Introduction to Dividend Stocks

There are a few variegated ways to make money on the stock market.

You can buy low and sell high, of course, or you can short the market by selling upper and ownership low, or you can buy a tuft of dividend stocks, kick back, and let the payments pile up.

Dividend Stocks Are Stocks That Pay More than Just Returns

Profitable companies have to decide what to do with their profits at the end of their respective fiscal years.

Some segregate to invest their profits when into their merchantry in the form of wanted improvements, infrastructure or IT upgrades, or headcount increases, but some take a slightly variegated tack and decide to pay out those profits to their shareholders. We undeniability those payments “dividends.”

Investing in Dividend Stocks

Dividend stocks don’t unchangingly alimony up with the market overall in terms of share prices, and growth stocks typically reinvest their profits in the merchantry rather than pay them out in dividends, but that doesn’t midpoint dividend investing is a bad idea.

Think of it like this: If a visitor like IBM is worldly-wise to pay a dividend year without year regardless of the prevailing market or economic conditions, owning shares in IBM scrutinizingly guarantees a return on your investment plane during withstand markets and periods of economic stagnation.

And while dividend stocks may not unchangingly come with the same potential for share price appreciation as the rest of the market, their dividend payments provide both a steady source of return and a uplift to the overall return on your investment.

Who Let the Dogs (of the Dow) Out?

The most straightforward and least time-consuming way to get into dividend investing is an tideway tabbed the Dogs of the Dow strategy.

The Dow Jones Industrial Average, as you may know, is a major stock alphabetize that tracks 30 of the largest public companies in America, many of which dole out dividends like clockwork.

The Strategy is fairly simple: All you have to do is identify the 10 or so stocks on the Dow with the highest dividend yields (Equal to the yearly dividend / the current stock price) and invest in them.

Why is it tabbed the Dogs of the Dow Strategy, you ask? Unconfined question, and the wordplay is moreover fairly simple: Math.

A company’s dividend yield goes up when they increase their dividends, but it moreover goes up when their share price drops—provided the dividend stays the same.

The Dogs of the Dow Strategy looks for companies whose dividend yields are upper and/or have risen recently, IE companies whose share prices have dropped recently.

Stocks that have seen big drops in price don’t squint very lulu (like dogs) to most investors, which is where the strategy gets its name.

The strategy is constructive for a few reasons.

• Blue Chip (Dow Jones) stocks are reliable earners and scrutinizingly unchangingly regain their value
• You get a steady stream of dividends from reliable companies
• You get both the dividends and the potential upside from increasing share prices

Now that that’s out of the way, here are some of the weightier dividend stocks you can buy in 2022.

International Merchantry Machines (IBM)

IBM is still a damn fine visitor with a stable merchantry model and a history of resulting quarterly dividends, plane if the days of “nobody overly got fired for ownership IBM” are overdue us.

IBM’s shares are trading at $130.95 at the time of writing, and each share entitles the holder to a quarterly dividend of $1.65, equivalent to well-nigh a 5% yearly dividend yield.

Granted, a 5% yearly return isn’t that unconfined compared to the market’s stereotype 10% yearly growth, let vacated to the upside potential of some individual stocks, but there’s something to be said for resulting returns that aren’t unauthentic by market fluctuations.

Last but not least, it’s worth noting that IBM is a stable, established visitor that’s pretty well insulated versus market forces—meaning you won’t have to worry if your dividend payments are going to show up next quarter or for the foreseeable future.

Caterpillar Inc.

Caterpillar is flipside stable, mature visitor with a long history of growth and resulting dividend payments.

How resulting are we talking? How does never missing a dividend payment since 1933 sound to you?

Their dividend isn’t that much—just $1.20 quarterly, a roughly 2.5% yearly dividend yield—but that’s on top of the stellar 69% growth their share price has seen in the last five years.

Caterpillar is a solid investment in pretty much every respect, and their 28 subsequent yearly dividend increases strongly implies their dividend payments will only get worthier in the future.

Essex Property Trust

What do you get when you combine a real manor investment trust that invests in multi-family housing on the west tailspin with the housing slipperiness on the west coast? Money, mostly.

Essex Property Trust didn’t make it on this list considering it’s a household name, it made it considering it’s a mature player in a no-brainer merchantry that’s posted resulting profits and increased their dividend 29 years in a row.

Its quarterly dividend payment of $2.20 per share may only value to an yearly dividend yield of well-nigh 3%, but that single stat doesn’t tell the whole story.

Not only has the visitor seen sustained growth since it went public in 1994, it’s moreover increased its overall dividend nearly 200% over the past 20 years.

Essex Property Trust won’t be waffly the world as we know it or making any major waves in its industry unendingly soon, but you can bet your stump that it’ll alimony posting solid numbers and paying out dividends like clockwork.

Microsoft

Speaking of reliable but not necessarily heady companies, have you met my friend Microsoft?

Okay, a $0.62 quarterly dividend with an yearly dividend yield of 0.85% isn’t great, but Microsoft has some good things going for them.

For one: Microsoft is a global player with decades of proven performance. That’s nothing to sniff at.

Microsoft’s share price has moreover rocketed up nearly 300% over the last five years—not too shabby for a corporation that’s scrutinizingly 50 years old—so you can expect its shares to alimony appreciating (unless something terrible happens) on top of the dividend payments.

And speaking of dividends, think when to IBM for a second. Its dividends have increased as its merchantry has matured and its wanted has found fewer productive outlets, right?

Well think of it like this: Microsoft’s posted 12 subsequent years of dividend increases, and it isn’t signaling any major moves into plush new lines of business, so isn’t it reasonable to think they might alimony on boosting their dividends as time goes on (like IBM. In specimen you didn’t follow that).

Lowes

Lowes is flipside established visitor with a long history of paying dividends and a steadily growing merchantry (seeing a pattern here?).

Their current dividend, $1.05 per share per quarter, only represents a 2% yearly yield, but there’s plenty of upside potential with the stock itself.

Though it’s lanugo from its upper older this year, Lowes’ stock price has grown by 160% in the last five years, and the current housing market implies that the DIY and home resurgence trend will protract for some time.

Conclusion

Dividend investing isn’t for everyone. It involves a lot of holding onto stocks for a long time—not too well-flavored for people with itchy trigger fingers—and is weightier suited to patient investors looking to follow a longer-term plan.

It is usually a good idea to have at least some dividend-paying stocks in your portfolio for mazuma flow, reinvestment, and inoculation versus market forces, however, so definitely don’t rule dividend stocks out when you’re looking for new investment opportunities.

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