Dividend Paying Stocks

Ahhhhh, "Dividend Paying Stocks". What a wonderful thing to have in your portfolio. I know for myself, I certainly like the thought of getting paid several times a year with minimal effort on my part producing a stream of passive income.

Well, depending on the stock we're talking about anyway. If we're talking about receiving dividends from our holdings in MCD, frequent trips to McDonald's may just help to boost our long term earnings!

That's okay though, who doesn't like McDonald's? Which may be exactly why it's a potential dividend paying stock to consider for a portfolio.

A company that pays out dividends, is choosing to share the wealth so-to-speak. They dedcide that to attract and keep shareholders, and try and keep them happy, they offer a percentage of their expected earnings to be distrubted to each shareholder, based on the number of shares each person holds.

If a dividend of $0.50 a share is announced and you own 1000 shares, you'll recieve $500.00 when the dividend is distributed. If this is a quarterly dividend, you'll potentially receive $2,000.00 for the year.

Different companies pay out dividends at various frequencies. Some pay out monthly, while others pay quarterly or annually. Once in a while you may even be lucky to receive a "special dividend" in addition to the regularly scheduled dividends paid out.

I remember back in November, 2004 (I looked up the date but I remember this incident) Microsoft announced they would be paying out a one time special dividend. At the time, they were paying an $0.08 quarterly dividend on a mid-$20's stock - nothing to write home about.

The special dividend was announced and they paid out a one time dividend of $3.00 which attracted a lot of interest from investors.

Looking back, not only has the stock for MSFT gone nowhere for the last 10 years (a perfect example for the saying "a lost decade"), but if you were using some type of Covered Call Options writing strategy with MSFT, you probably could have lowered your cost by now to under $15.00 a share, possibly even lower.

Dividend Paying Stocks

Without my example of MSFT above, if you're interested in dividend paying stocks, be sure to do research and select high quality companies that are worthy of being in your long term portfolio.

High quality may mean something different to each of us, but in general, don't select companies that you wouldn't buy their products yourself, nor companies that have huge debt with declining earnings. Of course you'll have to come up with additional requirements to suit your needs.

If your trying to take advantage of dividend paying stocks for a short term trading strategy, be sure to learn about announcements, payout dates and what date you must be a shareholder of record thru in order to receive the dividend. Just because a stock pays out a dividend on the 15th of October, for example, doesn't mean that if you buy the stock on the 14th and sell it on the 16th, you'll receive the dividend. There's more to it than that.




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