Dividend Stocks: Key Basics You Need To Know

A primer on one retirement investing tool [View in browser]( [The Juice Logo] Proprietary Data Insights Top Financial Advisor Dividend Stock Searches This Month Rank Name Searches #1 Apple 510 #2 Verizon 164 #3 Pfizer 160 #4 Microsoft 154 #5 Disney 151 #ad [Top Stock Picks for Massive Profits]( Brought to you by [Stansberry Research]( [FedNow’s Hidden Agenda]( [ Stansberry Research - FedNow’s Hidden Agenda]( You may have heard about "FedNow" - the Federal Reserve's flagship new payment system, launched earlier this year. At least 41 major banks are already using it. As is the US Treasury department that deals with tax rebates and social security payments. But what you may not realize is... It won't be long before this new technology makes the jump from being "behind the scenes"... to becoming integral to life for you and millions of Americans. Look at what's happening in the Federal Reserve, on Wall Street and in Silicon Valley and this becomes obvious. One FedNow Partner runs "point of sale" technology, the card processing terminals you tap your card against at the grocery store. Another is a market leader in mobile payments - the technology that allows you to make payments from your smartphone. In short, the most powerful players on Wall Street and Silicon Valley are getting ready to finish what FedNow started - and push this technology out to the consumer in a nationwide "reset" of the financial system. In the process, they'll create an opportunity for you to ride this wave of rapid adoption as far as it'll go on 2024. To take advantage you need to only make three very simple moves today. [Click right here and I'll explain everything](. Dividend Stocks: Key Basics You Need To Know As we noted in [yesterday’s Juice on Gen Z’s housing market prospects](, a reader said they wanted to hear more about dividend stocks. We get this request a lot. And we love dividend stocks. So, today we start from the beginning with a primer on the basics you need to know. Then, tomorrow, we clear up some of the euphoria and false hope that tends to exist around dividend stocks as income generators, particularly in retirement. Some of today’s terminology is key to best understanding what we discuss on Wednesday. It’s also relevant to the recent discussion we had when [we defined special dividends]( in relation to Costco (COST). A dividend is simply a payment a company makes, from its profits, to shareholders. Most often, companies distribute dividends quarterly. However, some companies pay out monthly. A few have issued one-time special dividends in addition to their regular payments. Costco is among the best known for this. The dividend payment you see listed alongside many stock quotes is per share. So, a $0.50 quarterly dividend means you collect $0.50 for every share of stock you own in a given quarter. If you own 100 shares of a stock paying a $0.50 quarterly dividend, that’s $50 in a given quarter. The Most Basic Dividend Terms Declaration Date. The day a company announces its dividend payment. Ex-Dividend Date. You must own a stock before this day in order to receive the next dividend payment. The seller of the stock takes the dividend if you buy the stock on or after the ex-dividend date. Record Date. The date you might be officially a shareholder in a company’s ledger. For all intents and purposes, you must buy a stock two a minimum of two business days’ prior to the ex-dividend date to ensure you’re logged as an official shareholder by the company. Payment date. You guessed it. The day a company actually pays its dividend to shareholders of record. The Most Important (Retirement-Related) Dividend Terms This terminology matters generally, but comes into specific play when we consider the role of dividend-paying stocks in retirement. Dividend yield. To illustrate, let’s use Verizon (VZ), which is the dividend-paying stock financial professionals have been searching for most (after Apple (AAPL)!), in our Trackstar database. As we write this, VZ has a dividend yield of 6.89%. This is pretty high. Dividend yield shows us how much a company pays in dividends relative to its share price. You calculate dividend yield using this formula: Dividend yield = annual dividend / stock price x 100. In VZ’s case, it looks like this. Divide its annual dividend payment of $2.68 ($0.67) per quarter by its $38.88 stock price X 100 and you get 6.89%. So, in real world terms. If you own 100 shares of VZ. At $38.88, it has a value of $3,888. 6.89% of $3,888 is $268 (after rounding up from $267.88). This jibes with that annual dividend payment of $2.68 per share, given that $2.68 times 100 (shares) equals $268. Pretty straightforward, right? It is. Until it’s not. In tomorrow’s Juice, we dig into two of the main things to look out for when investing in dividend stocks: - Dividend yield traps. As the price of a stock goes down, its dividend yield goes up, assuming no change to the dividend. VZ hasn’t been a great performer lately. - You need to own a lot of stock. To generate meaningful income from a dividend-paying stock, you need a relatively large amount of capital invested. Dividend reinvestment. This is crucial to many dividend stock strategies. And it can help you build a sizable position that might — someday — throw off meaningful income. When you purchase a dividend stock, your brokerage will give you the option to reinvest dividends. If you select this option, every time you receive a dividend payment, you won’t receive it as cash to keep. Instead, your brokerage will reinvest into new shares of the stock. Outside of the taxes, you might have to pay on this dividend payment, that’s essentially “free money” being used to build your position and effectively increase — all else equal — the size of your future dividend payments. Shortly after tomorrow’s retirement-specific Juice on dividend payers, we’ll do separate installments on dividend taxes and the power of dividend reinvestment. So much to consider. But, don’t worry, The Juice has you covered. The Bottom Line: Like so much else in today’s world, dividend investing has taken on a life of its own, complete with people who swear by it as the end all and be all and those who think it’s the worst strategy ever. As with most things in this polarized world, the truth sits somewhere in the middle. We’ll start defining that middle tomorrow. Preview: We love dividend stocks, but we would not stake our future solely on them. 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