For some sharemarket investors, dividends – regular payments from companies in which you are a part owner – are the main game. Owning shares that pay dividends can be especially important for people, such as retirees, who don’t receive a regular income from work.
Dividends are investors’ shares of a company’s profits and are usually cash payments distributed at regular intervals, normally every six months in Australia. They can also be paid monthly, quarterly or yearly or even on a one-off basis in the form of a “special dividend”.
Dividends can help boost portfolio returns in good times and bad, says the investing advice company the Motley Fool. “Cash payments aren’t subject to market whims like a share price is – meaning these payments can cushion the returns of a portfolio during a sharemarket correction or crash.”
So, how do you invest successfully in high-dividend stocks?
1 Do the research
Assess a company’s financial health and stability, considering factors such as dividend yield, growth history and payout ratio. This helps identify companies with a strong foundation for consistent dividends, shows Forbes.com.
Dividend yields are particularly relevant. You work this out by dividing the previous 12 months of dividend payments by the current share price. Many websites, including online brokers, give you this information.
The higher the yield, the better for income investors, but only up to a point, says the Motley Fool. “Abnormally high yields can indicate heightened levels of risk.”
This story is from the June 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the June 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Is the public market shrinking?
Australia needs a healthy stock market to give companies access to funds and to allow retail investors to build wealth.
India: three steps to transformation
Massive investment and extensive reforms turbocharge the economy.
The ballet of business
Changing direction, products, models and marketing is a hard task for a business. We chart what it takes to turn a business around, plus profile four successful pivots.
Save money and the planet
Could the high cost of living give us the incentive we need to reduce how much water and energy we use or waste? These eco-friendly household tips will help you do just that.
AI adoption is the new black
Artificial intelligence is set to reshape the commercial world, and small enterprises can’t afford to miss the boat.
Spam attack! Murky laws jam our inboxes
Unwanted marketing material is one of the pain points of modern life.
From rags to riches in style
Rich Tran sported a bowl cut until he was 14 years old and had no intention of becoming a hairdresser.
New work deals are killing the 'old' office
The Covid pandemic and the subsequent lockdowns accelerated the trend to more people working from home. It was a mixed experience.
Points taken: the truth about rewards
Can hopping between credit cards really boost your frequent flyer haul and give you cheap or free travel - or is it doing more harm than good behind the scenes? Money puts it to the test.
Shortcuts to own a home
Innovative ideas with a focus on low costs and sustainability could help solve the housing crunch.