​THE DIVIDEND INVESTOR

A special type of stock investor that invests in dividend-paying companies. A dividend is a share of a company’s profits, distributed to its shareholders – you, the stock investor. Not all stocks have dividends, but you can easily look up the ones with a great track record. You can essentially own shares of a great company that pay you just for owning it.

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STRENGTHS

Long-term strategy, with short & medium-term opportunities. You get paid the whole way and it can be a reliable income stream if you invest in the right companies. There are solid companies that have been paying and/or increasing their dividends for decades, and will likely remain that way in the foreseeable future.

There can be tax benefits. However, we’re not tax advisors, and you should seek advice in your own country. Dividends are much more liquid and easy to get into compared to real estate.

Low barrier to entry: You could invest in a matter of a few clicks or swipes.

Dividend yields can increase depending on how a company is doing.

WEAKNESSES

Companies can also reduce or even cancel their dividends.

The average yield is low.

TIPS

There are a couple of key points you must understand when investing in dividends:

THE ROLE OF DIVIDENDS

  • Dividends provide you cash-flow, but this cash-flow is not as high as real estate.

  • Regardless, it can set a foundation that will provide for your lifestyle

  • So in the OBL Financial Freedom Algorithm, The goal is to use the cash-flow generated by real estate and dividends to pay for all of your monthly expenses.

  • The question is how much do you really need for it to make a difference?

THE MATH

  • On average, a mix of great companies in a fairly diversified dividend portfolio will yield around 3% annually. Some companies pay you higher yields, but they tend to have poorer financial statements, thus making them riskier.

  • Using an example of $100,000 (a lot for the average person) invested will conservatively yield an average of $3,000 a year. In monthly terms, that will be $250 a month in cash-flow — for life.

  • Dividends are usually paid quarterly.