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Friday, 16 September 2016 00:00

How to make the most out of your dividends

Investing in a company could be quite lucrative, it is the practice where you can earn dividends that represent a distribution of corporate earnings to company shareholders and usually take place as cash or as stock.

If you hold a large portion of your Investment Portfolio in stocks, you will be unable to appreciate these capital gains until your shares are sold. However, if these stocks pay dividends, you will receive a cheque in the mail regularly for your share of the companies' profits.


Dividend payments are essential to the relationship between company and investor. There have been cases where company’s stock price plummets where the company aim to reduce or cut off dividends, showing that a stable dividend payout is essential to a company’s financial well-being. Reinvesting dividends can provide current and future income and also could be rewarding to add to your Wealth Creation strategy.

The one attractive strength of dividends is that it is not tied to volatile market changes but rather to the company’s successful profit earnings. Companies have a defensive stance to protect the company wealth.

Below are some truths about Dividends:
•    Dividend-paying companies usually announce an interim or annual distribution.
•    Dividends can increase (or decrease) over time
•    Dividend Investing is not Equivalent to Value Investing (One focuses on capital gain while the other primarily in dividend income.)
•    Pay Attention to the Dividend Dates (not buying a stock in time in order to capture the upcoming dividend, or selling too soon and forfeiting the upcoming dividend).
•    If dividends are too high it can adversely affect the sustainable growth rate of a company.
•    Dividend stocks typically fall less during declining market periods.

Dividend investing potential can be a great addition to your investment strategy, but there are several aspects investors should be aware of before investing in dividend stock and depends greatly on the future of the very company you intend to invest in.

Always speak to a professional before making any financial decisions, they are able to analyse and advise you on your wealth creation strategy.

Edited by N du Preez (Internet Marketing Solutions)

The content in this article is for general information purposes only and does not refer to specific advice to any particular person’s individual financial objectives or financial needs. Before making any financial decisions contact Ben Charlton or your Financial Planner.

Although every effort has been made to verify the accuracy of the information contained in this material, we disclaim all liability, for any error, inaccuracy in, or omission of the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information alone and not speaking to a qualified Financial Planner.

Ben Charlton

A financial planner can be someone who sees you as a number; they sell you the product that works best for them, they do exactly what you ask for, no more and no less. We are not like that, to us, our job is not to sell you a product, it’s to help you realise your dreams.



1 comment

  • Comment Link Dominic Chesmore Wednesday, 05 October 2016 16:27 posted by Dominic Chesmore

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