Best dividend paying stock
Today people do not want to put their money in the banks. Instead they want their money to work as hard as they do. No one today is satisfied with the interest amount given by the banks. People want more returns from their investment. And due to this desire to earn more, the latest trend of investing in best dividend paying stock has increased. Before we move further we must take a glance on the working of the stock market and dividend payment methods.
How stock market works?
In the stock market, people try to buy the best-selected stock according to their observation. The people usually make this observation, by watching the price of the stock for some time, say one-week, one-month etc. This observation helps in selecting the best return giving stock. Sometimes people don?t have time to observe and select the best suitable stock for them. At that time they invest in mutual funds. These mutual funds companies further recruit ?s experts to buy the best suitable stocks for the client. Therefore the experts on behalf of the client does the buying and selling of stocks. In return they get commission or fees as predetermined in the contract of mutual fund.
To earn a dividend from a company, the stocks of the same should be held for a required time frame otherwise the person is not be considered liable for getting the dividend amount. Mostly the day or short time traders do not get the dividend. The long time holders of the stocks are the one who gets the dividend on their investments.
What is Dividend payment?
Actually Dividend is the amount or more stocks or coupon/discount slips that a company sends to the stockholders on the end of the quarter or the financial year as the case may be. Dividend is paid as a token of splitting profits between the shareholders of the company. This Dividend can be in any form like more company stocks, cash, coupon/discount slips that can further be explained as the following.
- More company stocks.
- Cash.
- Coupon/discount slips.
Some times companies send more company stocks as a token of profit at the end of the quarter or year. For instance if a person has hundred stocks of a definite company and at the end of the quarter or year that person gets ten or fifteen more shares free of cost of the same company then this is called dividend in the form of more company stocks.
Cash is another way to split profit between the stockholders. The amount of sending cash to the investor?s depends on the amount of net profit and the number of shares held. This amount is send through bank draft.
Sometimes companies send coupon/discount slips to the investor?s. This method helps the company in two ways. Firstly, a token of splitting profits between the investor ?s is accomplished. Secondly the company advertisement is made, by offering to the public coupon/discount slips.
What is dividend yield?
Dividend yield is the method of calculating the return from the investment on the stocks other than its present market price. For instance, if a person invest 100$ in a stock and at the end of the year, the total dividend amount received is 10$ then the dividend yield is 10%. Although dividend yield never stays same. It changes as according to the profits or company policy. That is a company may select to give the same percent of dividend yield even after double increase in profits. Reason can be given as keeping reserve money for expansion, growth or any other fund. Therefore a company is not liable to pay the same dividend every time. The amount of dividend yield is fixed on the board meeting held with all the investor?s at the end of the year.
Various sites on searching for best dividend stocks.
A number of sites on the net help common masses to search for the best dividend stocks and figure out the best suitable one for them. Actually these sites are made either by the stock trading companies or book writer?s mostly the expert?s of stock market. They provide their views and news about various stocks in the market. The names of such suggesting sites are as follows.
Stock data for the year May 2007.
Till May 2007, the following estimates and data regarding the dividend given by various companies in U.S. have been given. These are as follows in an increasing order of their dividend yield.
|
Name of stocks |
Estimated annual dividend |
Annual yield. |
|
AXL American Axle & Manufacturing Holdings |
.60 |
2.1 |
|
CLCT Collectors Universe |
.48 |
3.4 |
|
T AT&T |
1.42 |
3.7 |
|
BAC Bank of America |
2.24 |
4.4 |
|
CT Capital Trust |
3.20 |
6.9 |
|
BPT BP Prudhoe Bay Royalty Trust |
7.27 |
11.3 |
From the above table some companies estimated annual dividend and its dividend yield has been compared. In this table the AXL American Axle & ; Manufacturing Holdings has least dividend yield. While BPT BP Prudhoe Bay Royalty Trust has given the maximum annual estimated annual dividend.
One more thing is worth mentioning here. That in the above table although the AXL American Axle & ; Manufacturing Holdings has given more yearly dividend than CLCT Collectors Universe. Still the dividend yield is more in the second company due to the amount of investment is more AXL American Axle & ; Manufacturing Holdings.
Conclusion.
In the end the people tends to invest their money in stocks because they want to earn more return from their investments. Although these investments are subject to market risks, still the return from such investments proves it to be worth taking. Moreover the dividend from these companies helps the people to earn from both aspects. That is the value of their stock increases and along with that they get extra returns on quarterly or yearly basis as the case may be. Finally their are many stocks in the market which gives better dividend yield, the need is just to pick the best one that suits the person?s desire and estimates both.
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