What Are Dividend Stocks? Dividend Investing for Income
Let’s talk about dividend investing for income. What are dividend stocks, and does dividend investment make sense?
The other day I got a comment from one of you. His name is Jose Silva and he said, “How do I find less than ten dollars dividend paying stocks that I can keep forever?”
What does this mean when he’s talking about – what are dividend stocks? Let me show you what dividend stocks are.
What Are Dividend Stocks?
What are dividend stocks: First of all, I searched Google for the best dividend stocks for 2019.
One of the articles that came up was from Motley Fool. It was a day old and said: Here are the top dividend stocks to buy right now.
In the article they talk about Home Depot, Six Flags, and General Motors.
If we were to take a look at HD for Home Depot, you will see that Home Depot is right now trading at $189. And you see that there is a forward dividend.
What does this mean?
It means that stocks that are being publicly traded often pay a dividend per one share that you own.
So if right now you had one share of Home Depot, you would get $5.44.
Now, how often is this dividend being paid?
It’s paid four times a year. There are companies who are paying it once a month. Most companies are paying it quarterly, four times a year.
The idea of dividend investment
Some people say just buy stocks, they’re not giving you dividends.
As you can see right now, it’s not that good. It’s 2.87%, but it is better than putting your money in a C.D., right? And this is why some people say invest in dividend stocks and then you’re getting paid quarterly.
In fact, I read an article that says how to make sure that dividend stocks are paying all your bills.
Well, first of all, let’s think about it. If you’re buying 100 shares of Home Depot, at $189, and let’s say a few weeks ago it was trading around $200…
If you were to buy 100 shares of Home Depot you’d have to tie up $20,000, and for this, you’re getting $544 per year.
Now, here’s the problem.
The problem is if the stock only goes down by $5, you give up all your dividends.
And if you look at Home Depot right now, it went from a high of $212, all the way down to a low of $158. That’s 25%.
Dividend stocks are only good if they keep going up.
If you look at Home Depot, it hasn’t been going up. Its been going sideways and hovering between $180 and $190, and this is the challenge.
So, I think that dividend income is really, really tricky because you’re betting on the stock going up. When the stock goes down, you give up all your incomes.
Let’s take a look at the other recommendations listed
Six Flags Entertainment
Six Flags, the symbol is SIX. This is another one that Motley Fool recommends.
The yield is a little bit higher at 6.77%, but let’s take a look at what happened here. This year has been decreasing tremendously. I mean, Six Flags was trading at $72 June of last year and now it’s trading at $48.
So if you had bought Six Flags in order to get a dividend of 6%, my gosh… You would have lost 36%.
Now let’s just do a very last quick comparison here because the other stock that they’re recommending is…
General Motors? Really? Let’s see. Are they paying high interest? And again, this article that I’m referring to right now is a day old. It’s from yesterday.
I’m not too impressed.
So here the yield is 4.1% and if you look at General Motors, you’ll see a very similar picture, it’s pretty ugly.
What does this mean for dividend investing?
For me personally, I don’t think that dividend investing is a good approach at all.
Now is it better than putting money in a C.D? No! Not even that, because if you think about it, if you put money into a C.D. or in the money market at least you’re not losing any money.
As you have seen with these dividend stocks, they’re whipping all over the place. And for the past few months, they’ve gone one direction, and this is down.
I really, really believe that dividend trading is extremely risky.
Some people say it’s safe. I don’t think it is.
What should you do instead?
Learn how to trade stocks and take advantage of the small moves.
The cool thing is, when trading you can participate when the market is going up and when the market is going down. And there’s always small moves in between while the market is in a transition.
So right now as I’m writing this, the markets have been sideways for most of March.
And yet, as you can see, in my portfolio, I have stocks where I’m betting on some stocks that are going up and some that are going down, and this is the way to go.
Stock Trading Goal
Because for me personally, my goal when trading stocks is, I want to make sure that I’m making at least 60% per year.
Most of the stocks that I’m trading are at around 70%, 80% so why would you piddle around with dividend stocks that make you 2% or 4% if there are ways how you can make 60%, 70%, or 80%?
And if you’re interested in learning how exactly I do this, go to mytradingroutine.com. Here I have a quick 35-minute video that shows you exactly what I do.
You can also come to one of our free Rockwell Trading Bootcamps. More details including dates and locations are listed at bootcamp.rockwelltrading.com
Was this helpful? Did this educate you on knowing what dividend stocks are and whether it’s worth investing in? Let me know in the comments below.