Dividends

Dividends are literally pennies on the dollar (AAPL on 05/06/22 was 53 cents/share), but they offer other opportunities 

• Reduces cost basis of your current holdings 

• Allows you to dollar cost average (DCA) into more shares when you amass enough or to invest into other holdings

• Example

  • You own 600 shares of AAPL at $138/share

  • A dividend of 53 cents x 600 shares would give you $318 and you could purchase 2 more shares of AAPL

  • You could also take that money and purchase other shares of companies you like

Dividend Screeners and Historical Payouts

• See the historical payouts of dividends and screener for stocks/ETFs (eg AAPL dividend history, Dividend Screener)

• Marketbeat.com offers a Dividend Screener to find stocks that meet your criteria

• In some cases, you may find companies that have shown excellent growth potential and dividends

• In general, dividends are great for long term investments versus short term

• There are people who will often purchase shares prior to the ex-dividend date and then sell on the following day or soon after simply to collect the dividend. This can be tricky as a stock could fall during that same time offsetting the dividend gains.

There are actually four major dates in the process of a dividend distribution:

• The declaration date is the day on which the board of directors announces the dividend.

• The ex-date or ex-dividend date is one business day before the date of record. Investors who purchased the stock before the ex-dividend date are entitled to the next dividend payment while those who purchased the stock on the ex-dividend date, or after, are not. The ex-dividend date of a stock is the day on which the stock begins trading without the subsequent dividend value. For example, if a stock is trading at $25.00 and has a dividend of $0.25, at the beginning of the ex-date the stock value will be lowered to $24.75 to reflect the amount that will be paid to investors.

• The date of record is the day on which the company checks its records to identify shareholders of the company. An investor must be listed on that date to be eligible for a dividend payout.

• The date of payment is the day the company mails out the dividend to all holders of record. This may be a week or more after the date of record.

see Investopedia

In all honesty, this has more to do with what you believe in and what you are willing to invest your money into. 

• This is no different from selecting a stock that is a market leader, shows great fundamentals, or great technical analysis

• What is the yield percentage of the dividend?

  • • We do not go by dollar amount as some stocks cost more than others

    • Yield % gives us the return on investment % annually

• Is it optionable? If it is, then you can sell covered calls against your 100 shares while collecting dividends. This can reduce your cost basis quicker and allow you to purchase additional shares (eg AAPL)

Rule of Thumb 

• Look at what institutions are holding; if they like it, there is a better chance that the stock is safe

• Use indexes like QQQ or SPY to look at top performers with a high yield %

• Consider what a company does and whether they are irreplaceable or have the potential to grow. As an example, I personally do not see anyone overtaking MSFT for word processing and other related products as it is the standard for businesses globally; Google docs and other products are not suitable for businesses.

• What are companies that everyone uses or will not go away?