Dividend Investing

Dividend investing is an easy way to earn passive income. A $10,000 investment in a stock with a 5% dividend yield will provide you with $500 in yearly dividend income – all without you doing anything! So this is like an easy way to FIRE, which also stands for Financial Independence Retirement Early.

In fact, the best dividend stocks can boost your total returns over time through a combination of dividend payouts and stock price appreciation. Think of, an enhanced compounding effect!

But not all dividend stocks are a good investment. For example, a stock with a very high dividend yield might turn out to be a dividend trap.

Criteria for Choosing Dividend Stocks

So now, there are 5 indicators that helps us identify a good dividend stock

Dividend Track Record

For long-term dividend investors, a company that pays out dividends like clockwork is more attractive than a company that pays a high dividend one year, but not the next.

One place to find reliable dividend stocks is to look at dividend aristocrats, companies that have been paying – and raising – their dividends for many consecutive years.

As the saying goes, consistency is key! So we would really want some consistent payout every month instead of unpredictable lump sums. Even if the final amount were to be the same, having a known cycle actually helps for an investor to plan their entry and exit.