A thorough analysis of dividend investing to reach our number
How much money would it take to make $100,000 each year through dividend investing?
Dividend stocks are attractive investments because most of them pay you each quarter just for holding onto them.
Some companies pay monthly, bi-annual, or annual dividends, but most stocks pay a quarterly dividend.
Some companies like Apple pay a measly dividend (0.71% yield as of writing). These are growth companies which will raise their dividends over time and are still prime for stock price appreciation.
Then there are stocks like AT&T that offer juicy dividends but dimming growth prospects. Their 7.48% dividend yield is higher than most stocks, but the dividend doesn’t offset the fact that AT&T stock’s returns have consistently underperformed the market.
As a dividend investor, it’s important to buy solid companies primed to appreciate and increase their dividend payments over time. Just because a dividend stock provides a high yield doesn’t mean it’s an attractive investment.
To figure out how we’ll reach $100,000 each year through dividend, we need to know two key numbers:
#1: The current dividend payments
#2: How much those payments grow each year (dividend growth rate)
While the dividend yield will change each day in relation to the stock’s price, the dividend payments will stay the same unless a company decides to cut or slash their dividend.
For this analysis, we’ll use Texas Instruments (TXN), a stock with growth opportunities and a growing dividend.
TXN is priced at $149.96 as of writing and offers a $1.02/share dividend per quarter. They increased dividend payments by 13.3% this year and have raised it by 15% or more over the past few years.
The higher the dividend yield and the dividend growth rate, the sooner you will make $100,000 each year through dividend investing.
The only significant hurdles that can get in the way are a company slowing down its growth rate or…
I'd be delighted to dive into dividend investing with you! Let's break down the concepts and insights within the article you mentioned:
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Dividend Investing Basics: Dividend investing involves buying stocks that pay regular dividends. These dividends are typically paid out quarterly by most companies. Dividend stocks are appealing because they offer income to investors just for holding onto them.
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Dividend Yield: The dividend yield is the percentage of income generated from dividends relative to the stock price. Companies like Apple may offer lower dividend yields (0.71% in Apple's case) but are considered growth companies, potentially increasing dividends over time.
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Balancing Growth and Dividends: There's a trade-off between high-yield dividends and growth prospects. Stocks like AT&T offer high dividend yields (7.48%), but their growth prospects might be dimming, affecting stock performance relative to the market.
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Choosing Solid Companies: As a dividend investor, it's crucial to select stable companies with potential for stock appreciation and consistent dividend growth. Merely having a high dividend yield doesn't guarantee an attractive investment.
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Factors for Calculating Dividend Income: Determining how to reach a specific annual dividend income involves understanding two key numbers: the current dividend payments and the dividend growth rate.
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Case Study: Texas Instruments (TXN): Using TXN as an example, the article highlights its stock price, current dividend per share ($1.02 per quarter), and its growth history. A 13.3% dividend payment increase this year and consistent increases of 15% or more in recent years indicate a strong potential for dividend growth.
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Impact of Dividend Yield and Growth Rate: Higher dividend yields coupled with strong dividend growth rates can expedite the path to achieving a significant annual dividend income, such as $100,000 per year through dividend investing.
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Potential Obstacles: Companies slowing down their growth rates or unforeseen market changes can impact the projected dividend income.
Understanding these concepts is key to successful dividend investing. It involves a strategic balance between high-yield dividends, potential growth, and the stability of the companies in which one invests. The article showcases the importance of analyzing dividend-paying stocks with both short-term and long-term perspectives.
