@CEY @dk1 thanks for the replies both, appreciated!
Another question - If I was to invest in a dividend paying company, do I have to own the stock for a certain amount of time before they pay? Whatās stopping me investing all my money a week before, then cashing out a week after they pay out?
You only need to own the stock on the ex dividend date, in practise this means you need to buy it before close of play the day before the ex-dividend date.
Thereās nothing to stop you doing that, except that it doesnāt usually work. The stock tends to rise just before ex-dividend date and drop back by approximately the value of the dividend straight after
The best way to make money with dividend stock is to reinvest the dividends so you get compound returns over the long term
This is why its not a good idea to buy the stock right before and sell it after the div gets paid out. Donāt even think of that ā lots of people lost money as they thought they can outsmart the system.
Exactly, In an efficient market with good liquidity any trick you can think of will get evened out by traders and algorithms who can buy and sell faster than you!
Just focus on good strong companies that have been paying out div constantly over long period of time and also have increased their div step by step over the years. Have a look at their balance sheet and their cash flow (get yourself familiar with these two elements and you are already smarter than 99% other investors). Including your personal margin of safety (how much risk do you want to take) you can make a very good decision in investing in div stocks for the long term.
There are some companies with very long histories of paying good dividends
For example Shell have not cut their dividend since WWII, so even though their dividend is around 6% I wouldnāt be too concerned
If a company operates in a mature market and there is not the opportunity for huge growth from reinvestment, but they still make lots of cash. Dividends are a good way of sharing profits with shareholders.
@Dave let me play devils advocate: Yes Shell ticks a lot of boxes for a good div paying stock but how do you think about investing in a company that is focused on a depleting commodity? So there are more questions you need to answer before investing in a company. I personally feel uncomfortable investing in a company that relies on a commodity.
Oil is going away anytime soon. I think there are probably decades of dividends to be had before that becomes a problem.
I agree. This should be a good discussion in the future 
I just wanted to point out that there is often more to look out for (especially based on personal preferences). Would you invest in a tobacco company even though they pay you lots of DIV ? But I see this is going into a different directionā¦
I think diversification is key here. I would invest in tobacco companies for dividends, but I wouldnāt go all in. People have been predicting the end of smoking and burning oil for decades but thereās no sign of it slowing down yet
Again true ! I was hoping to make a bit of a change and invested in Tesla and we all know where this is going right now hahaha.
There is an ethics question as well with tobacco and oil, Maybe more so with tobacco as it doesnāt really have a good side, at least Oil provides energy and transport. but I kind of think I canāt change the world with my investment decisions, might as well try to make a few quid off them.
Guess you can take any company and find out that they have been doing something ābadā ā¦ Investing in Coca Cola for example ā¦ do I contribute for rising obesity rates in the world ?
Thereās been some good discussion about that in the ethical investing topic too -
maybe thatās food for thought?
Some ETFs pay a decent dividend, eg IShares UK Dividend Plus (IUKD) pays a current yield of 6.51%
Iām sure there are others that you can research also which are available with Freetrade, so you get some diversification and dividend income.
I donāt think anyone directly answered this. I donāt think there is any sound theory along those lines, no. Your long term portfolio only has to increase in value over time. In theory you donāt need to care if this is done by the share price of stocks increasing (āgrowthā), or by receiving dividends that you reinvest by purchasing additional shares.
But due to potential tax and dealing charge implications (ā¦ however largely negated by a freetrade ISAā¦), on balance a wise investor would prefer growth stocks.
Youād only switch out to high-div stocks if you needed income in retirement.
Some great points in this thread. Hereās my two penniesā worthā¦
I like the core-satellite strategy, so I have most of my money in tax-wrapped passive investments and Iām slowly adding a high-yield portfolio as a satellite through a Freetrade basic account.
Why? First, Iād like to learn more about investing; second, I like the idea of having separate pots; and third, I think dividend payers are easier for relative novices like me to get your head around.
As mentioned above, high-yield ETFs are not a bad shout. A word of caution though: some seem to pick stocks in a yield-at-all-costs manner.
Evraz and Plus500 are IUKDās top two holdings, for example. The 15-30% dividend yields may be enticing but theyāre certainly not for the faint-hearted!
If you do go the income route, for me at least, the biggest factors are size of company, yield, dividend cover, dividend growth record, debt levels and sector diversification.
Some very interesting replies here, thanks a lot everyone - really informative.
Hi jspen, I donāt think anyone would suggest that you āshouldā do anything when it comes to investing.
You need to do plenty of research to decide what works best for you. There are many free places online where you can get professional information. Seeking Alpha, Investor Place, Market Watch are just three that come to mind. See what they say about Dividend Stocks and mull it over. Read as much as you can. The FT at the weekend is great. Investors Chronicle has good info too. Get books to educate yourself as much as possible on investing.
I love YouTube for an easy and quick way to get information. I have a number of favourite Youtubers who I listen to almost on a daily basis. Alessio Rastani is great.
I highly recommend Kenny Robinson if you want to learn more about Dividend Stocks and investing. Hereās one of his videos: Living off of Dividend Stocks - YouTube
Do a search on YouTube for Dividend Stocks and see what other Youtubers have to say too. Certainly, Kenny has persuaded me that itās time to invest in Dividend Stocks. Also, the FT Money section in last weekendās paper had a column saying Growth Stocks are coming to the end of their cycle and that now is the time to go into Dividend Stocks. Thereās possibility of a global recession within the next 12-18 months, and it is expected to be more hard-hitting than 2008.
Be aware though that the stocks with the highest dividends will be riskier. Lower dividends are not bad to shoot for. It really depends on your risk level but a well diversified portfolio should help balance out your portfolio when we hit another recession.
But before you start throwing money at stocks you need to do your due diligence. And patience is also a key: buy low and sell high. Donāt chase stocks that are rallying.
Iām going to list some of the stocks that Kenny recommends some time soon.
Hope this helps.
