Investing in Dividend Stocks
The Declaration Date, which is the date the dividend is declared.
The Record Date, which is when companies review the list of shareholders to determine who is eligible to receive the up coming dividend payment.
The Payment Date, which is the day shareholders will receive the dividend payment.
The Ex-Dividend Date, which is the date the stock no longer trades with the dividend. If you purchase shares on or after the Ex- Dividend date you are not entitled to the upcoming dividend payment.
One of the reasons people choose to invest in dividend stocks is because of the continual flow of income it may offer.
Another reason is the tax credits Canadians may receive for their Canadians dividends.
For many dividend stock investors, a benefit is the Dividend Reinvestment Plan (DRIP). A DRIP is when investors take their cash dividends and turn them into more shares (rather than taking the cash). This may be considered by shareholders who want to acquire more shares without having to pay commission.
Since companies that pay out dividends tend to have good cash balances, they may be considered financially stronger than companies that don’t. This means that some investors may assume them to retain their value in case of an economic downturn, often making them preferred by investors with a low-risk appetite.
Look at their past dividend payout trends. Has it doubled over the last couple years? Or has it been slowly declining? How much has it been fluctuating, if at all? Get a hold of their annual report, spend some time on their website, and immerse yourself in their business model to help understand their growth plan.
However, there’s no guarantee that a company will pay dividends. Take 2020 for example. No one could see that coming. While companies with strong balance sheets are often able to successfully weather a slow economy, even some of the best businesses had to slash dividends during the pandemic in order to save cash.