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  • Writer's pictureScott Richter

Buying stocks with dividends

Most of what you’ve seen me do on my Raja Makes Money YouTube and Facebook channels strictly involves day trading/options trading (with a little bit of Bitcoin/cryptocurrency purchasing thrown in for fun). From my personal experience, this is the fastest way to make (and to lose) large amounts of money in short time. But it’s not the only way to make money. Many investors will purchase a stock because it offers a dividend, or a “yield.”

If you’re new to trading, you might not be aware that dividends can be solid income. And that’s while you own a stock, instead of making money only when you sell it (if it’s up), like I often do. And indeed, these dividends are often still more than you’ll make if you just have money lying around, not invested in anything at all. For example, let’s say you have $10,000 sitting in a low-interest bank account (i.e. less than 0.5%). In that scenario, you’re only going to make $50 per year from that interest.

But, let’s say that you instead invest that $10,000 in a stock that pays dividends. While yields can sometimes pay up to 4 or 5%, more recently, with the marketing being as it is lately, you can expect 2 or 3% on the higher end. But even still, at worst, that’s four times what you’re making from letting it sit in that bank account. Wouldn’t you rather have the $200 per year instead of just $50, without having to put in any additional effort at all?

The good thing about dividends is that, so long as the company you’ve invested in has relatively consistent profit year after year, you’re always going to make that yield, usually even if the stock price itself dips. So, if you’re not going to rapidly flip stocks like I do on my channel, then this might be the safer way to go. To put things in perspective, you hear about lots of people who like to “HODL” Bitcoin, but Bitcoin is a cryptocurrency and doesn’t make you any money while you own it. In fact, just like with options, if you sell Bitcoin at a lower price than what you bought it for, then you’ve actually lost money long-term, and you’ve made nothing during the time that you held it.

This isn’t the case with stocks that pay dividends. If a stock with a consistent yield has gone down in price over time, then you can just hang onto it for a while longer, and you’ll still keep making money every year from the dividends until the stock price comes back up again (which, admittedly, is certainly not a guarantee), at which time you may decide to sell it then. So, if you’re more of a long-term stock player, then stocks that pay dividends are something you should definitely consider. I’ve personally seen that a lot of electric/power companies will often pay a higher yield, but before you invest, be sure to do your own research. Now, get to it Money Makers! I don’t care how you make that money, just so long as you MAKE THAT MONEY.

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