Investment Strategies: Dividend Investing

Dividend investing means buying shares of companies that pay dividends consistently. Ideally they should also increase these payments over time.

Dividends are cash payments companies make to their shareholders. You can find them easily by looking for the ‘yield’ category on financial websites. If the yield is zero, that company doesn’t pay a dividend.

If there is a percentage, that is the value of the annual dividend. Now, this figure is based on historical payments (ie extrapolating from the previous dividend). If the company reduces or eliminates the dividend payment, the yield will also change, often without notice.

Generally speaking, dividend investing is less profitable than value investing or index investing (to be covered next). It also requires you to take an interest in companies’ performance and policies.

The benefit of dividend investing is that your shares will provide you with regular income without you having to sell your shares. If you choose companies that increase their dividend over time you can end up with very attractive rates of return.