how to buy stock dividends

The company doesn’t tell you this date when the dividend is announced and it’s not published on the quote pages of TheStreet.com, Yahoo Finance or even the expensive Bloomberg terminal on my desk.
On the other hand, it’s possible to buy ABC shares in the final minutes of trading on Monday, the 10th and receive the full dividend.
This is useful information, but investors often confuse the record date as the cutoff to receive the dividend.
Here’s an example: Let’s say ABC Corp., which is trading at $10 a share, declares a regular quarterly dividend today of 10 cents a share (4% yield), payable to shareholders of record on Thursday, Dec.
Similarly, the ex-date is two trading days before the record date, so another way to look at the must-own date is the day before a stock goes ex-dividend.
Here’s how the dividend works: Only investors at the close of trading on Monday, the 10th will receive the dividend.
Here’s how to determine the must-own date for any dividend, so you’ll never be confused by this important question again.
With that in mind, an investor can technically buy ABC at 3:59 p.m. ET on the 10th and sell it at 9:31 a.m. ET on the 11th and still receive dividend in their account on the 27th.

As of this writing, a share of AT&T is at 24.83 and has a dividend of 0.40. What that means is that every three months, for each share of AT&T that a person holds, AT&T pays that person $0.40. So, let’s say that over time, you bought 1,000 shares of AT&T – at today’s market prices, that would have cost you just short of $25,000.
Provided that you are willing to have a diverse selection of dividend-paying stocks (more than 10 with no more than 20% of your money in any individual company or any sector) and you are willing to pay attention to it so you don’t end up holding a company as it falls down the Enron drain, this strategy can work.
A dividend reinvestment plan, commonly called a DRIP, is a plan offered by a company that allows investors to automatically reinvest cash dividends by purchasing additional shares or fractional shares on the dividend payment date.
Dividend compounding occurs when dividends are reinvested to purchase additional shares of stock, thereby resulting in greater dividends.
Instead of receiving your quarterly dividend check, the entity managing the DRIP (which could be the company, a transfer agent or a brokerage firm) puts the money, on your behalf, directly towards the purchase of addition shares.
Many people invest in dividend-paying stocks to take advantage of the steady payments and the opportunity to reinvest the dividends to purchase additional shares of stock.
Since many dividend-paying stocks represent companies that are considered financially stable and mature, the stock prices of these companies may steadily increase over time while shareholders enjoy periodic dividend payments.
Intel is fighting slowing growth in sales of desktop and laptop computers–its largest sources of sales and profits—and as it makes inroads into and tablets, its cash flow will grow and higher dividends should follow.
Kimberly-Clark (KMB) has raised dividends every year since the early 1970s and aims to maintain a higher dividend yield than most other industrial and consumer-product companies.
A blue-chip cash machine with a great group of global health businesses, Johnson & Johnson (JNJ) grows just enough to raise dividends between 5% and 10% a year while the shares almost never misbehave.
Smaller and mid-sized companies have joined the rush to pay higher dividends and WisdomTree MidCap ETF (DON) is a convenient way to sample 400 of them, spanning the economy from utilities to REITs to energy to retail.
Realty Income (O) pays dividends every month and raises the rate several times a year, though slowly and usually by small amounts.
For example, if Company A is trading at $20 a share and is about to offer a $1 dividend and you hurry to buy the stock before the ex-dividend date, you would receive the dividend and make an easy 5% return.
In actuality, however, the company’s stock price would decrease on the ex-dividend date by about the same amount of the dividend to eliminate this form of arbitrage.
So, if you purchased stock before the ex-dividend date you would get the $1 cash dividend, but this would be offset by the simultaneous $1 drop in the stock price.
Waiting to purchase the stock until after the dividend payment may be a better strategy because it allows you to purchase the stock at a lower price without incurring taxes.
Thus, buying a stock before a dividend is paid and selling after it is received has absolutely no value except a partial return of the capital invested in the stock in the first place.
Others seemed exotic to retirement investors merely a couple years ago, but have become much more mainstream as the Fed’s quantitative easing program has pushed people further out on the risk curve as bond yields have dried up.
Other times, cheap stocks might have sold off to a point where there’s too much value — and too much chance of a turnaround — to ignore.
With that in mind, here are five of the best cheap dividend stocks you can buy — four of which trade for less than $10, and one that’s just some pocket change more.
There’s an even stronger case to made for cheap stocks that pay competitive dividends.
