Having financial security is something we all aspire to. If having sufficient financial resources is always important, it is even more so when it comes time to retire, since from that moment on we will not work and our income will be reduced. Therefore, more and more people are interested in the possibility of living off dividends.
We know that this is an alternative for those who have a lot of money and can make large investments, but what about people who have average assets, is it not an option for them? In this article we are going to discover how you can supplement your income with good dividends even if you do not have much money to invest.
What are dividends?
Dividends are payments that companies make to their shareholders. If the company obtains profits from its activity, it distributes a portion of it among those who have given it their money (buying shares) so that it can carry out its mission.
Companies pay a dividend for each share, and payments are usually made semiannually or quarterly, although in some cases it is also possible to find monthly or even annual dividend payments.
Imagine that your friend has 50 shares of a company that pays 10 euros in dividends for each share per year. This means that your friend will receive 500 euros for his participation in that business.
You can obtain dividends by buying shares of listed companies, that is, by investing in the stock market. But also acquiring private shares in companies or, what is the same, entering as a partner in a business. However, keep in mind that not all stocks pay dividends, so having stocks does not necessarily mean that you will receive dividends.
Can you live on dividends?
As we said at the beginning of this article, it is possible. The key is to make good decisions and make the most appropriate investments. Always keep in mind that we are facing an investment that is more profitable in the long term.
The dividends that companies pay are relatively low because they need to reinvest most of the profits in themselves to continue operating. Therefore, in order to live on dividends you will need to invest in shares of several companies that pay dividends. In order to grow your portfolio, continue saving and investing, and also take advantage of the dividends you will receive to reinvest them in the purchase of new shares. In the end you will have a very interesting investment portfolio that will generate a good return.
Tips to make money with dividends
- Diversify: Don’t put all your money in stocks of the same company. Buy shares of corporations belonging to different sectors.
- Invest in quality companies.
- Don’t buy shares at too expensive a price.
- Always invest in thinking long-term.
If you design a good action plan and are realistic, living off dividends will be an option within your reach. To save what you need and make good investments, the best solution is to put yourself in the hands of specialists who can help you better understand your finances.
