Dividend stocks pay investors cash lump-sums (called a dividend) every quarter. Not only do investors benefit from rising prices of dividend stocks, but the dividends themselves provide a reliable passive income stream. Here’s a quick guide on how you can buy dividend stocks and watch your money compound and grow.
- You need an online low-cost broker to buy dividend stocks
- Ally Invest is the best online broker to buy dividend stocks
- Ally doesn’t charge any hidden fees for accounts and has 24/7 customer service
- After your account is open, choose a specific dividend stock to invest in
- Consider reinvesting your dividends to purchase more shares
Why Buy Dividend Stocks?
Dividend stocks are how celebrities, high net-worth individuals, and savvy investors keep getting richer. Regardless of the amount of money you have to invest, when you purchase a dividend paying stock, you’ll benefit from the stock price going up and you’ll receive cash lump-sum payments called dividends. Simply put, dividends = passive income. You’ll get paid to do nothing.
The best way to think of dividend stocks is like owning an apartment building. Every month, you’ll receive income from residents, and if the overall value of the apartment complex goes up, you’ll benefit from that as well when you decide to sell your ownership. Owning dividend paying stocks is truly a smart investment.
Step #1: Opening an Account
The first thing you’ll have to do before you can invest in dividend stocks is open an online brokerage account.
Not only will this allow you to invest in dividend stocks, but you will also be able to make other investments, like buying shares of growth stocks like Netflix, Snapchat, and Facebook.
Ally Invest is the top broker for investing in dividend stocks in 2018, (see full Ally Invest review in new tab).
- $4.95 per trade, lowest fees in the industry
- No inactivity or maintenance fees
- Ability to buy all dividend stocks
- 24/7 knowledgeable customer service
- Millions of satisfied bank and brokerage clients
Step #2: Doing the Research
Once your account is opened (takes 5 mins), the next step is to navigate to the “Trade” tab on Ally’s online trading platform.
For this example, we’re going to use AT&T (ticker symbol: T). AT&T is one of the most popular wireless network providers in the US, but they are also one of the most popular dividend stocks.
There are three important things to look at before you buy dividend stocks:
- Dividend amount
- Share price
- Ex-dividend date
All of this information is displayed on Ally’s platform. The dividend amount is simply the cash amount you will be paid for each share you own. For AT&T, the current dividend is $0.50, which means is you own 1,000 shares, you’ll receive $500 cash every quarter!
The share price is simply the price of the stock. I prefer to look for stocks with lower prices, because I can buy more shares and thus earn a bigger dividend payment. The final thing you need to look at before you buy a dividend stock is something known as the ex-dividend date. You need to own the stock on or before this date if you want to receive the dividend.
Step #3: Making the Trades
Once you’ve researched a dividend paying stock you want to purchase, it’s time to trade.
All you have to do is click on the “Quick Trade” button on Ally’s platform and the page should look like this.
Type in the ticker symbol, “T” into the the “QUOTE” box. Once you hit “enter” or click the blue arrow, you’ll see real-time prices and buttons to buy or sell. The number of shares to purchase is entirely up to you. You can buy 1 share or 1,000,000 shares. You’re only limited by the funds you have available.
When it comes to placing orders, we always prefer to use limit orders, because you get to decide what price you want to buy or sell at. A market order will execute your order at the current market price. This is sort of like buying a house without looking at the offering price; for stocks, market orders are only useful if you don’t care about the short-term price movements and just want to own the stock. After submitting your order, you’ll receive a confirmation of your investment and you’ll be a dividend stock investor!
If you want to sell your investment and close out your position, all you have to do is click on your position in your Ally account and click “sell”. Of course, if you need help with anything in this process, customer service is ready to help you 24/7.
Opening an Online Brokerage Account is Easy
Opening an Account
It takes about 5 minutes to open an account with Ally Invest. There is no fee to open or maintain.
You’ll probably have to answer questions about your current income and employment status.
What You’ll Need
US licensed stock brokers are required to have each client’s Social Security Number for tax purposes.
9 Popular Dividend Stocks
AT&T is one of the most popular dividend stocks to buy (mostly because it is so well-known) but there are a ton of other name brand stocks that pay healthy dividends.
(IMPORTANT: We do NOT receive any compensation from the companies on this list. These are just popular dividend stocks.)
|Company||Stock Ticker||Current Dividend Yield|
|Ford Motor Co||F||6.20%|
|Philip Morris International||PM||5.40%|
In the world of investing, dividend stocks are some of the safest investments you can make. Regardless of what happens with the price of the stock, you’re guaranteed your quarterly dividend payment.
There aren’t many online investments that guarantee a fixed lump-sum payment every fiscal quarter. This is why dividend stocks are so appealing. Of course, the goal of investing is to buy high and sell low, but dividend stocks always provide reliable income.
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Updated: September 5, 2018