Continuing on my stock market blog where you buy shares to become a part owner of a company. The other way of earning, aside from capital appreciation (buy low, sell high), is through dividend investing. The main goal of companies is to earn profit from their businesses. They can use the profit for further expansion, or they have the choice to give part of their profit to their shareholders in the form of dividends.
Not all companies give dividends in the stock market. Dividend payout differs from company to company, they can either be given annually, semi-annually, or quarterly. You can check here for the upcoming dividend payout for companies, you can also search for the stock that you want to check on whether they give dividends. I like dividend paying stocks because it has the best of both worlds, capital appreciation and dividend investing. This is what I primarily do in COL Financial.
Types of Stocks
There are 2 types of stocks: common and preferred. The main difference is that when it comes to dividends, preferred stocks are more stable and they have a lesser chance of capital appreciation. While common stocks have varying dividend payments, there’s also a chance they don’t give dividends, but they have a higher chance of capital appreciation. Dividends are given to preferred stocks before the common stocks.
You buy preferred stocks the same way that you would buy common stocks, through the stock market. The name of the preferred stocks bear the word “Preferred” or “Pref”. An example is GMA, it’s common stock code is GMA7, while it’s preferred stock code is GMAP. So what should you choose? If you’re starting out, it’s better to choose common stocks over preferred ones so you can maximize the capital appreciation. Personally, I don’t invest in preferred stocks yet.
When choosing a dividend paying stock, there are important dates that you need to check. The most important date is the Ex-dividend date, which is the date set by the stock exchange when the list of stockholders eligible to receive the dividend is finalized. If you want to purchase the stock to get the dividend, then you must buy before the ex-dividend date.
Now that you know how dividend investing works, what company should you choose? You should consider companies that give consistent dividends and good dividend yield. The dividend yield is the result of the dividend amount divided by the stock price. You can check this for top dividend paying stocks in the PH for 2020.
So how frequently should you buy dividend stocks? A good strategy is to do Peso-cost averaging based on the dividend payout. For example, Company X gives dividends every quarter, so you’ll just buy every quarter just before the ex-dividend date. By doing so, you don’t need to time the market. You can watch this for an example.
When you receive dividends, there is a 10% withholding tax, which is lower than the 20% for traditional/digital banks. The best practice is to reinvest the payout by buying more dividend stocks so you can maximize the power of compounding.
We all know that investing in real estate requires a lot of capital, but aside from using Flint where you can invest as low as ₱1000, another way of investing in real estate is through REITs (Real Estate Investment Trusts). REIT allows the public to own shares of big properties with minimum capital and without having to worry about managing the day-to-day operations.
REITs must be listed on the Philippine Stock Exchange (PSE), so it’s similar to a common stock. What’s great about REITs is that 90% of their net income is distributed as dividends. There are currently 2 REITs in the PH as of writing, AREIT (Ayala REIT) and DDMP (Double Dragon Meridian Park) REIT. Other REITs are coming soon such as Filinvest Land, SM Prime Holdings, and Robinsons Land.
Getting out of the rat race
As mentioned in Robert Kiyosaki’s book Rich Dad Poor Dad, we have to get out of the rat race, where we are in a never-ending cycle of working for money to pay bills. That means that when we don’t work, we don’t have income to pay the bills. So the strategy is to accumulate as many assets as possible that give you cash flow such as dividend paying stocks, instead of liabilities that reduce cash flow.
To get out of the rat race, your passive income from your investments should be at least equal or greater than your expenses. Example: if your monthly expenses are ₱20,000 and your passive income is ₱25,000 per month. You can retire and do whatever you want and have peace of mind.
I highly recommend you play Cashflow, where your main goal is to get out of the rat race and be able to buy your dream. Through it, you’ll understand the concept of income, expenses, assets, and liabilities. It’s very addicting and you can play by yourself or with your friends.
I complement dividend investing with MP2 that gives tax free dividends annually, and Flint that has monthly payout. My main goal is to reach financial freedom as young as possible. That’s why I’m maximizing my prime years by earning and investing as much as I can, while I still don’t have dependents.
Always remember at the end of the day that investments is still a volume game. For example, even if your ₱1,000 doubles, you’ll only get ₱2000. Compared to if you have ₱100,000 and only got 10% returns, you’ll still get ₱10,000. You may get 100% returns in stocks, cryptos or other investments, but they are far in between. Don’t focus on getting the maximum returns possible on your investments, to the point of getting scammed, but focus on building your base as getting 10% is more achievable and you’ll still be able to reach your financial goals.
