What if I told you the secret of making money passively?
The secret begins with stock investing. In particular income investing. Income investing is one of the simplest, if not the simplest, stock investing strategy in the market. Income investing involves picking stocks based on their dividend rates and yields ceteris paribus. In this post we will not include other investment strategies such as value investing. The post is transcribed in order to provide general knowledge of income investing.
Income Investing Terms to Know:
Dividend: distribution of income to the shareholders of a company
Dividend Yield: total annual dividends / current share price
Dividend Rate: total annual dividend payment
Here is one way to implement income investing:
Start by screening stocks that pay dividends. Then narrow down further by screening stocks based on dividend yields. You don’t necessarily want to choose high yielding stocks because remember the formula for the dividend yield? You divide total dividends by the current share price. A severally low current share price could mislead you into thinking the stock pays a fair dividend given the low share price is due to fundamentals. You also want to analyze the dividend payment history. See how long the company has been paying dividends. See if the company is decreasing or increasing dividends. This will allow you to choose companies that are growing, stable, or even dissolving. A company could be growing if dividend rates have gone up, a company’s industry could be stable if the dividend rates have been constant, or the dividend rates could be decreasing due to fundamental issues. All things considered, this small guide should suffice in order for you to incorporate income investing into your strategy.
Here are some Dividend Paying Stocks
WMT – Walmart
T – AT&T
WM – Waste Management
PMI – Phillip Morris
DOW – Dow Chemical
- I do not like to give direct stock investing tips due to the false nature of the industry. I am not a financial advisor, merely a Junior Finance student attending the University of Texas at Arlington with a knack for picking stocks.