Dividend Stocks: Building Passive Income That Lasts
What Are Dividend Stocks?
Dividend stocks are shares of companies that distribute a portion of their profits to shareholders regularly, usually quarterly.
Why Dividend Investing?
- Passive income: Get paid without selling shares
- Compounding: Reinvest dividends to buy more shares
- Stability: Dividend-paying companies tend to be more established
- Inflation hedge: Many companies raise dividends over time
Key Metrics to Know
Dividend Yield
Annual dividend per share / stock price. A 4% yield means $1,000 invested generates $40/year.
Payout Ratio
Percentage of earnings paid as dividends. Under 60% is generally sustainable.
Dividend Growth Rate
How fast the company increases dividends. 5-10% annual growth is excellent.
Top Dividend Categories
Dividend Aristocrats
S&P 500 companies with 25+ consecutive years of dividend increases. Examples: Johnson & Johnson, Coca-Cola, Procter & Gamble.
High-Yield Dividend Stocks
Yields of 4-8%. Higher risk but greater income. Often in REITs, utilities, and energy.
Building Your Portfolio
Conclusion
Dividend investing is a marathon, not a sprint. A portfolio yielding 4% with 5% annual dividend growth will double your income in roughly 14 years.