Investing in dividend stocks is a powerful and safe method for building wealth. Then practice what you've learned with our free stock market simulation.
Best Dividend Stocks
|JNJ||Johnson & Johnson|
|WFC||Wells Fargo & Co.|
|XOM||Exxon Mobil Corporation|
|DUK||Duke Energy Corp.|
|BX||Blackstone Group LP|
|KMI||Kinder Morgan Inc.|
|SOHO||Sotherly Hotels Inc.|
What Are Dividend Stocks?
What is a stock dividend?
A stock dividend is essentially a dividend payment made in the form of additional shares instead of the typical cash payout. If a company’s tight on liquid cash, it may decide to distribute dividend stocks to shareholders instead. They’re typically acknowledged in the form of fractions paid per existing share owned. Depending on the company, the payout frequency of their dividend will differ.
The shareholder can keep the shares and hope that the company will be able to use the money not paid out in a cash dividend to earn a better rate of return. Alternatively, the shareholder could sell some of the shares for cash. The biggest benefit of a stock dividend over a cash dividend is that shareholders don’t have to pay tax on it. If a stock dividend has a cash-dividend option, then tax does need to be paid (even if the shares are kept instead of the cash!)
How do stock dividends work?
A stock dividend is kind of similar to a stock split, in that a company will issue new shares to shareholders in proportion to their shares outstanding. A stock dilution of 25% or greater is considered a split. Stock splits simply reduce the par value per share of stock outstanding. In contrast, stock dividends require the shifting of retained earnings into the company’s capital stock account, which reduces the cash available to pay out classified as a dividend. Cash paid out that is greater than retained earnings is classified as a return of capital.
Stock dividends are typically in the 5% to 15% range. If a company pays a 10% stock dividend, it means that each shareholder will receive one new share for every ten shares they own. After the dividend is paid out, a shareholder with 100 shares will then own 110 shares.
Finding Dividend Stocks To Buy
Dividend stocks are appealing to both passive and active traders. A good dividend stock has a high yield but can also be bought at a good price. If you can’t get the stock at the price you want, wait. Or look for another opportunity. Stock prices are constantly fluctuating, so new opportunities arise every few weeks. Use a tool like FinViz to screen for stocks that meet your dividend criteria.
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We have been tracking ALL of the Motley Fool stock picks since January 2016. That's over 5 years and over 120 stock picks. As of Friday, January 1, 2021, 21 of their 24 stocks picks from 2020 were up and the average return was 78% compared to the SP500's 19%. Take a look at some of their 2020 picks:
- Lemonade (LMND) - Dec 3, 2020 pick is up 52%
- Autodesk (ADSK) - October15 pick is up 21%
- Fiverr Intl (FVRR) - Sept 3, 2020 pick is up 67% in just 4 months
- CrowdStrike (CRWD) – June 4, 2020 pick is already up 120%
- ServiceNow (NOW) – May 7, 2020 pick is up 44%
- Zoom Video (ZM) – April 16, 2020 pick is up 124%
- Shopify (SHOP) – April 2, 2020 pick and it is up 226%
- Zoom Video (ZM) – March 19, 2020 pick re-recommended and it is already up 172%
- DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 22%
- NVTA picked February 6, 2020 is up 88%
- Tesla (TSLA) picked January 2, 2020 before the crash and it is up 720%
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