The real MVP this week is… (Dividend Stocks)
This week’s MVP is Daylight Savings, for giving us all an extra hour of sleep after Halloween. 🎃 👻 Is that Michael Bublé we hear warming up for his 2-month shift?
Everyone shopping the day after Halloween
Are we the only ones refreshing our screens everyday this week? Watching the Dow has truly gotten us at the edge of our seats. After last weeks’ performance, it’s been truly fun seeing it soar for four consecutive days. However, given how things are going this morning, it looks like the surge might run dry, as markets tend to do. Such is life.
If you ever want to ask us anything, provide feedback, submit a request or tell us when you think it’s appropriate for stores to start selling Christmas decor, feel free to email or DM us on IG or Twitter. 🙃
This Week’s Biggest Headlines 🚀📉
- Elon Musk just dropped a
new mixtapeline of tequila, which apparently started out as an April fools joke. Originally coined Teslaquila, Tesla Tequila tells us one of two things about Musk: (1) he has way too much time on his hands; (2) everything he touches turns to gold. You can find out for yourself – a bottle of liquid gold, lightning-bolt bottle and all, is available for purchase for $250 a bottle. Read more.
- Ant Group’s IPO was suspended after Jack Ma forgot to read the entire room he threw shade at. The historic $37 billion IPO was just days away from its debut to Shanghai and Hong Kong markets before being pulled by Chinese regulators and Communist Party officials. Who was in this alleged room? Chinese regulators and Communist Party officials. To rub salt in the wound, Ma compared Chinese banks to having a “pawn shop mentality.” Read more.
- After TikTok said “nah” to Walmart, Comcast was like “hey, I have an idea that has nothing to do with social media.” Walmart is being courted by Comcast with a new proposition: smart TVs. It makes sense for both. Walmart sells TVs, so what’s wrong with selling one more – and getting even more revenue from each sale? Comcast recently launched Peacock, its own streaming service, and is looking to boost its subscribers. A smart TV that rivals the Samsungs and TCL’s of the world is just what we all need. Read more.
- ByteDance is looking to IPO one of its businesses. Douyin, also known to Americans as “not TikTok” and to Chinese as “our TikTok,” has grown to 600 million subscribers – from 400 million since February. The company is looking to raise $2 billion before going public on the Hong Kong stock exchange, which brings the valuation of ByteDancet up to $180 billion. ByteDance is still working through a potential sale of TikTok’s U.S. operations. Looking at its extreme growth over the last few years, it makes sense why ByteDance is considered an “app factory.” Read more.
Let’s not forget “the usual” 💸 💻 🦠
- Unemployment has dipped slightly. Last week, we reported that the week prior to last received 751,000 first-time unemployment claims. Since then, the number was revised to 758,000. The data that came in yesterday, however, coincidentally states that last week’s numbers were 751,000. This is a really small drop, considering the previous week had declined by 40,000. Read more.
- A stimulus is a top priority for the Senate when it returns on Monday.Senate Majority Leader Mitch McConnell originally stated that a stimulus was off the table until 2021, but is now suggested he’s open to passing one this year. Read more.
- COVID is that email list you don’t remember signing up for and swear you unsubscribed from. It just won’t go away. On Thursday, a record 122,000 cases were reported – that is 85 per minute. Nearly 250,000 deaths are reported so far. Read more.
You can make a livable income off of dividend stocks (and not have to sell for profit)
Dividend stocks are companies that pay dividends (usually cash) to their shareholders, typically two to four times per year. There are several reasons a company may offer a dividend: to draw in quick cash, dilute their price per share, or increase their trade volume. These payments may take the form of cash, additional stock, or even property, in rare cases.
You want to make sure that the stock doesn’t carry too high of a yield for your portfolio (which may signal high investor turnover or unsustainable payouts) or a payout ratio over 100% (which indicates the company is going into debt to cover its dividends).
When you purchase a share of a company, what you’re putting money toward is owning a piece of that company. Ideally, you’ll then be rewarded with an increase in value when the stock price shoots up – which is when you can cash in on your investment.
Some investors, though, prefer to earn their money in the market another way: with dividend stocks. In short, these are companies that pay out dividends (often in the form of cash) to their shareholders.
For income-oriented investors, dividend stocks are a great way to make sure you see some return on your investment – so long as the company keeps paying out.
When – and Why – Do Companies Pay Dividends?
Typically, stocks that pay dividends are issued by well-established companies with consistent profits. It’s rare to see startup or growth-oriented organizations distribute dividends, as these companies usually prefer to reinvest their profits and expand their operations.
Furthermore, companies with debts on their balance sheet may opt to allocate incoming revenue toward decreasing their liabilities, rather than toward their shareholders.
Companies that aren’t sure they can maintain their payments may also refrain from offering dividends to avoid slashing payments in the future.
For those companies that offer dividends, they may do so for a variety of reasons. Some may be in need of quick cash and throw out a line to reel in more investors (the bait here being the dividend payment). Others may desire to lower their price per share to increase liquidity and prompt increased trade volume.
How Do Dividend Stocks Work?
For every share of a dividend-paying stock that you own, you receive a dividend payment. How much you receive is dictated by the company and how often they pay out dividends.
To give an example, let’s say that you own one share of the Hairy Walrus Company. They pay out an annualized dividend of $1.00 per share on a quarterly basis. This means, that once per quarter – or four times per year – you receive $0.25 for every share that you own.
While this may not seem like a lot on its face, that money can add up quickly – especially if you reinvest your dividends to purchase more assets.
Two Kinds of Dividends
There are two types of dividends you may receive from your shares.
The first and most common type is cash dividends. This money is paid out from the company’s profits and is divided among stockholders according to how many shares they own. Individuals who purchase preferred stock will receive their payments first, followed by common stock shareholders.
There are also rare occasions when a company may pay out one-time dividends. Typically, these payments follow instances such as litigation, acquisitions and losses, or investment liquidation. One-time dividends may come as cash, stock, or property.
Dating Your Dividends
There are four important dates to keep in mind when it comes to stock-paying dividends.
- Declaration date: when the Board of Directors approves and announces the next dividend, date of record, and payment date
- Ex-dividend date: the cutoff for investors to buy into a company’s stock and receive a dividend on the next payment date. This date typically falls on the second business day before the date of record.
- Date of record: when the company must review its books to determine who holds stock. Any investors not listed on their rosters on this date will not receive a payout on the payment date.
- Payment date: when shareholders receive their dividends
The Bottom Line?
Dividend stocks are good. If you get enough of it, you could make a livable income – and not have to work a 9 to 5!. Or, you can reinvest that money into even more assets! A true win-win and totally ideal for people who want to make money from investing without having to sell for profit. This is a dream scenario for many of us who fall victim to FOMO, even in the most simplest forms of life. It’s a great way to buy and hold stocks while still managing to make money at the same time. 🤑
Irrational Exuberance: Revised and Expanded Third Edition is written by Robert Shiller, the Nobel Prize–winning economist who warned investors about the financial crisis in 2008 as well as the Dot Com bubble burst in 2000. In the expanded third edition, the book covers ever major asset market and explores the signs in which a bubble burst can be recognized. It also recommends policy changes that could prevent this from happening again in the future and offers ways investors could decrease their risk before the next bubble bursts. A good read for investors who wish to hold onto the money they earn.