How to invest in good stocks that pay dividends

Julie Brownlee, Fsp Invest, 23 Jul. 2014

Tags: dividends, invest in good stocks, investing for dividends, investing strategy, dividend yield,



When it comes to picking stocks to invest in, especially for the long-term, there are some things that indicate a fruitful future awaits.

One of the keys to this is finding companies that regularly share with you your cut of the profits. And the most common way of doing this is through paying dividends.

So what is a dividend? And what should you look for in a dividend paying company?

Let’s take a closer look…



What are dividends?


By focusing on companies that pays you dividends, you can benefit from a stream of income over the years. Not only that, you can benefit from growth in the company’s share price too.

Dividends are a portion of the profits that a company chooses to pay out to shareholders. Depending on which company you invest in, these dividend pay outs can be quite significant.


How big is a company’s dividend?


To find out how large the dividend payment is in relation to the company’s share price, you just need to find out the dividend yield.

The dividend yield is simply the dividends paid per share divided by the company’s current share price.

On the Johannesburg Stock Exchange at the moment, companies are paying dividend yields out of from less than 1% to nearly 36%.

Beware of investing in a company just for a high dividend yield. It might not be sustainable. You need to have a look at the company’s track record of paying dividends over a number of years.

Ideally you want to see a trend of dividend payments rising over the years. Sustainability here is a good indicator of things to come.

So there you have it, how to invest in good stocks that pay dividends.

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