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How can you earn on dividends, for example, shares of Gazprom or Sberbank? And what needs to be done for this? Where to begin? There are several answers to this question. Or rather, strategies that allow investors to profit from the stock market by buying shares of dividend companies.

Briefly about dividends

For those who have a very vague idea about the procedure for calculating and paying dividends, we will conduct a small educational program.

1. There are companies that pay dividends. And companies for which you will not wait for payments. The very procedure for accruing remuneration to shareholders is prescribed in the company's charter. Usually this is some share of the profit (from a modest 5-10% to 50 and even 70%). Accordingly, we need dividend stocks.
2. Dividends are usually paid once a year. Sometimes 2 times (but rarely) or 4 times a year (very rarely). Everything depends on the company.
3. How much pay? From a modest 2-3% to 15-20%. On average, you can focus on 5-8%.
4. Information on dividend shares: the name, when and how much they will pay, can be found in the dividend calendar. For example, .
5. Information about the payment of dividends (the date of payment and the amount per share) becomes known approximately 2 months before the payment. After the meeting of shareholders.
6. The record closing date (or dividend cutoff) is the last day you need to own shares to qualify for dividends. That is what is listed in the dividend calendar. It is enough to buy shares on this last day - and receive a reward. Accordingly, if you sell securities at this time, you will not receive dividends (even if you owned the paper for several months).
7. After the register is closed, everyone who owned shares will receive dividends within 2 months to their brokerage account.
8. There are many who want to buy securities and participate in the profit sharing. Increased demand pushes prices up. The next day after the cutoff, the price of securities immediately falls. Usually not less than the amount of accrued dividends. Investors are no longer interested in securities, profit has been received. And the massive sale begins.

Strategy or speculation?

In the stock market, profit using dividend stocks can be obtained in two ways:

1. Growth in the market value of securities.
2. Receiving dividends.

Ideally, it is better when both methods work and generate income for their owners.

You can invest or speculate.

What is the difference?

An investor who buys dividend stocks expects a constant cash flow from them. Annually. Plus, the value of the shares will increase over time. But….. this is a long process, designed for years.

Speculators try to make money on short-term investments. And make money fast. Here and now. Their horizon is from a few days to a couple of months.

To illustrate, let's use an example from real life.

Stepan (speculator) buys a chicken for 100 rubles. The next day, she brings him an egg. Stepan immediately sells both a chicken (for 100 rubles) and an egg (for 5 rubles). In total, he earned an instant 5% profit. The next day, the pattern is repeated.

Ignat (an investor) also buys a chicken for 100 rubles. But unlike Stepan, he does not sell it. But only an egg. And so every time. If we remove the cost of poultry feed, then the net profit from one egg is, of course, not 5 rubles, but much less. But on the other hand, Ignat secured a constant profit for himself for a long time.

If Ignat decides not to sell the egg, but grows another chicken out of it, then

• his capital will increase (two chickens are worth more than one) - we have an increase in market value;
• profit from the sale of eggs from two hens will increase - high dividends as a result of business development.

What to do everyone decides for himself. Many factors influence this. Are you ready to constantly monitor profitable options. Or you don’t want to bother and invest according to the principle “the less often the better”.

It is impossible to say unequivocally which of the ways to earn money is better (and more profitable). Someone achieves simply phenomenal success in speculation. Others "raise" good money on long-term investments.

5 Ways (Strategies) to Earn on Dividends

To earn on company dividends, use one of the following strategies.

Bought and keep

The simplest strategy. As the name implies, you need to buy shares of one or more companies. And that's it. Every year receiving dividends. And allowing the company to grow and develop. The growth of the company will entail an increase in its profits. And this will affect the amount of dividend payments upwards.

The problem is solved by expanding the portfolio to include shares of several companies. Albeit with a lower dividend yield. The problems that have begun in one company will not affect the receipt of dividends from others.

I see the future

No one will ever tell you with 100% certainty what will happen to the market or specific shares of companies in 5-10 years. Even after 2-3 years. And if he says, don't believe him.

Today, a company can pay generous dividends, and in a year cut them at times. This is found everywhere.

And vice versa. A company with a very modest dividend history may suddenly "shoot" and start paying generous dividends.

Therefore, betting only on high-dividend companies is not worth it. The middle peasants should also be present in the portfolio.

Example. Dividends were not Aeroflot's forte. In 2002, shareholders received a modest 6 kopecks per share. Sometimes the company did not reward shareholders at all. There were years when dividends were not paid. In 2017, investors received 17.5 rubles per share. And the company promises to adhere to a high dividend policy in the future.

For 15 years, dividend payments have grown almost 300 times!!!

Reinvestment

Buying additional shares with the dividends you receive is a free way to increase your investment returns in the future.

For example, they received dividends at the rate of 10% per share. Buy new ones for them. The next year, they already earned 10% more, in the form of dividends. And so every year. The rule applies here. Which, for long periods of time, can significantly increase both capital and annual profit.

As a result, in about 15 years you will already have 4 times more shares. And the annual dividend income will be already 40% of your initial investment.

