In a world fixated on cryptocurrency and AI, buying dividend stocks—those of companies who have made years, if not decades, of steady payouts—may seem old-fashioned. But it is also extremely effective: since 1930, 40% of all stock market returns have been from dividends, hardly something to scoff at. In flat or down markets in particular, an income stream becomes very valuable indeed.
Dividends aren’t hard to find: Roughly 4 in 5 stocks in the S&P 500 pay a dividend, typically once a quarter. But here’s the trouble: Not all dividend stocks are created equal. For instance, a good dividend cannot make up for an underperforming stock. Similarly, a high dividend yield could be a trap that covers up erratic payouts, poor performance, or minimal growth prospects.
Building a portfolio of individual dividend stocks takes time and effort, but for many investors, it's worth it. Here’s a quick guide to help you start dividend investing.
How to Start Dividend Investing – Quick Guide
- Find a high dividend-paying stock. You can screen for stocks that pay dividends on many financial sites, as well as on our platform that provides access to +3.000 stocks and ETFs with ownership. We've also included a list of high-dividend stocks below.
- Evaluate the stock. To look under the hood of a high-dividend stock, start by comparing the dividend yields among its peers. We’ve also detailed how to evaluate the best dividend stocks below.
- Decide how much stock you want to buy. You need diversification if you’re buying individual stocks, so you’ll need to determine what percent of your portfolio goes into each stock.
- Take your position – create an account with us to start dividend investing.
Alternatively, you can copy the moves of top performing traders in real time with NAGA Autocopy.
For more info about the best dividend stocks, you can discover everything you need to know in this guide.
What are dividend stocks and how do they work?
Dividend stocks are companies that pay out a portion of their earnings to a class of shareholders on a regular basis as a reward for their investment. These companies usually are well established, with stable earnings and a long track record of distributing some of those earnings back to shareholders. The distributions are known as dividends and may be paid out in the form of cash or as additional stock. Most dividends are paid out on a quarterly basis, but some are paid out monthly, annually, or even once in the form of a special dividend. While dividend stocks are known for the regularity of their dividend payments, in difficult economic times those dividends may be cut to preserve cash.
A high-value dividend declaration can indicate that the company is doing well and has generated good profits. But it can also indicate that the company does not have suitable projects to generate better returns in the future. Therefore, it is utilizing its cash to pay shareholders instead of reinvesting it into growth.
A company with a long history of dividend payments that declares a reduction of the dividend amount, or its elimination, may signal to investors that the company is in trouble. However, a reduction in dividend amounts or a decision against a dividend payment may not necessarily translate into bad news for a company. The company's management may have a plan for investing the money such as a high-return project that has the potential to magnify returns for shareholders in the long run.
Some of the Best Stocks for نوفمبر 2025
How Do Dividends Affect a Stock's Share Price?
Dividend payments impact share price and the price may rise on the announcement approximately by the amount of the dividend declared and then decline by a similar amount at the opening session of the ex-dividend date.
For example, a company that is trading at $60 per share declares a $2 dividend on the announcement date. As the news becomes public, the share price may increase by $2 and hit $62.
If the stock trades at $63 one business day before the ex-dividend date. On the ex-dividend date, it's adjusted by $2 and begins trading at $61 at the start of the trading session on the ex-dividend date, because anyone buying on the ex-dividend date will not receive the dividend.
This is not guaranteed but often the price adjusts by the dividend on the ex-dividend date.
Which Stocks Pay Dividends?
Stocks that commonly pay dividends are more established companies that don’t need to reinvest all of their profits. For example, more than 84% of companies in the USA 500 currently pay dividends.
The following industry sectors maintain a regular record of dividend payments:
- Basic materials
- Oil and gas
- Banks and financial
- Healthcare and pharmaceuticals
- Utilities
Companies structured as master limited partnerships (MLPs) and real estate investment trusts (REITs) require specified distributions to shareholders. Funds may also issue regular dividend payments as stated in their investment objectives.
What are REITs and do they work?
Not all companies pay dividends; some choose to reinvest profits back into the business. This is why investors who are interested in dividend payments must deliberately choose companies that offer them. If an investor did not want to trade individual stocks, they could decide to invest in a dividend-paying exchange-traded fund (ETF) that holds dividend stocks.
The fund will then pay out dividends to you on a regular basis, which you can take as income or reinvest. Dividend funds offer the benefit of instant diversification — if one stock held by the fund cuts or suspends its dividend, you can still rely on income from the others.
