How to become a dividend investor — Dividend investors earn passive income from dividend stocks. Become one in six simple steps. I am not a licensed investor and this article is not investment advice. It’s for entertainment purposes only. This article contains affiliate links.
If you are interested in learning how to become a dividend investor, you’ve come to the right place.
Personally, I am a dividend investor who has been documenting the growth of my dividend income on this blog since 2017.
In this time, I built a portfolio that is expected to generate $1,200 in dividends in 2022.
Eventually, my goal is to earn around $20,000 annually from dividend investing. I hope to accomplish this in 10 to 15 years maximum.
In this article, I will share what I’ve learned about dividend investing and tell you how to become a dividend investor in six steps.
Let’s get started.
Want to see the beginning of my dividend investing journey? Check out all my dividend income updates:
All Dividend Income Updates Since 2017
How To Become A Dividend Investor
What Is A Dividend Investor?
To understand what a dividend investor is, you need to know what dividends are.
Simply put, dividends are payments to shareholders. The payment comes from a portion of the company’s earnings.
Typically, dividends are paid quarterly to shareholders. However, some stocks pay monthly dividends.
Back to the question — what is a dividend investor?
A dividend investor is an income investor who prioritizes dividend income paying stocks.
Dividend investors focus on stocks that pay dividends as part of their portfolio allocation strategy.
In my humble opinion, dividends shouldn’t be the only thing dividend investors should prioritize. Even though I am a dividend investor, I still think total returns matter most.
Therefore, you don’t want to only buy stocks with the highest dividend yields. You should focus on dividend safety and dividend growth stocks that are growing earnings. In turn, you get good returns and dividend income.
Related article: What Dividend Yield Is Good?
How Do Dividend Investors Get Dividends?
Dividend investors are paid income directly into their brokerage accounts.
As long as you own a stock on its ex-dividend date, you will receive a dividend payment on the payment date.
The brokerage will deposit it directly to the cash side of your brokerage account. The cash shows up as if you made a contribution.
How To Become A Dividend Investor
If you still want to learn how to become a dividend investor, here’s how to get started in six simple steps.
How To Become A Dividend Investor
Step 1 — Decide To Become A Dividend Investor
Before you decide to become a dividend investor, remember that it is a long-term journey.
Dividend investing is certainly not a get rich quick scheme. It takes dedication and a commitment to truly benefit from it as an investment strategy.
If you stop part way through, you may not benefit from it much at all.
But if you consistently save money and invest it into quality dividend growth stocks for more than a decade, you will likely see tremendous results.
The first step is decided to become a dividend investor. Decide if dividend investing is the investment strategy that will keep you invested. Decide if it excites you. If it does, commit to it.
Step 2 — Prepare By Learning About Stocks And Reading
The second step of becoming a dividend investor is to prepare.
You have to start learning about stocks and the stock market. Also, you have to know what stocks you want to invest in.
Read books on investing, study the best investors of all time, and start creating watchlists for stocks you potentially want to buy.
Step 3 — Start Saving Money
Of course, to be able to invest, you need to have money.
As such, the third step of becoming a dividend investor is saving money.
Start saving money to invest once your account is open.
Save it in a savings account until you open a brokerage account.
The amount you need to save will depend on what stock brokerage you go with.
If you open an account with a zero-commission brokerage like Wealthsimple, you can start dividend investing with a very low amount. Less than $100.
However, if you open an account with a brokerage that charges a higher fee, you may have to save up more to make it worth your while.
For example, if the fee is $9.95, you might want to save up at least $1,000 so the commission fee doesn’t lower your returns.
The bottom line is that you need to save money to invest in dividend stocks.
Step 4 — Open A Self-Directed Brokerage Account
Once you feel like you are ready to invest and you have enough money saved, open a brokerage account.
Personally, I use a combination of stock brokerages to manage my portfolio. But I like to have my money in different places.
One of my favourite brokerages is Wealthsimple. If you are looking for a zero-commission brokerage in Canada, I would recommend them.
Alternatively, if you are looking for a brokerage with more enhanced trading functionality, I would recommend Questrade.
If you do not reside in Canada, start doing some research on brokerages that are available to you.
Once you find a brokerage that suits what you are looking for, open a brokerage account and contribute the money you have been saving.
Step 5 — Purchase Shares Of A Stock That Pays Dividends Before The Ex-Dividend Date
Ok, so you have a fully-funded brokerage account — you are nearly a dividend investor.
The only thing left to do is buy a dividend stock.
Based on your watchlist of dividend stocks and on extensive research, decide which dividend stock is the best value right now.
If you want to receive your first dividend payment as soon as possible, you will need to make sure you buy the stock before the ex-dividend date.
If you look up a quote for the stock you want to buy using your brokerage, it should show the ex-dividend date.
As long as you buy before that date, you will receive the dividend on the payment date.
Once you are ready to buy, place your order.
Step 6 — Hold The Stock And Wait To Receive Dividends
At the point, the majority of your work is done.
You are already a dividend investor now that you own a dividend stock.
All you have to do now is wait for the dividend payment date.
Usually, the dividend is deposited on the payment date or one business day after because of processing.
If you continue to hold the stock, you will continue to receive dividends for as long as the company pays them.
Of course, it’s probably a good idea to read financial reports to keep a close on on how the company is performing. Otherwise, just sit back and collect your dividends. I’d suggest reinvesting them to increase dividend income even further.
How To Become A Dividend Investor — Final Thoughts
In summary, dividend investors are investors who prioritize income generating stocks.
Dividend investors earn passive income from holding dividend income paying stocks.
Although it can seem an overwhelmingly complicated process to get started, it’s possible to become a dividend investor in six easy steps.
Frankly, it’s even less steps if we are talking about actions.
You just need to save some money, open a brokerage account, and purchase a stock before its ex-dividend date.
Voila, you’re a dividend investor.
Similar Articles On Dividend Investing To Check Out
Best Investing Books To Read — 11 Books To Be A Better Investor
Dividend Income Retirement — Retirement By Living Off Dividends
Dividend Investing Tips: 9 Must-Know Tips For Dividend Investors
How Much Do I Need To Invest To Live Off Dividends?
I am not a licensed investment or tax adviser. All opinions are my own. This post may contain advertisements by Monumetric. This post may also contain internal links, affiliate links to BizBudding, Amazon, Bluehost, and Questrade, links to trusted external sites, and links to RTC social media accounts.
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