing the trading for you. These funds are great for investors. They are tax-efficient, low cost, and have high volatility.

A Wolf in Sheep’s Clothing

But comparing ETFs from TIFs (traditional index funds), ETFs have given the name for “a wolf in sheep’s clothing” due to the aggressive volatility. They were made to hold, not trade (short-term for 5 years, unlike TIFs for 10+ years). However, there are many kinds of flexible ETFs and it’s up to the investor to make her/his decision on what is right for their portfolio. They are heavily diversified, affordable and an if used wisely, an appropriate investment for the novice investor.

Beware of Phone Scammers

So you just filed your taxes and you got a reasonable amount of money back from federal and state taxes. Right when you were ready to plan your next vacation, you receive a call from the “IRS”, urgently demanding $5,000 in unpaid taxes! Ever received a call like this? These are special con artists and they successfully steal millions of dollars every year. Here a way you can spot a phone scammer.

Sense of Urgency

The urgent caller may tell you that if you hang up the phone or don’t pay within 24 hours they will have to take immediate legal action and call the authorities. You can report these callers to your local police, but if you haven’t received state warning letters in the mail this is something you don’t have to be concerned about.

Payment Options

Usually, these con artists will tell you that you need to pay buy submitting your personal information online and pay through a gift card (Apple Store, Grocery Gift card, Retail, etc.). They will tell you that paying through these options has been approved to act as a government bond.

Some of these clues are totally obvious, but when you on your lunch break in the middle of the day and receive and an urgent phone call from the “IRS”, it may catch you off guard. I’ve never been fooled this way, but I have had friends that have lost over $8,000 dollars. But lesson one too everyone, simply be a good citizen and simply pay your taxes!