Some of the Best ETFs for نوفمبر 2025
What is dividend investing and how it works?
Dividend investing is a method of buying stocks of companies that make regular cash payouts to shareholders as a reward for owning their stock. Dividend investing is an alternative style to growth and value investing, which is the practice of either holding onto fast growing companies or holding onto cheap companies in the hopes of achieving long-term share price growth.
In general, stocks that pay dividends can offer investors a potential source of regular income. Many investors look for companies with a history of steadily increasing dividends, which can help keep pace with inflation, although this is not guaranteed.
Two commonly cited benefits of dividend-paying stocks are the potential for passive income and the option to reinvest dividends to help grow a portfolio over time. However, dividend payments are never assured and can be reduced or discontinued based on a company’s financial circumstances.
Passive Income
Companies that pay dividends typically issue them quarterly, creating a reliable stream of passive income that investors can spend how they please. Dividends also have the added advantage of offsetting share price depreciation.
Dividend Reinvestment
Investors can reinvest dividends they receive back into the company to acquire more shares. This is called a dividend reinvestment plan (DRIP). Participating in a DRIP allows the investor to take advantage of compounding returns—a proven strategy to build long-term wealth.
Example of Dividend Investing
Suppose you invest in a company that pays a 3% dividend per share. If you own one share of the company, and the shares are worth $100, you will receive $3 in dividends. However, if you owned 200 shares, you would receive $600 in dividends. The calculation is as follows:
- ($100 share price * 200 shares) = $20,000 * 3% or 0.03 = $600
It's important to note that when a dividend rate is quoted, it's typically an annual dividend rate, meaning your payout would be divided by four if it was paid out quarterly. So, in our example above, your dividend payment would be $150 per quarter ($600 ÷ 4), assuming the same share price and the number of shares.
Strategies for Dividend Investing
Good dividend investors tend to focus on either a high dividend yield approach or a high dividend growth rate strategy. Both serve distinct roles in a portfolio.
- A high-dividend-yield approach generally focuses on mature companies with established operations and relatively stable cash flow, which may enable them to support larger dividend payments. This can offer the potential for more immediate income. However, a high dividend yield does not necessarily indicate financial strength, and dividend payments can be adjusted or discontinued depending on a company’s circumstances.
- Using the high dividend growth rate, your focus is on buying stock in companies that pay low dividends but are growing quickly.
Different investors may prefer one approach over the other. It all depends on whether your goal is immediate and stable income or whether you prefer long-term growth and profit.
Dividends when trading
Dividends are not paid when trading, but holders still benefit from them. This is because trading is carried out using derivative products, which take their price from the underlying market. Derivative products do not require traders to own the underlying asset to open a position, which means that a trader will not gain any shareholder rights, such as voting abilities or dividends.
Even though you don't own the underlying assets when trading CFDs, when you trade CFDs on a stock or index you may receive a dividend adjustment, which is either added to or deducted from your trading account, depending on your position. If you are long (buying) a CFD on a stock that pays dividends, you may receive a dividend payment. If you are short (selling) a CFD on a stock, you may be charged a dividend adjustment, which will be deducted from your account.
To start investing in shares, you can create a NAGA Invest account today. If you want to trade shares instead, you can create a NAGA trade account. Alternatively, you can practice and improve your skills using a NAGA demo.
Some of the Best Yielding Dividends Stocks of نوفمبر 2025
Below, we look at some of the best dividend stocks in the USA, UK, and EU. Note that these stocks have not been chosen as the largest dividend providers alone, but rather based on various factors including market cap, future growth prospects, and latest results.
Best US Dividend Stocks of نوفمبر 2025
NAGA.com has compiled a list of the top 5 dividend-paying companies in the U.S. stock market based on third-party analysts' coverage. These companies have consistently increased their dividend payouts for at least a decade, possess attractive yields, and have shown strong earnings growth over time.
