If I invest $5000 in a company with a 6% dividend yield, how much of a dividend would that pay me? Motley fool is making this seem like a great payout, but my math is showing that it would pay me more than $80 a year in dividends.....
A quick note on yield. The quote sites I use are almost never accurate, with regard to yield. They do not calculate yield in real time. Yahoo used to calculate yield a couple of times per week. In fact, I've noticed a tiny bit of arbitrage possibility on stocks with falling prices, prior to the higher yield being published. That came in handy during the recent downturn.
You can do well in the market, over time. At least, you used to. These days, the market is so frothed up with stupid money, it's difficult to know when the music will stop. As long as money keeps pouring in, valuations will continue climbing and everyone will be happy. That could go on for a long time or it could stop tomorrow. As a dividend investor, you will get rich slowly and only if you select well run companies. Companies generate revenue. They should distribute their capital where it will make the highest return. A company like Tesla can make far more with any capital they have than any dividend. It would be insane for them to pay 8% to their shareholders, when they could invest that money into the business and probably earn 25% return for multiple years. Some companies, usually mature ones, don't have high return investment options. In this case, they should look at paying down debt in various forms. If the company has reasonable debt and no high return opportunities, the company should distribute profit to the owners.
Warren Buffett says two things....Go with companies that have the most power, the ones with the most capital that they can make the big moves....in the fintech market, to me, that means Walmart (Green dot), Apple (iPay), Google (Android pay), and Square because they seem equipped to adapt to anything technology requires....but if it go with these powerful companies I'll only have minimal shares... The other thing he says is buy shares cheap, and buy them in groups....but it seems like you needs 100,000's at least to make a fortune....I'm just trying to weigh my options.... The safest bet so far looks like the Voo S&P500 index fund Supposedly if i contribute $400 per month on top of my initial $3000....I'll earn somewhere around $200,000 in 20 years. That's not my idea of money. Im looking to play my cards right, I may just put it all in ford or paypal
The number of shares you have does not matter, it's only percentage rise. If you have 1 share at $100 that goes up 10% you will have $110. If you have a 100 shares at $1/share that goes up 10%, you will have $110. How old are you? It seems like your goal is to get rich quick. If you make 10% a year and contribute a reasonable amount to your 401K, over 30 years you could/should/would have $2M. You can increase your contribution amount as you get older and elevate in your career, have loans you pay off (car/house) allowing more for you to contribute to your nest egg. If you're in your 20's, that means you could be a multimillionaire in your 50's, which is still young. If you take care of yourself, that's 20 years of never worrying about anything and staying active and healthy. See below for the value of your account every year with your given numbers. I made a 2nd chart for you increasing your contribution 5 years down the road by 50% (this could be eased into by adding just a little extra every year, but for simplicity sake just wanted to show how the value of your account would change). Just be careful not watching too many movies, reading too many reddit posts, or getting caught up in the hype of getting rich quick. The people who plan to buy yachts are the ones who continually bust their accounts going all-in and losing it all, over, and over, and over, and over, and over again. 10 years from then, they're right where they were before still trying to make it big. Had they shot for 10% a year, they'd have significantly larger accounts, and those larger accounts making 10% more would be a larger increase every year. Of course that's over-simplified, but you get the idea. The best way to never make it to comfort and no worries is to have reasonable goals.
One of the metrics I used to rely on was $ / $1000. At one point, we could earn $1000 of dividends with $140,000 of stock. That was across our entire portfolio, and included non distributing companies and cash. Needless to say, those days are long past. Lol These days, it's difficult to average $1000 per $180,000. That's over 6% and is a pretty solid *average* return in this market. Chasing companies that have an extreme yield is not the way to make money through dividends. That company that distributes 24% this month is going to distribute 0% next month. You have to look at the books and consider the business operations to understand if the dividend is stable.
In order to understand dividends, you need to understand compounding. I'm not just talking about the definition of the word, you need to understand how the numbers look. Consider the point at which you have $180,000 saved and have $1000/mo of passive income. You might be saving aggressively at a rate of $1000/mo. That means, fully half of your savings growth is coming from your investments. In other words, the next $180,000 will come more than twice as quickly. I say "more than" because of how compounding works. Let's consider two companies that have 8% yield. Great companies. One company distributes annually. The other company distributes monthly. If you DRIP the company that distributes monthly, it will yield over 8.5%. The difference between 8% and 8.5% is significant. The 8% number is normalized to simple, annual, interest but is paid out monthly so it is misrepresented by the yield number. As per T0rm3nted, dividend investing is not a way to get rich quickly or generate big cashflow from small capital. In order to retire, you either need a significant amount of capital or you need to not have many years left to live. To financially sustain yourself indefinitely, it's going to take upwards of $1M and preferably upwards of $2M. Dividend investing will not only help to get you there but it will also cause you to understand how much you need and, by the time you retire, you will understand exactly how much cash flow you can generate with a given amount of money.
So, I was right....in order to make a million, you have to Have a million.... I'm 36, I have no 401k or retirement....I want to contribute everything I can and live very frugally for the next 20 years.....and end up with at least 2 million. There's no doubt that I want to get rich quick, but I also acknowledge that might not be likely. So I'm looking into longer term investing, no longer than 20 years for obvious reasons.... Supposedly if you invest $90,000 in Ford you receive $1000 per month dividend....I'm really trying to make this work....
I'm really not too concerned with dividend payouts.... because I don't have enough to get one, but 2 million in 20 years, I'll take that.... Also, am I correct when saying....If invest $1 into 1 share, that is trading at $1 per share....and that jumps up to $2 per share, I have doubled my investment and now have $2.00? Or is it about a percentage that I don't understand....
Just invest everything you can into a SP500 Index Fund EVERY MONTH for the next 20 years. Reinvest ALL dividends and capital gains automatically. That should get you as close as anything else to your $2MIL. Dont miss a month and NEVER sell no matter what is going on in the markets or economy or anything else. This should give you an average total return of about 10-11% per year LONG TERM.
In the first graph....if I invested double each month ($800 instead of $400), would that allow me to reach my end goal in half the time? I'm guessing no, because I'm losing compound interest that way.... Also, hypothetically, let's say I bought 20 shares of a company at $100 a piece....and 2 months later the trading cost dips down to $40 per share....can I sell my shares and reinvest all the money at the lower cost per share? Is that a common practice....?
Yes, but you would lose money assuming you have a transaction cost. If you have no transaction cost, you'd break even. If you sell them at $40/share, then rebuy at $40/share, you'd be in EXACTLY the same situation minus the transaction fee you lost, for example $4.99.
Ok so it really does not matter how many shares you have....seems odd. It really just has to do with how much $ you invest?
Take a minute,,,, and think about what you just said..... 20 shares at 100 = $2,000 50 shares at $40 = $2,000.... do you see my point.... I guess it would make sense,,,, if it was a dividend paying stock.... you might have a good point there... My only question would be... why in the world would you ride a stock down that much?????? The button you used to buy it... works the other way to...lol..lol..lol
Yes. 10 shares of a $10 stock is $100. 1 share of a $100 stock is $100. If either of them go up 10%, you'll have $110 with both.
