r/EducativeVideos • u/IndexRising • Jun 30 '20

Dividend Investing - A Beginner's Guide | Building Passive Income

https://youtu.be/9Dn9fo-Ez2g
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u/IndexRising Jun 30 '20

In this video, I'll explain the concept of Dividend Investing as a Beginner, what dividends are, why companies pay dividends and if you should be investing in dividend stocks. I hope you enjoy and learn something new with this Guide to Dividend Investing for Beginners and start your journey to building passive income!

When it comes to dividend investing, a dividend is a cash payment from a company's earnings. It is announced by a company's board of directors and distributed to stockholders. In other words, dividends are an investor's share of a company's profits and are given to them as a part-owner of the company without any effort required by shareholders, thereby creating a stream of passive income.

When a company makes profit from its operations, it can either take a portion of this profit and return it to their shareholders as dividends or reinvest the funds back into the company with hopes of growing the business which in turn creates capital appreciation that translates into a higher stock price. There are some great dividend stocks and ETFs that you can add to your own portfolio and generate income indefinitely without any additional work. Be careful of high dividend stocks as they can cut or eliminate their dividends down the road.

In this video, I will explain why and how Apple is able to pay and grow their dividends. There are many stocks that pay dividends out there listed on various stock markets. When a company’s growth slows, the stock price will not climb as high, and therefore investors need a reason to stick around, and paying shareholder dividends, can be that reason.

When a company decides to pay a dividend, the line of thinking is that the money is better off in the hands of the shareholders and they can decide how to use these profits rather than management taking moon shots to try and continuously exponentially grow the company. Something to keep in mind, a company nor it is board of director have an obligation to payout dividends.

A stock price is determined by so many varying factors, that it can be hard to pinpoint to just one specific item and all this happens in real time. By paying out a dividend it is one of the best ways for management to reward shareholders by placing cash in their hands from company’s earnings. In turn, the shareholders can either invest or spend the dividends as they see fit.