Johnson & Johnson (JNJ)
- Dividend Yield 2.6%
- Consecutive years of dividend increases: 63
- Five-year dividend growth rate: 5.5%
Johnson & Johnson (JNJ) is a pharmaceutical and medical device giant that holds a prestigious "AAA" long-term issuer credit rating from S&P Global Ratings, reflecting its strong financial stability and conservative financial policies despite active acquisitions. The company maintains an adjusted leverage generally under 1.0x, supported by steady sales growth and strong cash flows from its pharmaceutical and MedTech businesses. Analysts expect Johnson & Johnson's earnings per share (EPS) to grow modestly by around 4.6% next year, with revenue growth projected at 4–5% annually, driven by pharmaceutical launches and an enhanced medical device lineup.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company has a strong history of dividend growth, with an average annual dividend increase rate of approximately 3–4% in recent years. Although the stock price may have fluctuated, Johnson & Johnson has outperformed the S&P 500 over several periods. For example, it delivered annual returns that outpaced the S&P 500's 10-year average by a noticeable margin, including a recent year with about 31% return compared to the S&P 500's 11%. This combination of financial stability, steady earnings growth, and dividend reliability makes it a well-regarded stock among analysts and investors.
Procter & Gamble (PG)
- Dividend Yield 2,9%
- Consecutive years with increased dividends: 69
- Five-year dividend growth rate: 6.1%
Procter & Gamble (PG) is a global leader in consumer goods, known for its diverse portfolio of trusted brands across beauty, health, and home care categories. The company enjoys a strong financial position, with consistent earnings growth supported by steady demand and innovation in its products. Analysts project a solid earnings growth rate in the mid-single digits annually, reflecting stable performance in a competitive market.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company has an impressive dividend track record, having increased its dividend for over 60 consecutive years. Its average annual dividend growth rate over the past decade has been around 6%, demonstrating a commitment to returning value to shareholders. The current dividend yield stands near 2.9%, with a payout ratio around 59%, indicating sustainable dividend payments relative to earnings. Though the stock price fluctuates with market cycles, Procter & Gamble has delivered steady returns over the long term and remains favored for its financial stability and reliable income generation from dividends, similar to other blue-chip dividend stocks.
McDonald's (MCD)
- Dividend yield: 2,4%
- Consecutive years of dividend increases: 48
- Five-year dividend growth rate: 7.5%
McDonald's is a leading global fast-food chain known for its strong dividend performance. It currently pays an annual dividend of $7.44 per share, with a dividend yield of about 2.44%. The payout ratio is approximately 61%, indicating that its dividend payments are well supported by earnings. McDonald's has a long history of steady dividend increases, with consistent growth over the past decades.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
In terms of financial performance, the company reported a net income of $8.94 billion in 2025, reflecting an 8.8% increase from the prior year. The company's profitability and operational efficiency support its ability to sustain dividend payments, making it a reliable income stock for investors seeking steady returns alongside moderate capital appreciation.
Realty Income (O)
- Dividend yield: 5.6%
- Years paying dividends: 30
- Five-year dividend growth rate: 2.9%
Realty Income (O) is known for its strong dividend performance, paying an annual dividend of $3.23 per share with a yield of approximately 5.6%. It boasts a remarkable track record of 664 consecutive monthly dividend payments, highlighting its reliability as a consistent income stock. The dividend payout ratio is quite high at about 300%, reflecting its nature as a real estate investment trust (REIT), where dividends are a primary return for shareholders.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
In terms of financial performance, Realty Income’s steady cash flows from a diversified portfolio of income-producing properties support its ability to maintain monthly dividend payments and deliver shareholder value. Its consistent dividend growth—around 2.9% over the past year—along with the high yield makes it attractive for income-focused investors seeking dependable returns in the real estate sector.
U.S. Bancorp (USB)
- Dividend Yield: 4.5%
- Consecutive years paying dividends: 14
- Five-year dividend growth rate: 4.6%
U.S. Bancorp (USB) is a major U.S. bank known for its consistent dividend payments and solid financial performance. The company currently offers an attractive dividend yield of approximately 4.5%, with a quarterly dividend recently increased to $0.52 per share. Its dividend payout ratio stands at a sustainable 48-63%, supported by earnings per share (EPS) of about $4.18, highlighting a robust capacity to maintain and grow its dividends.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company has demonstrated steady dividend growth, averaging around 5.1% annually over the past few years, making it a reliable choice for income-focused investors. Analysts project EPS growth near 19% over the next few years, indicating strong potential to support further dividend increases. This blend of stable dividend yield, growing earnings, and manageable payout ratios underscores U.S. Bancorp's appeal as a dependable dividend stock in the financial sector.
Best UK Dividend Stocks for نوفمبر 2025
We list some of the UK’s best dividend stocks with high dividend yields recommended by industry experts.
M&G – estimated dividend yield of 9.2%
Savings and investment provider M&G Group Limited (MNG) is a UK-based asset manager known for its high dividend yield and income-focused investor appeal. The company targets a dividend yield around 7.5-9.4%, with analysts forecasting a yield of approximately 9.4% for 2025, supported by a consistent dividend payout that has grown from 18.2p per share in 2020 to an estimated 20.6p per share in 2025. M&G prioritizes dividend payments, generating substantial surplus capital to support ongoing dividend growth despite market challenges
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
Company's dividend payout ratio could seem high due to the nature of its business, but it balances this through targeted capital generation and cost savings. This strategy positions M&G as an attractive high-income stock with dividend growth prospects, appealing particularly to investors prioritizing income over capital appreciation. Its stable dividend policy and consistent cash flow from its asset management operations solidify its reputation as a dependable income stock in the FTSE 100 index.
B&M European Value Retail – estimated dividend yield of 8.3%
B&M European Value Retail (BME) offers an attractive dividend yield of around 8.3%, with an annual dividend payment of approximately £0.30 per share, paid semi-annually. The company's dividend payout ratio is about 48%, showing a balanced approach to distributing earnings to shareholders while maintaining business sustainability. However, it experienced a dividend decline of around -13.5% over the past year, reflecting some recent challenges.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
Despite the recent dip, B&M has a history of dividend growth averaging nearly 14% over the last decade, supporting its reputation as a strong income stock in the retail sector. Its high yield combined with a moderate payout ratio makes it appealing to investors seeking income with potential for recovery and growth in dividend payments.
Investec – estimated dividend yield of 6.34%
Investec (INVE) is a diversified financial services company with a strong dividend profile. It offers a dividend yield of approximately 6.34% in 2025, with a dividend payout ratio around 50%, reflecting a balanced approach to distributing earnings while retaining capital for growth. The company maintained a stable dividend policy, with dividends covered comfortably by earnings, and has shown modest dividend growth averaging around 4.6% over recent years.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company targets a payout ratio range of 30% to 50% of adjusted earnings per share, ensuring dividends remain sustainable alongside business expansion. Its consistent cash flow and capital strength support reliable dividend payments, makes Investec attractive to income-focused investors within the UK financial sector.
Legal & General Group - estimated dividend yield of 9,16%
Legal & General Group (LGEN) is a major UK-based financial services company with a strong focus on dividend income. For 2025, it offers an attractive dividend yield of around 9%, supported by consistent dividend payments and an annual dividend of approximately $1.37 per share. The payout ratio is high, reflecting the nature of its business, with recent ratios around 290% when smoothed over three years, indicating dividends are often paid out of surplus capital rather than just earnings.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company has maintained dividend growth of nearly 9% in the past year, appealing to income-focused investors seeking high yield. While the elevated payout ratio suggests dividends rely on retained reserves or other capital sources, Legal & General's steady dividend history and solid performance make it a well-regarded choice for those prioritizing income, with anticipated continued dividend support and potential growth in the UK financial sector.
NatWest Group - estimated dividend yield of 4.3%
NatWest Group (NWG) is a prominent UK bank with a solid dividend record. It offers an annual dividend of about $0.63 per share, yielding around 4.25% as of 2025, with dividends paid semi-annually. The payout ratio is moderate, roughly 38-42%, reflecting a sustainable approach to dividend payments that balance shareholder returns with capital retention for growth.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company has shown strong recent dividend growth, increasing payments by over 10% in the last year. NatWest Group plans to raise its ordinary dividend payout ratio from around 40% to 50%, signaling confidence in ongoing earnings growth. Its stable dividend, reasonable payout ratio, and planned increase make NatWest an appealing option for investors focused on attractive income with potential for growth in the financial sector.
Best European Dividend Stocks for نوفمبر 2025
European dividend stocks have for a long time yielded more on average than their U.S. counterparts. As of late 2025, the European Dividend Aristocrats index had an indicated dividend yield of approximately 4.4%, which is notably higher than the previously mentioned 2.9% and higher than the U.S. Dividend Aristocrats' yield of around 2.1%.
Total Energies SE
- Dividend yield: 4.6%
- Consecutive years with increased dividends: 41
Total Energies SE (TTE) is one of the big 5 Oil & Gas majors in the world with a solid dividend record. In 2025, it pays an annual dividend of approximately €0.85 per share, with a dividend yield around 4.6%. Dividends are distributed quarterly, with recent interim dividends showing a 7.6% increase compared to the prior year, indicating steady dividend growth.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company maintains a payout ratio close to 46%, balancing shareholder returns and reinvestment in the business. TotalEnergies has a history of consistent dividend payments over the past 18 years and is expected to continue supporting dividend growth, making it attractive for income-focused investors in the energy sector.
BASF
- Dividend yield: 5.3%
- Consecutive years with increased dividends: 13
BASF (BAS) is one of the largest chemical producers in the world and it’s currently domiciled in Ludwigshafen, Germany, and a prominent chemical company with a strong dividend history. In 2025, it pays an annual dividend of approximately €2.25 per share, resulting in a dividend yield of about 5.3%. The company has demonstrated resilient financial performance over the past five years, navigating market volatility and evolving industry dynamics. From 2020 to 2024, BASF increased its EBITDA before special items by 18% in its core businesses, while net income surged significantly from €225 million in 2023 to €1.3 billion in 2024.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
Despite a recent modest dividend growth of approximately -0.03%, BASF SE has maintained consistent dividend payments over the years. Its high yield and low payout ratio make it attractive for dividend income investors, though it’s important to monitor the financial performance and industry trends that could impact future dividends.
Allianz
- Dividend yield: 4.2%
- Consecutive years with increased dividends: 15
Allianz (ALV) is one of the largest insurance and financial services companies in the world. The company was founded in 1890 and it is headquartered in Munich, the south of Germany.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
Allianz yields 4.2% which may be considered quite a juicy dividend. Their dividend-to-earnings payout ratio is around 59% based on their latest earnings. Their dividends have been growing for 15 years and during that time it almost tripled. This is an amazing dividend growth track record for such a behemoth of a company.
Sanofi SA
- Dividend yield: 4.5%
- Consecutive years with increased dividends: 24
Sanofi SA (EPA) was officially established in 1973 as a subsidiary of Elf (the oil company). However, Sanofi, as we know it today, has really been created in 1994 when it was listed as an independent company on the stock exchange in Paris.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
In 2025, Sanofi delivered strong financial results with net sales growing about 9.7% to approximately €9.9 billion in Q1 alone, driven by robust demand for key pharmaceutical launches like Dupixent and vaccines. Business EPS rose 17% to €1.79, reflecting solid earnings growth and operational efficiency, while full-year guidance anticipates mid-to-high single-digit sales growth and double-digit EPS growth. This performance underscores Sanofi's continued strength in innovation and market presence.
ASR Nederland B.V.
- Dividend Yield 5.71%
- 5 Year Average Dividend Growth 20.9%
SR Nederland B.V. (ASR) is one of the major Dutch insurance companies. The company is a spin-off from Fortis which got nationalized during the great financial recession in 2008. It took until 2016 for the Dutch government to bring back the company to the stock exchange and until 2017 to sell its full stake in ASR.
Past performance is not a reliable indicator of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
The company pays an annual dividend with a current annual yield of about 5.7%, showing an 8.75% dividend growth over the past year. ASR Nederland's stock has outperformed its Dutch insurance peers and the Dutch market itself, with a one-year return of approximately 27.3%, surpassing the Dutch market return of 19%. Over the past five years, ASR Nederland's stock has achieved a return of over 113%, highlighting substantial capital appreciation.
Are these the best dividend stocks?
The stocks above may have high yields, but that doesn't necessarily mean that they're the best dividend stocks for any investor. The ideal portfolio varies from person to person, based on individual goals and timelines for those goals. Besides, many investors are better off buying index funds rather than individual stocks.
A high dividend yield can also indicate many things, and not all of them are good. As stated previously, falling stock prices can increase dividend yields, and some companies go into debt by overspending on their dividend. The over-spenders may eventually be forced to cut their dividends if they become unsustainably expensive.
If you're looking for dividend stocks with a low risk of cutting their dividends, check out the dividend aristocrats — a group of S&P 500 stocks that have increased their dividends every year for at least 25 years.
Remember, dividends are nice, but they aren’t the only factor to consider when buying a stock. Ideally, a dividend stock is financially strong and growing—continued stability and growth signals that the company’s dividend is sustainable over the long term and likely to be increased regularly.
Experienced third-party financial analysts selected the stocks above, but they may not be right for your portfolio. Before you purchase any of these stocks, do plenty of research to ensure they align with your financial goals and risk tolerance.
*Note: Our top dividend stocks are not necessarily the best by size or any other singular factor, but are picked based on analysts' coverage, valuation, market capitalization, dividend pay-outs, and more. Please be advised that this doesn't mean that they're the best dividend stocks to invest in.
How to evaluate dividend stocks
An investor can use different methods to learn more about a company's dividend and compare it to similar companies.
Dividend Yield
This ratio measures the annual value of dividends received relative to a security's per share market value. Investors calculate the dividend yield by dividing the annual dividend per share by the current stock price. For example, if company XZY issues a dividend of $10 annually with a current share price of $100, it has a dividend yield of 10% ($10 / $100 = 10%). Those seeking high-yielding stocks can start their search by screening for issues with a divided yield above a certain percentage. Bear in mind that there are many other factors besides dividend yield that investors should consider before investing in a stock.
Dividend Payout Ratio
The DPR measures how much of a company's earnings are paid out to shareholders. Investors calculate the ratio by dividing total dividends by net income. For instance, if company XZY reported a net income of $50,000 and paid $15,000 in annual dividends, it would have a DRP of 30% ($15,000 / $50,000 = 30%). This means the company pays out 30% of its earnings to shareholders. Generally, a company that pays out less than 50% of its net earnings in dividends is considered stable and has the potential for sustainable long-term earnings growth.
Dividend Coverage Ratio
This ratio measures the number of times a company can pay dividends to its shareholders. Investors calculate the dividend coverage ratio by dividing a company's annual earnings per share (EPS) by its annual dividend per share. For example, if company XZY reported $10 million in net income with an annual dividend of $2 million to shareholders, it has a dividend coverage ratio of 5 times. ($10 million / $2 million). Typically, investors view a higher dividend coverage ratio as more favorable.
The No. 1 consideration in buying a dividend stock is the safety of its dividend. Dividend yields over 4% should be scrutinized; those over 10% tread firmly into risky territory. Among other things, a too-high dividend yield can indicate the payout is unsustainable, or that investors are selling the stock, driving down its share price and increasing the dividend yield as a result.
Investing in dividends stocks – what you need to know
Dividends are frequently seen as a key component of an investment plan since they offer a consistent source of income or can be reinvested to purchase further shares of a company. A return on an investment calculated only based on capital growth may differ significantly from one calculated also taking dividend returns into account.
Dividends should be a bonus feature added to the primary criteria of choosing a company with solid fundamentals and/or a favorable price trend rather than the only factor to be considered when making an investment. Additionally, it's crucial to avoid choosing firms solely based on dividend yield, as payouts might be decreased or increased.
A well-managed firm would typically seek to pay dividends to show investors its financial stability and investment appeal, although there is a chance that companies may do so from cash reserves rather than from profits.
Investors should be wary of dividend yields that are unusually high, often exceeding 7%. Since the dividend yield is computed as (dividend per share divided by share price) times 100, dividend yields typically rise substantially when a stock price declines. Such declines result in a significant rise in yield without an increase in dividend payout.
Although there is a risk that businesses may choose to pay dividends from cash reserves rather than from profits, a well-managed organization would normally prefer to do so to demonstrate to investors their financial stability and investment attraction.
Dividend yields that are unusually high, frequently reaching 7%, can raise investor concern. Dividend yields often increase significantly when an equity price decreases since they are calculated as (dividend per share divided by share price) multiplied by 100. With no increase in dividend distribution, such losses cause a sizable increase in yield.
To determine this, a ratio is created by dividing net earnings by the dividend. The dividend is at least completely covered by profits when it is over 1, indicating that existing cash reserves are not being used to pay dividends. A ratio below 1 may also be a warning sign because it indicates that the company's profits are insufficient to fund the dividend payment, necessitating the use of cash reserves. A dividend reduction or complete payout cancellation could result from this.
Start investing in dividend stocks and ETFs
- Create an account. Regardless of your chosen assets and strategy, you need to register and complete the KYC process to verify your identity.
- Fund your account with fiat money. Before buying and trading any dividend stock, you need to fund your exchange account with U.S. dollars, Euros, or other currencies.
- Select your dividend stocks. Having a thorough understanding of how to invest in dividend-paying stocks will help you make informed decisions when building your own income portfolio.
- Place buy order. Follow the steps required by the trading platform to submit and complete a buy order for one or more dividend stocks and dividend ETFs.
With NAGA, you can invest in +3,000 stocks and ETFs with ownership.
Free Resources
Before you start investing in dividend stocks, you should consider using the educational resources we offer like NAGA Academy or a demo trading account. NAGA Academy has lots of free trading and investing courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more-informed investment decisions.
Our demo account is a suitable place for you to get an intimate understanding of how trading and investing work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged securities.
