How To Invest In Dividend Stocks

Dividend stocks are financial vehicles that pay out a significant portion of their earnings and profits to investors. This is different from interest on bonds, which pays a fixed amount in pre-defined intervals (i.e., monthly) based on the bond’s principal amount only. 

Look For Established Companies. 

Dividend payments are a sign that a company is financially healthy, and the stock price reflects this reality to some degree. Thus, it stands to reason that a younger company without as much of a track record will not be able to pay dividends yet. 

Look For Consistent Dividend Increases Over Time. 

When a company has had a dividend payment for several years that continues to increase (based on the amount of its earnings and profits), the odds of continued increases are better than if it had not increased one’s dividends. 

Look For Companies With Good Competitive Advantages. 

If the company has a solid, defensible competitive advantage, it will generate revenue and thus profits year after year. 

Look For Companies Whose Stock Price Is In Line With Their Fundamentals. 

If there is a disconnect between the price of the company’s stock relative to its earnings, dividends paid, and assets, it may be a sign of an over-valued (or under-valued) stock. 

Look For Stocks With Low Volatility. 

This means that the movement in the price of the company’s shares is either minimal or no significant activity at all. A stock that tends to move up and down a lot has what is called “high volatility.” 


Knowing how to invest in dividend stocks is an integral part of one’s overall investment strategy. If you use the pointers listed above as a guide to help direct your research and analysis, your chances of success are significantly increased. 

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