| Although not every company's stock you buy will | | | | A Dividend Reinvestment Plan is one where a |
| pay a dividend, they are something to consider when | | | | company allows the stock holder to use the dividend |
| buying stocks. Having a percentage of dividend | | | | to automatically buy small amounts of their stock. |
| paying stocks in your investment portfolio has some | | | | Usually this is done without having to pay a |
| advantages. | | | | commission. As stated this is a great plan for the |
| First and foremost what is a dividend? Simply put it is | | | | Long Term Investor. Using a DRIP allows the investor |
| a portion of profit that a company pays out to its | | | | to accumulate stock without additional expense to |
| stock holders. An obvious point here is that a | | | | the investor thus over time averaging down their |
| dividend is only paid when a company is making a | | | | overall investment. |
| profit. That said not all publicly traded corporations | | | | For the investor nearing retirement or already retired |
| that are making money pay out a dividend. Any | | | | dividend paying stocks can be an excellent way to |
| profit not paid out to shareholders is called retained | | | | generate regular income. By doing nothing more than |
| earnings. Additionally the frequency that a company | | | | taking the dividend as income one can offset a |
| may pay out a dividend can vary from monthly to | | | | pension or other retirement draws. A word of |
| yearly. For that reason dividends are generally looked | | | | caution is to remember what has already been |
| at on an annualized basis. | | | | stated, this is profit dependent and can vary greatly |
| Since dividends are a portion of profit the amount | | | | from year to year. The best paying dividend stocks |
| paid out varies from year to year and in many cases | | | | are those of companies that are large, the blue chip |
| from quarter to quarter. Dividends are usually paid in | | | | type companies. |
| cash to the shareholder miraculously appearing in your | | | | When considering buying stocks in companies that do |
| online brokerage account. Some companies who | | | | not pay dividends take a good look at the financial |
| regularly pay dividends will offer what is called a | | | | statements. Make sure that the company is using |
| Dividend Reinvestment Plan (DRIP for short). Many | | | | their retained earnings to reinvest in the company |
| investors believe that a DRIP is a key to a successful | | | | through new projects or other forms of expansion. |
| portfolio, particularly for the Buy and Hold Investor. | | | | |