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Buying Dividend Paying Stocks

The following is a guest post written by one of our readers and friends, Bryan Postern.

There are many advantages to investing in dividend stocks. Most dividend paying stocks outperform those that do not pay dividends in both the short and the long term. Besides the obvious advantage of getting better returns over time, there are several “hidden advantages” to investing in dividend paying companies.

An investor focused on putting his or her money into top dividend stocks needs to do a sufficient amount of research. They should make sure that the company is profitable, that the dividend yield is significant [over 2%], that the dividend has been increased over time, and that the company is poised to grow and become more profitable each and every year. After the initial purchase however, things should be on autopilot for the most part.

Dividend investing is not about trading and trying to make a quick buck; it is about buying and holding for as long as you can. You should still monitor your investments and make sure that the companies you are investing in are still doing well, but the work involved in dividend investing does not even compare to other types of investing. When you are investing in dividend paying companies and you plan on buying and holding for the long term, you only need to be correct once, in which company/companies you buy. When you are trading or at least more active in trading, you need to be right three different times to be profitable. You need to be correct in your assumptions of what company to buy, when to buy it, and when to sell it. I do not know about you but it is hard enough for me to be correct once, let alone three different times. If professionals have a hard time profiting from rapidly buying and selling companies with little rhyme or reason, what makes you think that you would be successful in doing so? Warren Buffet did not make 40+ billion dollars from investing in companies he knew little about and then quickly selling them. Buffet buys a stake in a company and expects to hold the company for decades, not days, weeks, months, or even years.

There are less low points in dividend investing. This is a documented fact. You will not completely avoid recessions, depressions, or simple downturns in the market by investing in dividend paying companies, but you will experience higher and less “lows”. Dividend paying companies are much more stable then companies that do not pay out dividends for several reasons. Dividend paying companies tend to be profitable and they tend to trade at lower valuations. Also investors do not put their money into dividend paying companies with the intention of selling the next day, they buy and hold these companies for the most part.

There is simply much less risk involved in dividend investing. Not only will you get better returns in the long run, your portfolio will be more stable and you will not have to do nearly as much work. It’s a no brainer

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Buy Stocks Online: Scottrade

Please note: This is a review of the online brokerage firm, Scottrade and their website. It was written by B. Wayland, one of our new readers.

Scottrade is one of the many available companies through which individual investors can invest in the stock market online. The Scottrade platform offers a number of advantages for investors including the opportunity to invest not just in stocks but also, mutual funds, options, bonds, and certificates of deposit. Additionally, their research tools offer comprehensive reviews of the stocks, mutual funds, exchange-traded funds, CDs, and bonds. Furthermore, their $7 flat fee for all trades presents a low entry fee compared to other investment fees.

Upon login, the investor’s homepage shows a summary of buying power depending on whether your account is a margin or non-margin account. This is followed by the total money balance available, equivalent to cash that can be withdrawn and the total account value, equivalent to the value of stocks and cash combined. Other available information include open and completed orders, positions, and a watchlist. Across the top of the homepage are tabs which allow the investor to quickly switch to trading, account details, quotes and research, and Scottrade’s Knowledge Center. The Knowledge Center provides investment education, information about Scottrade live events, and even a dictionary of investment terms.

Actually buying stocks is a simple process with additional options as to the type of order, including market, limit, stop, stop limit, and trailing stop orders. International investors also have access to a number of foreign markets. For newer investors, Scottrade offers links to investment basics based on the type of security to be invested in. Furthermore, a quick stock quote and an overview of the three US indices is always available no matter which page the investor is on. Scottrade’s stock research platform provides comprehensive information on any publicly listed company. An initial search for a stock will pull up a summary of the stock, including price to earnings ratios, earnings per share, volatility, and betas. More detailed information is further divided into additional tabs that include the most recent news, charts, options being traded for that stock, fundamentals such as profitability, valuation, and financial strength, trades made by company insiders, earnings, financial reports, and any SEC filings the company makes.

For those who are unsure of where to start when it comes to choosing stocks to buy, the stock screener provides matches based on market segment, price performance, fundamentals, and earnings and dividends. One of Scottrade’s strong points is its low price point for trading. With a flat fee of $7 for each trade, the cost of trading is greatly reduced. This is particularly beneficial for those investors looking to diversify without a ton of money to invest. The minimum initial deposit of $500 also offers cash poor investors a chance to get their feet wet.

Depositing money into a Scottrade account can be done easily through the Money Direct option in which an ACH transfer can be made directly from a bank account. Withdrawing the money is simple enough as well. By calling one of Scottrade’s 483 local offices, a withdrawal can be made with a check sent out in the mail within one business day.

Overall, Scottrade is an excellent trading platform for new and experienced investors. It provides a simple interface with detailed information when necessary. All research can be done in one location with a tremendous amount of investment information available to the investor. Scottrade’s low cost point offers an attractive investment portal for any current or would-be investor.

© 2010 Buy Stocks Online
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Stock Buying Tips

Buying stocks is not rocket science, but without proper research and planning you’re doomed before you even start. Everyone wants to get the latest information about a stock or some type of investment tips. Who wouldn’t want to get the upper hand on the rest of the investors, I know I do and that’s why I research constantly on different companies that I want to invest in. I also belong to a stock market forum or two to help search for stocks. I’ll try to give you some stock buying tips to make it easier for you.

One tip to help keep you in the green would be to decide if the investment you’re making will be long term or short term. When buying stocks for the long term investment, you need to think about how the economy is doing presently and in the next couple of years. Look into buying stocks that have dividends. Dividends will help increase you portfolio over the years even if the stock price hasn’t even changed. When you want to buy stocks for the short term, you’re more or less looking for some sort of catalysis to move the price of the stock, and once that event is passed, you sell your position no matter what. Either way you need to know how to pick stocks for the type of strategy you are using.

Knowledge is power. The more you know, the more profitable you’ll be in your stock trades. There are some software out there that many use to make their picking the right stock easier. Of course there are many that aren’t any good, but you’ll have to find the right one for you. When investing in the stock market, it’s best to be well informed about the world markets and latest business trends. It never hurts to take some stock market courses too. The internet is the best way to keep in touch with the latest news of the financial markets. In this day of age, what happens in one part of the world will effect the rest of it. The world economy is so intertwined that there’s no way one country can stand alone and not be effected.

The stock market is a place where people can become rich overnight or they can completely lose all their money. It’s not a place for people to put their money if they look at it like a gambler looks at Las Vegas or a horse track. Especially when it comes to going to other people for a “stock tip”. You have to do your own research and keep up on the company’s doings if you want to make some money. You can’t expect someone else to know what’s good for you as an investment.

This is a guest post from Thomas B, a long time reader and friend. Thomas is fairly new to the stock market and wanted to share some of his insights to other beginners.

Reader Question: What are YOUR best stock buying tips?

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