A BEGINNERS GUIDE TO STOCK DIVIDENDS

What are stock dividends? In this time of market crisis and uncertainty in 2008 – 2009, many stock experts are suggesting buying stocks with dividends and holding them until there is a recovery. One of the reasons for this is because it is difficult to find an alternative such as a high yield certificate of deposit. At least with a stock that pays a dividend, you are getting a small return with the hope that the stock will go up when things get better.

Not all stocks pay a dividend and most that do are under 1%. With some careful research though, you can find stocks that pay a higher dividend. What the stock gurus are saying is that you might find stocks that pay a reasonable dividend and buy those instead of stocks without dividends.

A company stock may pay a dividend for many reasons but the most common one is that they want to return something to their investors. Some companies, like Microsoft, may have a lot of cash and decide to give some of it to their investors in the form of a dividend. Other companies might need all their cash for research and development and not pay a dividend. Tech stocks are notorious for not paying out dividends.

No stock dividend is guaranteed safe. Any time a company gets in trouble, the first place they go the cut costs is their dividend if they have one. Therefore, even if you find a stock with a great paying dividend, you cannot buy that stock and be able to count on it. Especially now in these troubled times, stock dividends are in trouble across the board.

Some dividends are safer than others because of the financial position of the company. If a company is doing well, the dividend is probably safe and will not be reduced. Companies like to have a record of increasing their stock dividends but this is not always possible, especially in dire times like these. The stock market for beginners is now a rough place to get started but buying stocks with dividends is a good place to start. You need to do the research and find out what companies are doing all right and pay a nice healthy dividend. If you buy this type of stock, even if it goes down the dividend minimizes the losses.