Today, we’re going to take a look at high paying dividend stocks, that pay you over 20% dividends and the risks that go along with that.
What are dividends?
A dividend is a sum of money paid periodically (usually quarterly) by a company to its shareholders from its profits.
Not every company pays dividends. But in simple terms, if you own shares of a company that’s a dividend paying company, you get a sum of money that’s paid to you in form of dividends, into your trading account. So every three months they pay you money simply for holding on to those shares.
You get paid based on the number of shares you own. The more shares you have, the more money you get.
This is how some people make a fortune in the stock market. If you have a lot of money and you have some really good dividend paying stocks, then you can make a fairly decent living from the dividends.
However, there are some issues that go along with this. People get attracted to high-paying dividend stocks. But remember, in the market, you make money from two different ways.
You make money from the dividend itself, the payout. But also you make money through appreciation, as that stock heads up. And if the stock goes down, you lose money.
High paying dividend stocks are not necessarily the only thing that you want, because usually the more dividends that a company pays out on a percentage basis, the more likely it is to continue to depreciate. And in this case, it would take quite a bit of time to get back what you lost with dividend payments.
In general, if you’re investing in dividends, look for the popular companies, the stable companies that have been paying out consistently time and time again. Like Wal-Mart, Verizon or AT&T.
In this video I want to share with you some more speculative stocks, they still pay out dividends, but you should be aware of them, and most people should stay away from them because they are very speculative and very risky.
Usually these companies offer very high dividends, and it sounds pretty good, but in reality, they have a very low share price, which means they’re only paying a few cents per year in dividends, even though it’s a big percentage relative to the share price.
You want to be careful because they can seem attractive when you look at the dividend rates, but remember, depreciation matters quite a bit as well. Usually, the dividend is not stable, and you don’t know when they’re going to stop paying it. You don’t know when they will reduce it or increase it. Because remember, it comes down to how much money they have on that balance sheet, and if they don’t have the capital to pay you, you may not get paid.
So in conclusion, compared to other vehicles that you could put your money in, most high-paying dividend companies, is not something I would want to go for, simply because the stock appreciation is not usually there, and dividends are usually extremely cheap.
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