If you’re new to buying dividend stocks, it is important to know which dividend stocks are preferable in advance. That’s because not all dividend stocks are affordable or will be profitable in the long run. So it pays to do your due diligence way ahead of the time of purchase.
Best Five Dividend Stocks to Buy
Lowe’s Companies, Inc. home improvement retailer is considered a “Buy” option by analysts because it is still posting a solid performance in the market despite being hit hard by retail theft resulting in certain inventory shrink.
Realty Income Corp. real estate investment trust is another darling of the analysts and is listed as a “Buy” option. The most notable news about this company is that it is investing in Bellagio Las Vegas for a 22% stake.
Chevron Corp. -Analysts recommend this stock of this US-based integrated energy and chemicals company as a “Buy” as well. The petroleum giant is also investing in an electric vehicle charging company named Electric Era.
Target Corp. – It is a US-based general merchandise retailer in the discount stores industry that has also earned a “Buy” status from analysts. Target recently revealed that it is releasing more affordable toy products in anticipation of the Christmas holiday season.
Starbucks Corp. – This company which operates a chain of specialty coffee shops in the US and in different countries garnered another “Buy” rating from analysts after it released a statement that it will reportedly invest in more branches within the US.
What to Look for in Dividend Stocks
If this is your rookie foray into dividend stock trading, it is important to be aware of certain factors that can influence your stock trading success.
First of all, you need to look into your own motivation for wanting to invest in dividend stocks. This is important because of the investment horizon that each investor has. Some may want an immediate return on their investment so this kind of investor might not want to wait until dividends are issued. Others may be more patient and prefer a stock that will perform well and produce generous dividends instead.
Second, you need to know whom to approach if you want to buy dividend stocks. One way is to invest in mutual funds that will manage the shares for you. If your taste is more “refined”, you may try dividend exchange-traded funds since these usually trade in only the best stocks in their portfolio. Or you can invest by yourself without passing through a fund manager or stockbroker. Understandably, none of these three methods is 100% safe or will allow you a 100% return on your investment. So you need to do your due diligence about the mutual fund company, fund manager, or stockbroker that you contact before you start investing. The good news about investing by yourself is that your earnings go directly into your pocket without giving a commission to any investing professional.
Third, ask yourself where you intend to use the earnings. This is quite important and will influence the speed at which you want to profit from stock trading. Some investors want to build a nice little retirement fund in anticipation of the time they stop working or are let go by their employer. Others may want a continuous income stream so they want to trade hard and fast so they can realize some serious profits along the way. There are also investors who are a mix of these two investor profiles. Remember, it’s up to you.
Fourth, how big a dividend will satisfy you per stock you buy? The earnings may be coming in swiftly but the amount you receive might not satisfy your sweet tooth sufficiently. In this kind of scenario, it would be best to examine the market performance of the stock over time so you won’t be disappointed and frustrated if the dividends you receive don’t match your expectations.
Fifth, do have a look at the dividend history of your preferred stock. This will show you the timeline of the payouts of your dividend stock over the previous years. You can see the stock performance of your dividend stock in quarterly mode, and the amount of each payout for each share.
Sixth, the industry your dividend stock company is doing business may perform better or worse than other industries. And there are particular sectors within each industry that may outperform the rest. So you cannot generalize that “my dividend stock is doing badly” unless you can compare it to its competitors within the same industry and sector. Some industries will naturally perform better than others for reasons that do not hold true for other industries. It pays to be specific.
Seventh, do not get carried away by the PR machine of startups or IPOs. Yes, sometimes there are literally gems in stock trading that happen to be startups or have launched their IPOs. But if you are not an expert in the industry that those startups and IPOs operate in you might be blinded by the hype. This is also why some prefer to invest in mutual funds or actively managed funds – you can’t be an expert in every industry so sometimes it makes more sense to listen to an expert instead.
Eighth, what goes up may go down, even within the same trading day. It is possible that a dividend stock that was highly profitable in the morning may sink down significantly in the afternoon. This is why it sometimes can be better to let an experienced fund manager handle your stock trades – this professional might be more skilled at judging the timing of the market than you. Also, an experienced fund manager would not panic when the market turns but would instead control his investment activities to avoid costly losses for the investors he represents.
Conclusion
As you can see, dividend stock trading and investing is a fascinating topic. This may be why many investors, such as the famous Warren Buffett, are willing to keep investing over time. There is much to learn about dividend stocks – hence, experience is often the best teacher. If you are cautious yet educated enough, you might literally be the next Warren Buffett though it remains to be seen whether you will be as successful as him in the world of dividend stock trading and investing.
Hailing from the bustling metropolis of Metro Manila, Philippines, Eleanore Hatta is BizTech Africa's trusted crypto news correspondent. With over a decade of experience as a content writer, Eleanore has honed her expertise in the world of cryptocurrency, with a keen focus on issues like the FTX exchange.