Like small-cap stocks, cheap stocks often get less interest from analysts, the media and Wall Street.
In any case, cheap stocks can have big upside, and they’re certainly easy to buy in bulk.
In some cases, cheap stocks merely priced in the single-digit-dollar range when they went public.
A low share price isn’t always a sign of weakness in cheap stocks.
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A recent bout of rising U.S. interest rates has beaten up on dividend-paying stocks, rattling shareholders who had been enjoying regular income and higher prices from these so-called defensive equities.
The dividend gets paid to the investor on the payment date set by each individual company, these dates can be found on a company’s investor relations section of their official website.
If you are looking to receive a form of income other than capital gains (i.e. dividends) then the dividend yield figure will help you pick out the companies paying the highest dividend.
A simple search on a stock market practice account site will enable you to filter out the stocks with the highest dividend yield.
The figure is expressed as a percentage and indicates to traders the dividend they are likely to receive from trading a stock.
A stock dividend is the payment a trader receives from the company he/she is currently investing in.
But investors who simply chase the stocks with the biggest dividend yields — which is the annual payment divided by the stock price — often get burned when dividends are cut or eliminated.
A simple screen to run on any potential investment is the percentage of profits returned to shareholders via dividends, or the dividend payout ratio.
Simply divide annual dividends by the earnings per share and that tells you how much of the company’s cash is going to investors and how much is going elsewhere.
(Note that this is just a hypothetical illustration; very, very few people should have so much money in one stock; also, the same principles apply to a mutual fund that pays dividends, even if you invest just $100.) The stock has a 3% dividend yield, so over the past year you received $3 per share, or a total of $3,000 in dividends.
*ANY* dividend could be said to be “cutting” potential capital investment for a company, but part of the valuation of the company itself comes from the fact the stock maintains a basic price based on the value of the dividend and… if this sounds like cyclical and cryptic logic, try to calculate your own P/E ratios using the last annual report.
It’s possible dividend stock prices could be driven up by demand, but – again, in my observation, and I am not a market expert – stable dividend-paying stocks tend to be pretty high-priced.
I have chosen Dividend Growth stocks — companies who are committed to growing their dividends through thick and thin for the past 10, 25, 50+ years.
I’ve been looking at dividend stocks in lieu of a savings account for my emergency fund.
B) High dividend stocks are generally a little less volatile than low or no dividend paying stocks (in the long run you generally get paid for the diversified risk you are willing to take) but a portfolio that is focused on dividend paying stocks means you are taking undiversified risk that would otherwise be deversifiable (the market does not reward this type of risk taking).
Bill Gross was singing a tune similar to what has been wafting from the pages my Rule Your Retirement newsletter over the past few months: Stocks are not priced for exceptional returns over the next decade, and in a sideways market, dividends play an even bigger role in your portfolio.
Here’s what such an investment would look like after 10 and 20 years, if the dividend increases 6% a year but the stock price doesn’t budge.
Contributing just $100 per month for the next 30 years will turn that $100k into $1M.
Contributing $800 a month for 30 years would give you a $1M portfolio by age 65.
If you are saving $400 a month at age 25 it is pretty reasonable to think you could save and invest $2k/month 20 years later.
In fact 10 years later the portfolio will be worth $1.5 million and provide $60,000 in annual income.
And just for fun, if you wanted to shoot for a $2M portfolio you’d just need to contribute $400 a month until age 45 and then move up to $2k/month from 45-65.
Thinking about $2M? You’d need to do $1600 a month for 30 years or you could do $800 for 10 years and $2650 for next 20 years.
Any 30-something with over $100k invested is doing well in my book and if they keep saving regularly, they are well on their way to becoming a millionaire by age 60 at time of a decent retirement age if they just let their money make money which can make more money.
Looks like if I can do $500 a month I can get close to $2 million by 65! Sounds reasonable and shows the huge power of compounding when you start young.
To turn that $100k into $2M by age 65 you’d contribute $900/month for the next 30 years.
Contributing nothing for 20 years will turn that $100k into $431k.
Just $400 per month for 40 years will turn into over $1.1M by age 65.
Let’s use the dividend calculator to take a quick look at what it will take to build a $1M dividend portfolio over a 20-40 year period.
What does it take to have a million dollar dividend portfolio? If you are like me you are keeping track of your portfolio’s yield and payouts.
