Dividend stocks with Horizon: Helpful guide to consistent profits
With Horizon Finance, you can explore the key aspects of dividend stocks below. What are dividend stocks and how can they become a crucial part of your investment strategy?
Focus on dividend stocks: What do you need to know?
Dividend stocks represent shares in companies that continuously pay out profits to shareholders. This practice serves as a way to reward shareholders by sharing a portion of the company’s profits with them. These payouts are usually in the form of cash, quarterly, semi-annually or annually, depending on company policy. Some companies also choose share buybacks as a form of dividend. This practice, where the company buys back its own shares, can increase the share price and contribute to the total return.
Who makes dividend stocks an attractive option?
Dividend stocks appeal in particular to two types of investors:
- Income-oriented investors: These investors seek regular income and view dividend stocks as a reliable source of ongoing earnings.
- Conservative investors: Those who want stability and less volatility find dividend stocks attractive. Dividends can add predictability and stability to the portfolio.
Important dates and how dividends affect the share price
To receive dividends, you must be a shareholder on important dates:
- Ex-date: First day on which the share is traded without the right to a dividend. If you buy shares after this date, you will not normally receive the relevant dividend.
- ‘General Meeting’ date: The day before the Ex-date. Shareholders must be registered as owners of the shares on this date to be entitled to the dividend payment.
- Payout date: The day on which the company pays out the dividend to the shareholders.
Reinvestment, Diversification and Savings
Investors can maximize the potential of the dividend by reinvesting it. Reinvestment allows for the compound interest effect, which can increase future dividends.
Diversifying the portfolio by investing the dividends in other stocks or mutual funds can help spread the risk. Alternatively, savings outside the stock market can provide extra financial stability.
Companies that typically pay dividends
Certain sectors are more likely to have companies that pay dividends. This includes insurance, health and breweries. However, historical dividends are no guarantee of future payouts.
Why invest in dividend stocks?
- Stability: Dividend stocks are often associated with well-consolidated companies, adding stability to your portfolio.
- Ongoing returns: Dividends provide ongoing income, which can be attractive to investors who want to receive regular payments without selling shares.
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