Singaporeans generally are attracted to the idea of dividend stocks investing. This is because we are living in a country where we pay no tax for our capital/dividend gains! If you build a portfolio big enough, eventually, this can replace your active income (which is taxable) with one that isn’t taxable. Who wants a portfolio that can gives you $10,000 passively every month?
With every awesomeness comes some form of luck, perseverance and financial planning. We have probably met people who are lucky. Money seems to flow their way when you gamble with them during Chinese New Year. However, have you wonder why they have not become financially free even with all the luck? The way to stay rich is to have perseverance and a good strategy.
Today we are going to share a simple way to start.
Step 1: Know what is a dividend stock
A dividend stock is one that gives out dividends. A dividend is one that pays out a sum of money regularly by the company to it’s shareholders out of it’s profits (or reserves). Some companies don’t give out dividends because they would use the profits and reinvest by buying a factory for further growth (for example). There are many companies in Singapore that gives out dividends. A simple search on www.sgx.com will give you a result of more than 300+ companies that you can investing in for dividends.
You can see the dividend yield varies wildly from 0.5% to 8.2% (in this photo)
Step 2: Know what is your dividend yield
Now you know where to find your dividend stocks, what yield are you getting? The dividend yield will tell you just that. Let’s assume you have $10,000 and want to invest your money into 800 Super Holdings. A dividend yield of 2.87% will translate to $287 per year. Consider bank interest rates are at 0.05% now, which translates to $5 a year. Wouldn’t this be a smarter way to deploy your money?
Step 3: Know what kind of payout ratio the company is giving
Remember the good old days where we get money for allowance from our parents? Wasn’t it such a distant but sweet feeling? I asked my friends and most of them were getting $2 per school day (in my generation). This translates to around an average of $50 a month. (Just what has inflation done to us!). Now, it will only make sense that our parents were to earn more than $50. Otherwise, where would they find the money to pay for the flat, buy food and take us out to the toys”R”us.
The same logic goes in the stock market. If the company earns $1 million but gives out $2 million as dividend, I would stay very far away from this company. How can they sustain this?
Step 4: Know that it is a fundamental stable stock
Your $10,000 investment can be flushed down the toilet if the stock isn’t fundamentally sound. Consider that you are lending money to either DBS and Dubious Bank A. Which bank will you feel more confident in investing? I probably will put my money investing in DBS as compared to Dubious Bank A. There are many ways to find out whether the stock is fundamentally sound, you can find out more at stock investment Singapore. After that, create a portfolio of dividend stocks that you like to own.
Step 5: Get started (Actually, this is step 1)
You have already got started if you are reading this article.
Half a year of 2017 is gone and if you are looking for something to do to upgrade yourself, why not invest in yourself picking up better stock investment skills. We strongly recommend these stock investment courses for you to consider, suitable for different experience levels.
In Journey with money, we want to empower individuals to retire early and avoid financial pitfalls such as this. Such a financial pitfall will delay retirement by at least a decade if not forever. If you already have a financial plan or a financial planner, that’s fantastic. You should be proud that you have taken the first step. However, there are many still unaware of this. We will like to offer our readers (even if you have a plan already or not) a free review by our in-house Financial Planner. He will cater a uniquely designed portfolio for your specific needs and your journey with money.
Feel free to leave comments below or contact him at firstname.lastname@example.org