Wednesday, 25 May 2022

The POWER dividend paying stock

When you invest in the stock market for an ever-increasing cash dividend income, trying to make money in the stock market, your thinking will change. There will be no more fear of losing money in the stock market. With the right type of investment plan and investment choices, the worries of losing money in the stock market will disappear.

It doesn't matter if the value of your investment portfolio is increasing or decreasing. Your investment plan to generate income is the focus here. Earnings from all your investments in the stock market on a weekly, monthly, and yearly basis, are what make this type of investment interesting.

These proven investment plans are based on two very simple and basic investment strategies – investing only in companies that have historical data on annual dividend growth, and dividend returns from those companies.

By only investing in companies that increase their dividends every year, you become confident about your investment choices. And by getting each company's dividends payment, it will give you a sense of security for the future.

Are you trying to make money on the stock market?

Then, only invest in companies that have a proven track record of rewarding their shareholders every year. 

Cash dividend income will increase on a quarterly basis regardless of how the company's stock price is at any given time. In fact, after 10 or 15 years of owning the stock, you will be confused about whether you want the stock to go up or down, because a lower stock price allows you to reinvest dividends to buy more shares, thus accelerating your cash dividends.

Dividends payment that increases every year will help offset the risk of inflation. Over time, using this type of investment plan/approach, you will find that reinvesting growing cash dividends combined with stock appreciation is a very powerful wealth-building formula!

I am Canadian, so my experience comes from the Canadian banking system. To my knowledge, there is two option for dividend payment, either your broker deposit the money in your investment account, or the stock participates in the DRIP program. (1) When you start your investment program, I would recommend choosing a stock that participates in the DRIP, the beauty of the DRIP is the company will add shares to your portfolio free of charge. This has two major advantages, first, you get more shares of that same stock free of cost, and second, this will reduce your average price. (2)

The advantage for you is you get more shares of that company and the company gets to keep the money for operation or expansion, then, in exchange, the company gives you new shares.

As soon as I understood that, in my early 30s .. I started to look for Dividend-paying companies that participate in the drip, In some companies, I have invested about $20,000 and the company has issued/given me approx $10,000 worth of shares. Over the period of 20 years, we both contributed to buying shares, at first I was buying shares on top of those issued to me, increasing my number of shares very rapidly. I remember the first time it happened, I received one (1) share and I was all happy about it, then a few years later I was getting 100 shares a month without me contributing to it. In fact, I was contributing to a third or fourth stock repeating the exact same pattern. Later when retirement will come around, I will ask my broker to get me off the DRIP and pay all of my dividends to my investment account. Just to give you an example, if I did that right now, I would be receiving $5,000 a month, for the rest of my life, Canada pension plan retiring at age 65 is $1,253 a month. Who can live off $1,253 a month ???

I hope you know this guy, he made his fortune collecting dividends, he's now 80-something and is one of the richest men in the United State, yup his name is Warren Buffet. The reason I state him is because of one of his quotes, he once said that a man/woman should never rely on a single source of income. 

Based on that, I would not recommend investing $200,000 in a single dividend-paying stock, I would go for 4 times $50,000 ( 4 different stocks) or even better go for 8.

Even dividend companies can go thru harder times, therefore they can stop paying dividends for a while or reduce the amount paid out, so of course, you understand that if you had put all of your eggs in a single company then your monthly amount paid to you would be affected, to me here, this is just common sense, I hope it is the same for you.

Once you decide to retire and do something else than the 9 to 5 job thing, Your income will be there every month, quarterly or year too because every company you chose pays you dividends 

If your account costs $250,000 and your securities net worth drops to $200,000 due to a severe stock market downturn, your $200,000 net worth will still result in higher cash dividend income. Your holding net worth doesn't mean much when it comes to income. This is why it is important to select the proper company to prevent the loss of your way of living.

And if you're retired and no longer investing in stocks, the stock price won't affect your dividend income at all. 

I hope this article has helped you clarify a few things, don't forget I am not a financial advisor, I am only writing from my own experience and own financial success. I am 55 and retired.

Sylvain Richard,

(1) . DRIP = Dividend Re-Investment Program

(2). The average is calculated as follows. the total amount paid divided by the number of shares.