When people invest in stocks, they usually think about the price going up so they can sell it for a profit. But there’s another way to earn money from stocks: dividends. A dividend is a payment a company gives to its shareholders, usually every few months. It’s a way of sharing the company’s profits with the people who own a piece of it.
Not every company pays dividends, but the ones that do are often large, stable businesses that make steady profits. For example, companies like Coca-Cola and Johnson & Johnson have been paying dividends for decades. If you own 100 shares of a company that pays $1 per share in annual dividends, you’ll get $100 every year just for holding those shares. That’s money in your pocket without having to sell your stock.
Now here’s where DRIPs come in. DRIP stands for Dividend Reinvestment Plan. Instead of taking your dividends in cash, you can choose to automatically reinvest them to buy more shares of the company. This is a great way to grow your investment over time, especially if you don’t need the money right away. It’s like putting your money on autopilot and letting it build up little by little.
Dividends and DRIPs are powerful tools for long-term investors. They can provide steady income, help you grow your investment faster, and reduce your risk. Even if the stock market isn’t skyrocketing, those regular payments can add up and give your portfolio a solid boost over the years.
Let me know when you’re ready for me to continue with the next four lessons! (Growth vs. Value Stocks, Cyclical vs. Non-Cyclical Stocks, Blue Chip Stocks, Small Cap vs. Mid Cap vs. Large Cap Stocks) or if you’d like to review or tweak these first
