Dividend paying stocks are a good choice to have in your portfolio. For several good reasons, one; they pay dividends, and two, they pay dividends. There is also the fact that the company can make a profit and the dividends may go up, and yes, they can go down. Good proven consistent stocks that are stable, and the dividend payouts are consistent, are usually the better choice for most that are just getting started in their IRAs or investing in the stock market.
There are 2 options for the dividends; the first option is dividend reinvesting, this option allows you to have the dividend that is paid, used to purchase more of the same stock without paying the trading fee.
You will need to set the account to do this. Then it will be done automatically without you having to do anything. The amount of shares that is purchased is based on the current market value of the stock and how much the dividends are.
Option 2 is to have the dividend paid into your account in cash. With this option you now have the ability to allow the dividends to accumulate and buy another stock, diversifying your account.
Wait until you have a minimum of $1000 or more to make the purchase of stock. This will help offset the trading fee. With option 2 you will have to be involved in managing your account.
Something else that should be noted for those that are new to the dividend paying stock aspect is, the dividends are paid per share and not on how much the stock cost per share.
For instance, you purchase 500 shares of a stock that cost $10.90 per share. The dividend pays $0.11 per share monthly, so 500 x $0.11 = $55.00 per month in dividends. That would be 12% over the year, which is $660.00, from an investment of $5460.00, including the trading fee.
Here are a few stocks to research. PSEC, ARR, ORC, DCIX, these are dividend paying stocks that are consistent or on the rise. Always do your research and/or consult your broker or financial advisor before investing in stocks.
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