Earnings from dividends allows you not only to preserve, but also to increase your capital. This is a classic investment strategy that requires relatively little knowledge and experience. At the beginning of 2021, we collected the TOP 10 best dividend stocks that have demonstrated stability over the past 5 years. We also successfully overcame the difficult 2020, full of unrest and sharp collapses.
What are dividends and how to get them
Dividends are paid by the company from profits received. Accordingly, you can count on receiving them only if the company operates successfully in the market. The higher the dividends and the more stable the company's financial position, the more expensive its shares are.
To receive dividends and, in fact, make money on stock dividends, you must own the security on the cut-off date. This is the last day on which the register of shareholders is closed. Whoever had the share registered on that day receives the same dividends.
For example, in 2021, Alrosa closed the register on June 14. You had to buy shares before June 11 - weekend adjustment plus T+2 trading mode (shares are credited to your account on the second day, so you need to buy at least 2 days before the cutoff).
But you don’t need to count or think too much - any broker will provide a dividend calendar with all the dates listed.
You can sell a share even the next day - the main thing is that you own it on the closing date of the register.
To calculate how much you can earn from dividends, you need to look at the same dividend calendar. In the example with Alrosa, you could earn 5.04 rubles per share. The yield was 4.94% - the share itself was worth 106 rubles on the closing date of the register.
Each issuer itself determines the size of dividend payments, the closing date of the register - and the price per share is set by the market. In general, if you want to go deeper into the topic, read the article “How to buy shares and receive dividends.”
When the question arises whether you need to work at all...
can simply live on dividends - everyone decides it in their own way. However, we must take into account that work is not only a way to earn money for a living, but also an opportunity to communicate and develop oneself as an individual. An excellent option could be the following: accumulate significant capital (let’s say 10.5 million rubles) and find an interesting job, focusing not so much on the salary, but on the satisfaction received from it. This will diversify your life and fill you with new impressions.
By the way, as for pensions, dividend payments will be very useful in this matter. Even if these are insignificant amounts that are stored in shares, in any case, this is additional income that will not hurt older people.
Where can you buy dividend shares?
Short answer: from any broker with access to the Moscow Exchange.
Detailed answer: issuers are listed on exchanges, including Moscow. But you can’t just come and buy a share there. We need a mediator. They act as a broker.
You will need to pay a commission to purchase shares. Usually it is generally small - hundredths or tenths of a percent. But in addition to this, brokers charge fees for depository services, account maintenance, etc.
And here’s another interesting article: Which Russian companies are conducting buyback in 2021
In general, to buy a share, you need a broker. There is no way without him.
Read more about how to choose the right broker to buy shares.
Which companies to choose for buying dividends
To make money on dividends, you need issuers that consistently pay these same dividends. There are not so many such “dividend aristocrats” in Russia. I personally recommend:
- MTS – stable payments and, in principle, a good future;
- Lukoil – regularly increases dividends;
- Sberbank is the main bank of the country, its dividend policy provides for an increase in payments;
- Moscow Exchange - growth prospects;
- Norilsk Nickel;
- Gazprom.
From foreign issuers:
- Kimberly-Clark;
- SySCo;
- Coca-Cola;
- Apple;
- Berkshire Hathaway;
- Procter & Gamble (manufacturer of Tide);
- McDonald's and other US dividend aristocrats.
These companies pay dividends consistently—and, more importantly, regularly increase their payouts. By purchasing Dividend Aristocrat shares at a discount, you can expect that one day the dividends will even exceed the purchase price.
In general, you should choose dividend stocks based on the following data:
- how long has the company been making payments?
- Are dividends growing?
- what is the financial condition of the company;
- whether the shares are overbought;
- whether dividends are included in the share price;
- does it repurchase[/anchor] shares (if yes, this is a good sign, since, firstly, stock prices will rise, and secondly, management will be ready to pay generous dividends to themselves);
- Are there plans to change the dividend strategy?
Of course, you should also look at the ratios - primarily P/E and P/S. And stick to any of the strategies for buying dividend stocks.
And one more thing - past profitability does not guarantee the same profit in the future. Consider this a risk notice.
To make a profit you need...
buy a lot of Sberbank shares. Income can either rise or fall, it all depends on the situation. The greatest benefits come from shares of companies whose quotes are always elevated (for example, oil and gas or gold mining). But we must take into account that the prices for such assets will be quite high. You can, of course, use the help of a broker who will control your portfolio, however, you will have to pay for his services. Interest payments are transferred to the broker's account.
For people who are in our country for 183 days a year, dividends are subject to tax payments, like other types of income (13%). It’s up to the broker to remove them and redirect them to the personal income tax budget. The user can control the transfer of interest payments in the “Personal Account”. The investor decides what to do with the amount of money received (you can transfer the money to a bank account, or you can leave it at the disposal of your broker and carry out further operations to invest and replenish your portfolio.
Strategies for buying dividend stocks
Buy and hold
The simplest strategy, it is sometimes called the averaging strategy. Its essence is that you can earn money from dividends on shares simply by purchasing them in certain shares at regular intervals.
Important: in the following example, I did not calculate profit to the nearest ruble; it is more important to understand the principle of the strategy itself.
For example, a year ago you decided to save 5,000 rubles from your salary and use this money to buy Sberbank shares at the current price. Over the past year, quotes have varied from 140 to 220 rubles per share. You managed to buy 330 shares for an average of 180 rubles.
In 2021, the dividend amount was 12 rubles per 1 share. Consequently, by the middle of the year (and Sberbank pays dividends in June) you had approximately 300 shares, and you received 3,600 rubles. If the bank increases payments next year, you will receive even more - due to an increase in the number of securities in your possession and due to a larger number of dividends.
And here’s another interesting article: The most undervalued stocks in the US and Russia in 2021
The beauty of the strategy is that you don't need to calculate multiples or understand financial statements. You simply buy shares of well-known, reliable companies that consistently pay dividends, and receive payments.
Over the course of a year, you buy shares at the average possible price—hence its name: “averaging.”
Purchase at a discount
But the method described above is not always good. For example, if you did not buy Sber shares for 240 rubles, but put 5,000 rubles into your account, and bought shares when quotes fell to at least 200, you would have purchased not 20 shares, but 25 (in fact, Sberbank shares are sold in lots at 10 shares, so in both cases you would buy 20 shares - but it is important for us to understand the very principle of buying at a discount).
Therefore, a better strategy for making money on dividends would be to buy at a discount.
You should purchase shares of reliable companies whose quotes have collapsed due to external reasons beyond the control of the business. For example, due to the sanctions imposed against Russia. Or due to seasonal changes. Your task is to buy more shares for the same money. After all, the size of dividends does not depend on the amount of money invested, as is the case with deposits, but on the number of shares in hand.
Buy before dividend announcement
The company announces the payment of dividends after a meeting of the board of directors. This is where the recommended payment amount is decided. Then a meeting of shareholders is organized, where they confirm the decision of the directors or decide that it is better to leave the money in the company.
It seems like the best time to buy dividend stocks is right after this. But you're not the only one so smart
