so I said this before when you invest in a dividend-paying stock or ETF you give
yourself a raise for every share that you buy so in this video today we're going to explore
dividends what they are and how you can use them to grow your Investment Portfolio Dividends are
a share of a company's profit paid out to the shareholders are typically paid in cash but can
also be paid in the form of additional shares of stock NOW Dividends are usually paid on a regular
basis such as quarterly and can provide a steady stream of income for investors what's really cool
about that is anytime that you pick like your favorite company to invest in and that company
pays dividends you ultimately become an owner of that company by way of being a shareholder if the
company profits a lot of money and they're able to pass those profits onto you in the form of a
dividend that's how you can make money on top of your investment simply for just being invested
in the first place now that does mean that companies that pay dividends are often mature
companies they've been around for a long time they're very stable and they have a long track
record of growth these companies are generally considered less risky than non-dividend paying
companies and are often sought after by income seeking investors but let's talk about how you
can use these dividends to grow your Investment Portfolio see dividend investing involves
investing in those companies that pay dividends and then what you do is you take those dividends
and you reinvest it back into the company every time those Dividends are paid out this is known
as the dividend reinvestment plan otherwise known as drip Now by reinvesting your dividends you can
take advantage of compounding returns which can significantly increase your long-term wealth so
dividend reinvestment is a powerful tool that can help you achieve your investment goals over
time so with that in mind how do we actually identify dividend paying stocks well there are
a few things that you're going to want to look for first you need to look for companies that
have a consistent record of paying dividends every quarter or every month second look for
companies with a high dividend yield which can be calculated by taking the dividend payout divided
by the stock price and third look for companies with a sustainable dividend which means that they
can continue to pay those dividends long into the future sure based on their past performance
now if we're talking individual stocks some very popular dividend paying stocks include but are not
limited to Blue Chip companies such as Coca-Cola Johnson and Johnson and Procter and Gamble these
companies have a long history of paying consistent and sustainable dividends and are often sought
after by income seeking investors now of course I got to pull up Seeking Alpha to show you some
of these companies because it takes you behind the scenes it is my favorite investing research
tool in fact you can get a discount if you want to get this as well link down in the description
below but let me pull up one of those companies as an example let's start with Coca-Cola so KO
you know a lot of people drink Coca-Cola products so let's take a look at that now right now up here
is the share price at sixty dollars and fourteen cents we're not so worried about that we're more
worried about the three things that we just talked about the very first thing is what is the dividend
yield so right over here on the right hand side you can see the dividend yield which is right here
is 2.97 and again that can be calculated by taking the dividend rate right here of 1.76 and then then
you divide that by the current share price at sixty dollars and 10 cents and that equals if you
convert this decimal into a percentage by moving the decimal over two places that's about 2.93
percent very close to what we see here at 2.97 now of course that rate will adjust based on the
current stock price of whatever day you're looking at the share price of the particular Stocker
company but how do we know if it pays consistent dividends and how do we know if it has that growth
potential in the future well what you want to do on whatever stock that you decide to pull up here
on secant Alpha hop over here to the dividends tab it's about the fifth one in right at the very top
we're going to click on that and then it's going to give us a wealth of data we're going to see
things such as the dividend safety the dividend growth yield and consistency we're looking for
of course b and a rated grades in this particular category but also we want to look at a few more
things we see our dividend yield we see the annual payout per share and we see the five-year growth
rate of 3.53 percent with dividend growth over the last 60 years now that is of course because
Coca-Cola is one of those Champion dividend stocks probably one of the Stellar students the fact that
they've continued to grow their profits and grow their dividends paid out to shareholders for the
last 60 years with a five-year growth rate of 3.53 percent that is great those are the type of things
you'll want to look for if you're interested in dividend investing now you can see right here they
pay out no dividends every quarter which means every three months based on however many shares
you own and the amount was 44 cents per share of Coca-Cola so if you owned 100 shares of Coca-Cola
you multiply that by 44 cents which means you're going to get 44 dollars in addition to whatever
your growth is on that particular investment and then if you buy another share you get another 44
cents two shares you get 88 cents every share that you buy you're giving yourself a dividend raise
but let's do a little bit of math to see the power of dividend investing now let's say you invest ten
thousand dollars into a dividend payment stock that has a four percent dividend yield that means
you're going to receive four hundred dollars in dividends every single year that you stay invested
and if you take that money and you reinvest it back into the company with the dividend
reinvestment plan assuming a seven percent annual return your investment will be worth twenty eight
thousand dollars in twenty years and that assumes that you're only reinvesting the dividends and
you're not investing any more money out of your normal investing strategy now assuming that you're
younger and you have plenty of investing years ahead of you let's take a look at the portfolio
visualizer if we invest in Coca-Cola for example and we invested for the last 15 years from the
Year 2007 until the end of 2022 and we only put in ten thousand dollars on the very first day of
2007 but we didn't invest any more money and we're not going to actually reinvest the dividends which
means anytime that Coca-Cola pays you dividends you're gonna take those dividends and you're going
to run with them that's what you're going to do so you're not going to reinvest at all let's see
what happens over the course of 15 years we're going to analyze the portfolio and you can see
your ten thousand dollar balance grows to twenty five thousand four hundred and eighteen dollars
over 15 years now that's not too bad but let's take a look at the difference if you decide to
reinvest those dividends because you don't need those dividends you don't need that money you
want that to continue to pile on top of all this growth that happens over that period of
time let's see the big difference now remember this number twenty five thousand four hundred
and eighteen dollars I'm going to come up here to the portfolio visualizer and I'm going to say
yes reinvest the dividends come down here and hit analyze portfolio I hope you remember that number
because now look the difference of reinvesting the dividends with the same amount of money that
you started with grows to now forty one thousand four hundred and fifty Seven dollars as opposed
to that twenty five thousand dollars that we looked at earlier so if you're not yet needing
the dividend income let that grow you money because is when they reinvest the dividends
you're going to get additional shares which means your Shares are going to earn you more dividends
and it becomes this big snowball and before you know it you look back and you're like oh man
that's awesome so dividends provide that steady stream of income that can help you achieve your
income goals now make sure you subscribe for more dividend videos and the most important thing to
remember in any case is that dividend investing is not a one-size-fits-all approach so you got
to make sure you do your own research don't just go out and buy a bunch of Coca-Cola look into the
companies look into the ETFs and try to find the best ways to do that now if you're looking for a
way to automatically diversify where you don't have to put all of your money on a single stock
just in case like Coca-Cola goes like bankrupt or something then what you want to do is look into
ETFs that'll give you an immediate diversification in fact there's a few ETFs that pay you monthly
check out this video that'll tell you all about it and we'll see you on the next video