5 secrets to becoming a dividend investing pro
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5 secrets to becoming a dividend investing pro
Dividend investing has become quite popular among many different kinds of investors, but it seems to still be most popular among older investors looking for a reliable stream of income in retirement. While having that extra income funding your lifestyle in retirement is important, I completely disagree with the fact that dividend investing is only for those nearing this stage of their lives.
The best dividend stocks pay a growing (and sustainable) dividend which can help preserve purchasing power in an inflationary environment. I don’t believe in waiting until you have a lot of money to start dividend investing. I believe in getting a lot of money BY dividend investing.
The truth is, you can become filthy rich if dividend investing is done correctly over a long period of time. A common issue is that most people aren’t willing to wait that long. But if you’re patient and determined, keep reading… because I’m going to be revealing 5 secrets that will turn you into a dividend investing GOD. This quite possibly could be the most important piece of content you will ever read. If you follow these 5 steps, you may be switching out your toilet paper for $100 bills at some point in the future.
Sustainability is key
The best investors find a way to preserve the money they have. It’s hard to compound your money if it’s getting smaller every year. Make sure you’re prioritizing capital preservation just as much as finding the next 10 bagger.
What’s a good way to preserve capital? Make sure there’s some cash flow rolling into your account to make up for any unrealized losses. One of the best ways to avoid massive losses is to buy companies that can sustain their dividend payouts even if the market is falling or the industry is having a rough time.
Another reason why dividend sustainability is key is because if dividend investors believe that the dividend is unsustainable or will fluctuate, it’s likely that many of them will sell out of their positions therefore pushing the stock price down.
If a dividend cut is announced, the stock price will get beaten up again (this time much harder) as even more investors and large funds reduce their positions or sell out entirely.
A good way to check the sustainability of a dividend is by using the payout ratio.
A general rule of thumb: a dividend is considered healthier/more sustainable if the payout ratio is lower because that means the company has room to increase the dividend. If the payout ratio is too high, the company may be paying out too much and may have to cut the dividend if the market takes a turn for the worst.
You’ll learn how to find the best dividend stocks on the market in 5 minutes or less.
