Chances are, if you invest the in the stock market, you have seen some dividends. Today I’d like to outline some of my thoughts on that and explain why every investment you make, one way or another, needs to make positive cash flow.
Some basics: what are dividends anyway?
Stock dividends are a way for a company to distribute their earnings, and attract investors that seek income (like myself). While there are many ways a company can decide to do so, some people argue this is an ethical obligation for a company that makes profit. Some big players though, like Amazon, consciously decide to re-invest those back into the company.
Why do I mostly invest in dividend paying stocks?
While I do not own stocks of many different companies, or a substantial amount of them, I do think that every investment you make needs to produce positive cash flow. Not only that provides a certain return on investment, it also allows me to re-invest those back into my portfolio, which will then benefit from compounding over long term. It is no secret that over long term market always goes up, so why not to benefit from both dividends and positive growth?
Motivational aspect
I am at a stage in my life, where none of the investments I have can make me broke if the market crashes. I mostly invest what I am ready to lose at any moment, and try to maintain long-term mindset. Long term in my opinion is at least a few years. Anyone who has held money in the stock market for longer than a few months knows, that it can fluctuate a lot. That obviously has an emotional aspect to it, which drives most people to sell or buy. Having a diversified portfolio, that pays monthly or quarterly dividends, is a good way to keep yourself on your goal even when the market is down.
Dividend paying stocks grow slower
It is commonly discussed that those stocks that pay dividends grow slower. Kind of like a give-take situation, where in the end you will still earn the same. While that might be true with some, I did not notice a significant difference in my own portfolio. For example, Apple pays dividends, and their stock has been growing pretty steadily.
What stock paying dividend do I own?
Some stocks were chosen by me personally, while others were a part of “Investment pie”, a feature offered by the broker I use – Trading212. An investment pie is created by another user and combines different stocks, that usually have some common theme. For example, “clean energy”, or “automotive”, or, in my case “dividends”. Always make sure you make your own research into those companies.
Here’s the list:
- AbbVie
- Altria Group
- Apple
- AT&T
- Cisco Systems
- Coca-Cola
- Home Depot
- Johnson&Johnson
- McDonald’s
- Microsoft
- Starbucks
- Visa
- Walmart
Some summary
Of course all the thoughts outlined here are up to interpretation, and I have only captured some very basic concepts. I’d love to extend on this topic in the future, and I’ll be sure to link new articles. Please do comment if you have something to add, I am happy to discuss it. Also note that I am not giving financial advice to anyone, rather sharing my thoughts.
I like when my investments produce cash flow. That keeps me motivated and brings money in over time. If you manage to find enough streams to produce you cash flow, you can certainly start to think in terms of living off passive income. I am very early in achieving that goal, but it is my destination nevertheless.