Making Money Through Stock Dividends

What Is It?

Using an online brokerage or bank you buy a portion of a publicly traded company (stocks/shares) for a certain price plus fees. You then hold onto the stock and either monthly, quarterly or yearly you receive a payout from the company based on the number of stocks/shares you own.

How Does It Work?

This starts out very similarly to if you wanted to make money onlinestock market investing.

You setup your account through an online brokerage. Typically the easiest way is through your bank. Next you transfer some initial money to start buying and selling stocks. Using the brokerage’s website or apps, you find stocks you want to buy and it will list the price they are currently trading for. If you want to buy them you put in an order to by X number of those stocks at Y price. Once the system finds someone who wants to sell at those price it automatically makes the transaction and transfers those virtual stocks into your online portfolio. At any time you can do the same process to sell your stocks.

However unlike straight forward stock investing where you want to buy and sell regularly for a profit, this is about finding stable companies with relatively high dividends and then holding onto them. Dependent on the company they will payout their dividend monthly, quarterly or annually to your account in your online brokerage. You can withdraw your earnings at any time.

Advertisements

Compared to other types of investing, this is relatively reliable earnings that is for the most part passive income. Usually the dividends companies payout are not very high, usually 2-5% of the value of the stocks that you own. So if a company has a 3% annual dividend and they pay out monthly then that would be 0.25% of the value of your shares. If you own $10,000 worth of shares then that is $25 per month.

Compared to other types of investing, this is relatively reliable earnings that is for the most part passive income. Usually the dividends companies payout are not very high, usually 2-5% of the value of the stocks that you own. So if a company has a 3% annual dividend and they pay out monthly then that would be 0.25% of the value of your shares. If you own $10,000 worth of shares then that is $25 per month.

Why Isn’t This Recommended For Students?

Two reasons.

The first reason is the amount of money you need to invest. To make a steady, reliable income you would need to invest a very large amount of money ($30,000+). As a student you likely don’t have that money sitting around.

The second and more important reason is that this is also a little risky. Like stock investing, stock price can drop. If you needed to sell your shares for the money then you could potentially be forced to sell the stocks at a substantial loss. Plus dividends can be reduced or eliminated from companies that are not performing well.

Once you have a steady paying job and are looking for a long term way to make some extra money for retirement, this is a great approach to reliably building up a nest egg. Until then I would not recommend it.

Advertisements


Categories: Not Recommended

Tags: , ,

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

shares
%d bloggers like this: