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Investing In Dividends For Dummies PDF

261 Pages·2015·2.06 MB·English
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Investing in Dividends For Dummies® Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com Copyright © 2016 by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book. LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ. For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For technical support, please visit www.wiley.com/techsupport. Wiley publishes in a variety of print and electronic formats and by print-on- demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com. Library of Congress Control Number: 2015951277 ISBN 978-1-119-12195-4 (pbk); ISBN 978-1-119-12197-8 (ebk); ISBN 978- 1-119-12198-5 (ebk) Investing in Dividends For Dummies® Visit www.dummies.com/cheatsheet/investingindividends to view this book's cheat sheet. Table of Contents Cover Introduction About This Book Foolish Assumptions Icons Used in This Book Beyond the Book Where to Go From Here Part I: Getting Started with Dividends Chapter 1: Wrapping Your Brain Around Dividend Investing Coming to Terms with Dividend Stocks Prepping Yourself for the Journey Ahead Selecting First-Rate Dividend Stocks Building and Managing Your Portfolio Checking Out Various Investment Vehicles Chapter 2: Brushing Up on Dividend Details The Major Stock Market Indexes The Difference Between Common and Preferred Stock Company Fundamentals Paying Tribute to Yields The Role Dividends Play in the Market Important Dates in the Life of a Dividend Chapter 3: Grasping the Dividend Advantage The Pros and Cons of Investing in Dividend Stocks Investing in Solid Companies The Rise and Fall of Dividend Stocks’ Popularity Part II: Exploring the World of Dividends Chapter 4: Income-Generating Industries Lighting Up Your Portfolio with Utilities Assessing Utility Companies: What to Look For Pumping Up Your Portfolio with Energy Partnerships Exploring Master Limited Partnerships Exploring Telecommunications Stocks Assessing Telecom Stocks: What to Look For Discovering the Consumer Goods Sector Identifying a Good Consumer Staples Stock Chapter 5: Exploring REITs and Financials REIT Basics Evaluating REITs Dividends from Banks Chapter 6: Dividend Investment Vehicles The Nature of DRIPs and DIPs Diversifying Your Dividends through Mutual Funds Investing in Dividend-Focused Mutual Funds The Best of Both Worlds: Exchange-Traded Funds Dividends from ETFs Shaking WisdomTree’s Family of Dividend Funds Going Global with Foreign Dividends Examining Ways to Go Global Part III: Selecting an Investment Approach Chapter 7: Setting Goals and Making Plans Your Personality Profile Formulating an Investment Plan Planning Specifically for Retirement Chapter 8: Risky Business: Assessing Risk and Your Risk Tolerance Weighing Risk and Reward Gauging and Raising Your Risk Tolerance Recognizing Factors That Can Increase Risk Mitigating Your Risks Chapter 9: Choosing Your Approach — And Your Dividends Finding the Right Investing Approach for You Sizing Up Potential Picks Calculating a Dividend’s Relative Strength Recognizing a Potentially Good Dividend Stock Chapter 10: Buying and Selling Dividend Stocks Deciding Between a Full-Service and Discount Broker Choosing a Full-Service Broker Finding a Discount Broker Buying and Selling Shares Chapter 11: Staying Current on Tax Laws Dividend Taxation The Tax on Dividends from Mutual Funds The Tax on Dividends from ETFs MLP and REIT Taxation Calculating Your After-Tax Returns Part IV: The Part of Tens Chapter 12: Ten Common Misconceptions about Dividends Dividend Investing Is Only for Old, Retired Folks I Can Get Better Returns with Growth Stocks Dividend Stocks Are Safe Investments Companies Limit Their Growth by Paying Dividends Paying Down Debt Always Comes Before Paying Dividends Companies Must Maintain a Stable Dividend Payout My Dividend Increases Won’t Even Keep Up with Inflation All Dividends Are Taxed at the Same Rate You Should Always Invest in High-Yield Stocks REITs and Bank Stocks Are No Longer Good for Dividends Chapter 13: Ten Dividend Investing Mistakes to Avoid Buying a Stock Solely on a Hot Tip Skipping Your Homework Expecting to Buy and Sell Shares Just for the Dividend Focusing Solely on Yield Focusing on Current Rather than Future Dividends Failing to Monitor Stocks and the Market Buying a Stock Just Because It’s Cheap Holding a Poor-Performing Stock for Too Long Failing to Account for Taxes Giving Too Much Credence to Media Reports and Analysis About the Author Cheat Sheet Advertisement Page Connect with Dummies End User License Agreement Introduction The purpose of the stock market is to enable companies to raise the capital they need to start or grow their businesses. Instead of borrowing money from a bank and paying interest on it, a company can sell shares of itself to investors. Over the years, the stock market has gone from being a respectable venue for investors to purchase partial ownership in companies to something more akin to a casino. Seduced by reports of individuals earning millions nearly overnight by investing in high-growth stocks, speculative investors poured money into many companies that offered nothing more than a promise of sales and profits, further inflating share prices. When the needle point of reality finally popped the bubble, the poor unfortunates who failed to cash out their chips early enough were blown away like dust. Fortunately, the deflated bubble (along with some dividend-friendly tax legislation) brought many investors down to earth and back to the basics — investing in companies with a proven track record of earning profits and paying dividends. As they return to the fold, investors are beginning to realize what their parents, grandparents, and great-grandparents already knew — dividend investing offers a host of benefits that provide a safer and often more profitable way to invest in the stock market. Dividend investing is nothing new. In fact, since 1602, when the Dutch East India Company became the first corporation to issue stock, dividends have been the primary way for investors to receive profits from their investments without dissolving the company or selling the investment. However, following a dividend-investment strategy is new to many modern investors who’ve been focused solely on growth investing. If you count yourself among this crowd or are just starting out and plan on investing in dividend stocks, you’ve come to the right place. Investing in Dividends For Dummies contains all you need to know to develop your strategy, find and evaluate potentially good dividend stocks, manage your portfolio, and avoid the most common and critical mistakes. About This Book I’d love to be able to hand you a list of stocks and send you off with instructions to buy each one, but investing doesn’t work that way. Every

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Get the lowdown on adding dividend stocks to your investment portfolio Investing In Dividends For Dummies shares the fundamental information you need to know about one of the steadiest investments you can make: dividends. This approachable resource provides you with the details necessary to make con
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