If you don’t find a way to make money while you sleep, you will work until you die.Warren Buffet
29 thoughts on “Dividend Investing: Passive Income for Life”
Good evening. Just a comment that you can still receive dividends even if you sell ur shares on the record date as long as you bought the shares before the ex-date.
Wow! Awesome brother!
It抯 really a cool and useful piece of info. I抦 happy that you just shared this helpful info with us. Please stay us informed like this. Thanks for sharing.
Wow! Thank you! I continually needed to write on my site something like that. Can I include a portion of your post to my blog?
go ahead of course!
What i do not realize is actually how you’re now not really much more smartly-liked than you might be now. You are so intelligent. You know thus considerably in the case of this topic, produced me for my part consider it from numerous numerous angles. Its like men and women are not fascinated except it is one thing to accomplish with Girl gaga! Your own stuffs excellent. Always deal with it up!
Heya i抦 for the first time here. I came across this board and I find It really useful & it helped me out a lot. I hope to give something back and help others like you aided me.
Hey there! I’ve been reading your site for a while now and finally got the bravery to go ahead and give you a shout out from Austin Tx! Just wanted to mention keep up the fantastic work!
Oh my goodness! an amazing article dude. Thanks Nonetheless I’m experiencing situation with ur rss . Don抰 know why Unable to subscribe to it. Is there anybody getting identical rss drawback? Anybody who is aware of kindly respond. Thnkx
This design is steller! You obviously know how to keep a reader amused. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Wonderful job. I really loved what you had to say, and more than that, how you presented it. Too cool!
whoah this blog is excellent i love reading your articles. Keep up the good work! You know, a lot of people are searching around for this info, you could help them greatly.
Great post. I used to be checking continuously this weblog and I’m impressed! Extremely helpful information specially the last phase 🙂 I care for such information a lot. I was seeking this certain information for a long time. Thank you and best of luck.
These days of austerity and relative panic about running into debt, most people balk contrary to the idea of having a credit card in order to make acquisition of merchandise or perhaps pay for a vacation, preferring, instead to rely on the tried and trusted approach to making repayment – hard cash. However, if you have the cash on hand to make the purchase entirely, then, paradoxically, that’s the best time to use the credit cards for several good reasons.
Do you mind if I quote a few of your articles as long as I provide credit and sources back to your webpage? My blog site is in the exact same niche as yours and my visitors would really benefit from a lot of the information you present here. Please let me know if this alright with you. Thanks!
go ahead much appreciated!
You actually make it seem so easy along with your presentation however I in finding this topic to be actually one thing which I believe I might by no means understand. It seems too complicated and very large for me. I am taking a look forward for your next put up, I will attempt to get the dangle of it!
I’m usually to running a blog and i really recognize your content. The article has really peaks my interest. I am going to bookmark your site and hold checking for brand new information.
There is noticeably a bundle to find out about this. I assume you made certain good factors in features also.
Hello, i think that i saw you visited my site thus i came to 搑eturn the favor?I am trying to find things to enhance my site!I suppose its ok to use a few of your ideas!!
Hi my friend! I want to say that this article is awesome, nice written and include approximately all vital infos. I抎 like to see more posts like this.
Thanks for these pointers. One thing I additionally believe is credit cards offering a 0 rate of interest often attract consumers together with zero rate, instant endorsement and easy online balance transfers, nevertheless beware of the real factor that will probably void your current 0 easy road annual percentage rate plus throw anybody out into the bad house quick.
I likewise conceive thus, perfectly indited post! .
I do accept as true with all the ideas you’ve presented in your post. They’re really convincing and will certainly work. Still, the posts are very short for novices. May just you please lengthen them a bit from next time? Thank you for the post.
you are really a good webmaster. The website loading speed is incredible. It seems that you’re doing any unique trick. Furthermore, The contents are masterwork. you have done a wonderful job on this topic!
I have been checking out a few of your articles and i can claim pretty nice stuff. I will make sure to bookmark your website.
You could definitely see your expertise in the work you write. The world hopes for more passionate writers like you who are not afraid to say how they believe. Always follow your heart.
you’ve a great weblog here! would you wish to make some invite posts on my blog?
Enjoyed every bit of your blog post. Fantastic.