Stock Investing 101

I am a huge fan of dividend investing. Over the past 100 years most of the wealth that has been created by the stock market has come from dividends believe it or not. Companies are starting to move away from dividends, the average company is paying out less than a 2% yield, which is disappointing.

The dividend growth rate for a company can be just as important as the dividend yield that a company provides.

Calculating the dividend growth rate for a company is very easy, which is another reason why it is such a great way to look at a company. All you have to do is compare the dividend a company is paying out currently to what it has payed out in the past.

If a company is paying out 2 dollars a share currently and payed out 1.20 a share 5 years ago, its dividend growth rate is 67%. 2.00-1.20= .80/1.20= .66 X 100= 67%. You could estimate that a company would be giving out 3.35 a share in dividends five years from now if it continues its growth rate of 67% per 5 years.

Calculating the dividend growth rate for a company might not be as appealing as looking at a penny stocks prospectus or trading currency on very high margins but if you want to be as wealthy as you can be over time you will stick to investing in dividend paying companies that are profitable and proven.