LENSANUSANTARA.CO.ID – Dividend is a good way to build income from your investment.
Dividend offers a unique way to turn your stock investment into a fixed income. But, how does it work and how can you invest in your own dividend and start building investment income? This is how to generate income with dividends!
What is dividend?
While a lot of investments, especially purchased for sale at a higher price, some investments can give you a stable cash payment flow. This includes any revenue or any income that does not require work or active involvement.
Many of these assets require large debts or purchases to be accessed, but the financial market gives us a broad way to access it. This includes instant access to dividend assets such as public business, commercial mortgage, managed funds, and more.
The most common way to invest in dividends is to buy dividend shares. This type of stock is offered by companies that have achieved good growth and strive to give awards and attract investors with stable cash payments from their profits.
While small companies prefer to maintain their profits in business to grow companies and their stock prices for investors, stock dividends offer a very liquid way to access profits from your investment.
On the one hand, dividend shares are very similar to bonds. Bonds are loans that provide stable fixed income over -the growth of assets from typical shares. Dividend payers also focus on providing fixed income without much focusing on company growth.
Just like typical stocks, dividend shares can be bundled, managed, and sold in a basket of assets by the Dana Manager. This fund manager will focus on examining and choosing assets that provide the largest dividend for their investors.
However, not all dividend funds are focused on the stock market. Dividend funds often involve assets other than stocks that are not possible difficult for investors on average to access.
This includes payment of commercial real estate hypotek, government real estate hypotek payments, a combination of asset hybrids, and more.
How to build income with dividends?
Dividends are paid based on the profits of companies that sell, or problems, they are. So if a company does it well, then they can pay most of their shares as dividends. If it is not bad, then they pay a portion of smaller dividends.
However, it is important to remember that dividend stock is still an equity. In other words, the dividend stock that you have can still go up or down its value and resold for profit. So you can still get a profit or loss in your dividend stock, but the company is less focused on this.
Dividends are paid as a price portion of the underlying stock. For example, say shares are valued at $ 10 per share and pay dividends of $ 0.8. This is an 8%dividend, which is the total part of your investment paid as dividends.
So, if you have 100 shares worth $ 1,000 at $ 10 per share, then you will receive a dividend payment of $ 80 when it’s time to pay dividends. Now this may not look like much at first, but it is important to consider payment schedules and compounding effects.
Not all dividends are paid at the same time, but most dividends are paid every three months. That means you will receive four payments placed in a period of three months throughout the year. This payment is often in accordance with quarterly reports that detail the company’s performance.
However, some dividends are paid every year or semi-marrow, which means that you will only receive payments once a year or twice a year. This is a good choice for patient investors who want to build stable growth, and a longer payment period usually means greater payment.
Finally, there is a dividend investment class that pays every month. This is a popular choice, because it is similar to a monthly wage or salary payment, and a shorter payment period means that monthly dividends can be invested again to grow dividends in the future.
One of the most powerful concepts in investing is compounding. This involves taking advantage or dividend from investment and returning it to your portfolio. Every re -investment is a greater part of an increase in portfolio, so that it grows exponentially.
For example, say we have dividend shares worth $ 10 per share that pays a healthy dividend of $ 1. If you have 1,000 shares, you will receive $ 1,000 as your first dividend payment. If you re -invest the $ 1,000 dividend, then you will have 1,100 shares and receive $ 1,100 as your second payment.
When your dividend increases with your investment, your investment growth will slowly accelerate over time.
After 20 dividend payments, you will receive a dividend of $ 6,115.91 and have built an investment worth $ 67,275.00.
After 40 payments, you will receive a dividend of $ 41,144.78 and have built an investment worth $ 452,592.56.
Now you can see the combined value with investment, and this is from investing a fixed amount only once and just waiting. The company will pay for you dividend only to have shares, this return does not require active management of the underlying company.
There are ways to speed up this process and make a higher return, but this is just an example of a fixed portfolio with a healthy and stable dividend. In fact, you can be more active in the way you manage this investment. Let’s explore how this can be achieved.
Make your first investment
Make your first dividend investment as simple as opening an account with a registered retail broker, depositing funds, and ordering the purchase of assets that generate dividends.
However, while the process may be relatively simple, making successful investments requires thought. It is important to be careful with the assets you choose to be invested, and there are also ways to manage your investment to maximize returns.
Savings and contributions
In our previous example, 1,000 shares were bought once and left to sit and grow over time. However, it is far more effective to make routine contributions to permanent investment such as dividend payers, mutual funds, funds traded on the exchange, and other conservative investments.
This is the philosophy behind the many employer’s pension investment benefits such as 401 (K). By making a routine contribution to stable investments such as those paying dividends, you not only encourage healthy savings habits, you are speeding up your profits.
Healthy Dividend Investment Potential
So, let’s consider examples. Say you set aside $ 1,000 per month to invest. That is not a small amount, but can be achieved with a healthy saving habit, and it will cause $ 12,000 in cash every year. However, one cent that is stored is one cent obtained. However, savings can be invested carefully. Not only to defeat inflation, but also to grow your assets continuously.
Say you put the investment into a stable monthly dividend asset portfolio that pays a combined annual dividend of 8% every year. That means you will receive around 0.67% of your total portfolio every month as income, and you contribute most of your savings along with dividends that are invested back into this portfolio.
At the end of your first year, you will save the usual $ 12,000, but you will also get your initial dividend worth $ 532.93 for a total portfolio balance of $ 12,532.93.
In five years, you will have a total of $ 60,000 stored, and you will have an annual return in a $ 5,241.12 dividend, with a total dividend of $ 13,966.70 for a total portfolio balance of $ 73,966.70.
In ten years, you will have $ 120,000 stored in a monthly deposit of $ 1,000, your annual dividend revenue is $ 13,686.61, your total dividend accumulated is $ 64,165.68, and your total portfolio balance is $ 184,165.68.
That is the power of healthy saving habits when combined with wise investment. Collecting money little by little will make it grow, but it takes a lot of patience and discipline.
In this example, 20 years of stable $ 1,000 deposit and 8% annual return which is worse every month will be a total of $ 240,000 in savings, $ 45,015.03 in annual income, $ 352,947.22 in total dividend payments, and $ 592,947.22 in Total Portfolio Value.
Not bad, given that this annual dividend revenue is more than enough to replace the median per capita income in the US, and the portfolio value is sufficient to buy one or two houses in cash. You can see the power of combining good savings habits with wise investment.
However, dividend investment is safer than stock equity investment. The stock market will give you a return of around 10% through a stable index fund investment. Other investments will result in a higher return, but it requires more risks and active management.
It is important to diversify your portfolio. Don’t put all your money into one investment, distribute it in several investments. That way, if one asset is not bad, the remaining portfolio can still guarantee value.
Here are some of the popular choices together with their latest annual dividend returns:
Columbia Research Enhanced Value ETF (Nysearca: Revs): 23.31%
Investco MSCI ETF Future Future (Nysearca: Erth): 15.55%
Orchid Island Capital Inc (Nyse: Orc): 15.45%
AT&T (Nyse: T): 6.45%
Welltower (Nyse: Well): 4.6%
Vanguard Reit ETF (VNQ): 4.2%
These are just a few examples. In general, lower results means more consistency, but this does not always happen. Sometimes the higher funds or stock results are a truly better investment.
Whether you examine funds or stocks and review the consistency of the performance records. Understand the basis that encourages its value, and carefully reads the financial statements that release every quarter.
Careful and informed investors can build serious income from dividend investment.(Adam)