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Module 5 Part 2/2: Dividend investing

June 17, 2024
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EasyEquities
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EasyEquities

Dividend investing explained

Welcome to the EasyEquities Mentorship program, where we make investing EASY for you!

We have prepared 6 modules that we will post on FinMeUp over the month of July.

The modules are intended to give investors the necessary knowledge to start their investing journeys.

Lets get into it!

Factors to consider for dividend investing
Dividend yield
Dividend payout ratio
Increasing dividends

Dividend yield

The dividend yield shows how much money investors are getting back for every R100 invested in a single year. For example, Pick n Pay has a dividend yield of 3.66%. This means that for every R100 invested, investors will receive R3.66 every year.

Dividend payout ratio

The dividend payout ratio shows investors the proportion of earnings a company pays its shareholders in the form of dividends. The number is expressed as a percentage.

Companies that are growing typically have a lower payout ratio and companies that are mature typically have a higher payout ratio. A lower payout ratio could result in more capital growth since the company is reinvesting more funds back into the business.

Investors can find the dividend yield on websites such as www.dividendsranking.com and https://simplywall.st 

Increasing dividends

Dividend stocks that increase their dividends year on year are proof that their business model works. Most dividend investors invest in stocks that have increased dividends for at least 5 years. Some stocks have increased their dividends for 10 years, 15 years, 25 years, and even 50 years!

Examples of stocks that have increased dividends for at least 50 years include:
Procter & Gamble Co.
Johnson & Johnson
Coca-Cola
Target Corp.
Kimberly-Clark.

Investors can find out how long businesses have increased dividends from many websites. One of our favorite websites is https://www.dividend.com

 


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