Dividend stocks allow you to generate passive income, take advantage of stock appreciation, and the whole process can be automated with M1 Finance. M1 Finance automatically invests your deposits, and reinvests dividends back into your entire Portfolio. Sign up with this M1 Finance Link, and receive $10 bonus.
Dividends are payments made by companies to owners of its stock [shareholders]. This is how companies give some of its profits back to investors. Most companies in the United States offer quarterly dividends, and these companies tend to be large corporations that do not need to reinvest a ton of money back into their business.
Yield and Payout
The yield is percentage representation of the annual dividend divided by the stock price on a given date. For example, in 2019 AT&T (T) had a 5.3% yield. The annualized payout is simply the quarterly dividend times the periods. Once you know Yield, and Payout, you can begin comparing dividend stocks.
Generating Passive Income with Dividend Stocks
Dividend stocks offer a unique opportunity to generate passive income. First, buy dividend stocks periodically. Second, reinvest the dividends. Third, Allow the compounding forces to take care of the rest.
Think of it as getting paid for doing nothing. Well, yes, you must own the stock before the EX DIVIDEND-DATE. EX DIVIDEND-DATE is a day before the dividend goes on record.This date is announced beforehand, so investors know the cutoff day. Theoretically, you could own a stock for a few days and be entitled to the next payout. The benefits of dividend stocks do not stop there, with good dividend companies, the shares may go up in value, and you can make more money through appreciation. Furthermore, Dividend stocks are less risky, and less volatile. These are big businesses that would not disappear even during an economic downturn. Lastly, this strategy is meant for the long term.
Automate the whole Process
With today’s technology, the whole investment process can be automated.
1)Open a brokerage account with M1 Finance. I believe they offer the best solutions for a dividend portfolio. They offer very low fees, fractional shares, and automatic rebalancing. Other platforms like Robinhood, or Webull are awesome, but they do not reinvest your dividends automatically. I would use Robinhood, and Webull for trading.
2)Set up automatically recurring deposits to your M1 account.
3)Create a pie or portfolio with stocks that pay a dividend.
4)Set auto invest to ON and when your account reaches $10 from any source, it will be reinvested.
In Conclusion, investing in dividend stocks is an easy way to generate passive income, and the entire process can be automated on M1 Finance at a very low cost. Do your due diligence upfront, and set your investments to autopilot. This process can be started with as little as $100, and will set you up for the rest of your life.