If nothing else I hope this is an eye opening demonstration of the power of dividend investing and/or compounding interest for retirement planning.
Expirations often go out five years or even a bit longer, ten years in the case of TARP warrants, so some of those companies that were startups or rescues or “blank checks” several years ago are coming close to warrant expiration (like Retail Opportunity Investments Corp, which I own and which has warrants that expire this October — we traded the warrants for some nice gains, but I wasn’t willing to hold the warrants as expiration got closer).
Oh, and I should also point out one other key aspect of warrants — unlike options, where each options contract is already attached to a specific share lot that’s in existence when the option contract is written, a warrant creates a new share of stock that the company will issue and sell to warrantholders at the strike price, so the exercise of a large tranche of warrants changes the capital structure of the company.
Warrants can and do expire worthless even if they have value — if you hold warrants that are “in the money” (ie, the warrant strike price is below the current price of the stock), they are worth something… but if you don’t sell them or exercise them, they stop existing after expiration and are worth nothing.
Or if you want to really turn Mayer’s rosy risk picture into reality and say that you’re risking “more than 95% less money” then you have to just size the warrant position as if you were buying the stock and keep the rest in something safer — ie, if you would normally buy 500 shares of a $32 stock and risk $16,000, with warrants you can buy 500 warrants and risk just about $1,000 for potential upside exposure to the same number of shares of KMI.
The nice feature that the TARP warrants carry, other than their long time to expiration, is that they are protected from dilutive offerings or big dividend raises — normally warrants don’t participate in dividends, and warrant holders are just out of luck if the company decides to dividend out all of its cash instead of reinvesting it to grow the company, but the government wisely forced terms that require the warrant strike prices to adjust for dividends paid out above whatever the dividend was before the TARP rescue.
And the nine-digit codes he talks about? Well, those actually don’t come up very often with listed warrants like Kinder Morgan or like the others he presumably is talking about, but those are the CUSIP numbers — most of the time you can and would trade warrants using the ticker symbol, so the AIG warrants that Mayer also references as an example would be AIG+ at TD Ameritrade or AIGWS at Fidelity or something similar in most brokerage trading platforms, but you could also call your broker and use the CUSIP if you wanted to be sure (the CUSIP number for that warrant happens to be 026874156).
Most arguments for the bank stock warrants like these, which have expiration dates usually in the Fall of 2018, are based on the fact that most of the big banks trade still at historically low multiples of book value and are profitable and growing, albeit slowly, so you could see excellent gains from most of these warrants if the banks just stay the course — and spectacular gains if banks get back to the (probably too high) valuations they carried at their peak of 2X book value or more.
When you’re within a year or two of expiration, in most cases the warrants and options with similar strike prices and expiration dates should be priced close to each other, and investors are less interested in warrants as they get closer — a lot of the appeal is in the very long time until expiration that gives a nice fertile ground for the investor imagination to conjure up massive gains.
Warrants are a little bit like call options on stocks — they give the holder the right to buy a stock at a set price (the strike price) anytime before the expiration date.
But yes, warrants can be an excellent way to get long-term (sometimes very long) leverage on an underlying stock — further out into the future than options are available, and sometimes on stocks that don’t have options trading.
Kinder Morgan (KMI) does have warrants outstanding, a relic of their deal to buy El Paso a couple years ago — the warrants trade at KMI-WT (though tickers vary for warrants — sometimes it will be KMI-WS or KMI.W or KMIWS or any of several different variations), and they give the holder the right to buy a share of KMI at $40 before expiration on May 25, 2017.
Really, though many of the warrants have appealing possibilities — Citibank and Bank of America are arguably the riskiest, because those banks are so troubled, but they also have big possible snapback potential if they trade at a premium to book value again in the future, and the warrants are well out of the money.
By starting here, you’ll learn to avoid tax traps such as buying dividend stocks between the ex-dividend date and the distribution date, effectively forcing you to pay other investors’ income taxes! You’ll also learn why some companies refuse to pay dividends, how to calculate dividend yield, and how to use dividend payout ratios to estimate the maximum sustainable growth rate.
Have you ever wondered what it would be like to sit at home, reading by the pool, living off dividend checks that arrive regularly through the mail? Before you can even hope to achieve that level of financial independence, you must understand what dividends are, how companies pay dividends, and the different types of dividends that are available such as cash dividends, property dividends, stock dividends, and liquidating dividends, just to name a few.


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