And we still do not take into account that quotes can also grow significantly. As well as the amount of dividend payments. Then the return will be even higher.

Rebalancing

After the formation of a portfolio of dividend stocks, the following situation may occur. Some papers can significantly increase in price. And their share in the portfolio will be unnaturally high. And as a result, the risks increase in the event of adverse situations.

It is desirable to maintain the share of assets in the same proportion (or initially set). And you need to sell some of the expensive papers. And on them to buy shares with a fallen price.

• do not let the risks grow;
• get additional profit by selling part of the shares at maximum prices;
• with the proceeds, you buy a lot more other stocks at a good discount.

For example, you have 200 thousand rubles. With this money, you bought Gazprom and Sberbank in equal proportions. For 100 thousand shares of each company. A year later, Sberbank shares doubled (+100 thousand rubles of profit). And Gazprom fell by 30% (30 thousand loss).

Net financial result - 70 thousand profits. Or 270 thousand the cost of all papers.

During the year, the share of shares in the portfolio changed. Now Sberbank accounts for almost 75%, while Gazprom only 25%.

And if Sberbank starts to decline, you will suffer very big losses. And the growth of Gazprom will have a lesser impact on the overall profit.

We sell 25% of the portfolio in the form of Sberbank shares at a high price. Thus, we fix part of the profit. And with this money we take Gazprom with a good discount.

Successful investments and generous dividends!

The pursuit of dividends requires the trader to use special trading tactics that are fundamentally different from the usual trading options.

Trade high only with a leading broker

Actually, it should be understood that dividend strategies are designed for long-term traders or investors.

Popular dividend earning strategies

The first strategy with which we would like to start the review is a medium-term tactic with a payback of two to three months. The essence of this dividend strategy is to buy shares a couple of days before the register closes.

After the closing of the register, the so-called cut-off period begins, when the share, after paying a dividend, drops in value by the amount of the dividend. This drawdown, which is formed, is a working moment, and your goal is to wait it out. After the price of the asset returns to the starting point, you should sell the shares and take profits in the form of dividends.

However, it should be understood that in order to implement this strategy, you will need to choose a strong asset that is prone to constant growth and recovery. You can see an example of such a deal on the example of buying a Gazprom share a couple of days before the cut-off and profitable closing a deal a couple of months later:

The advantage of this strategy is the quick return on investment, and if you take into circulation shares with quarterly dividend payments, you can get a yield of 40 percent per annum.

Also, this option allows you to maximize the reinvestment of the income received, involving more and more new shares in circulation. If we talk about the disadvantages, then it is worth noting the fact that you can choose the wrong asset or get into a black band for the company, and the stock will continue to fall.

The second strategy is more long-term, and holding shares can be up to one year. The essence of the strategy is to buy shares after the cut-off and pay dividends. It is at this moment that the value of the stock falls sharply in price (by the size of the dividend).

However, as we know, companies that pay dividends are in great demand for investors and the price will begin its recovery growth. A share may be held until the next dividend is paid. You can see an example of such a transaction for Rosneft shares in the image below:

Unlike the previous trading tactics, almost all earnings fall on receiving income from the exchange rate difference. However, if you hold the position as long as possible in the market until the next dividend is paid, then you will not lose money at the cutoff.

Also, in the process of work, you will have a minimum drawdown unlike the first option. If it speaks of shortcomings, then you are not immune from force majeure in the company and a strong decrease in the value of shares, the loss on which does not cover the dividend yield.

The third strategy most commonly used by investors is called Buy and Hold. The essence of the strategy is to select the shares of the leaders of their growth with inexhaustible potential. For example, Gazprom will trade gas for at least another 100 years, so the dividend income from it will last a lifetime.

Once you have chosen the leaders with high dividend yields, they are bought and held for decades. Since dividends received from shares must generate income, the investor on an ongoing basis produces reinvestment into new shares.

Actually, the purpose of this approach is to create an additional source of income due to dividend yield, and not exchange rate differences. This technique is used by such a famous investor as Warren Buffet.

How to minimize the risks from a dividend strategy

For the first two strategies discussed above, you can use the hedging method. What is it? For example, if you decide to catch the dividend yield on the first strategy, but are afraid that you will lose a lot after the cutoff, you can buy a futures for the same stock only for sale.

Thus, you will form a position as neutral as possible to the market. However, in the process of forming a position, the volume in monetary terms must be the same, because otherwise you will receive either profit or loss on one of the instruments.

You can also for hedge a position, such as a CFD contract with a forex broker that does not adjust for dividends.

In conclusion, I would like to note that dividends are not the main source of income for speculators on the stock exchange, therefore, in order to get maximum income with minimal risks, you must form a portfolio of shares and diversify risks as much as possible.

Not all brokers accrue dividends when buying shares, some companies use purely speculative trading options, well-known brokers pay dividends

The tax reform in the US has had a positive impact on the profits and free cash flow of companies, which has opened up prospects for higher dividends. Investors invest in stocks that pay dividends in order to receive a steady income and be able to reinvest it in the purchase of additional securities. Since many companies that pay dividends are considered financially stable and mature, their stock prices can gradually increase over time, while shareholders receive periodic dividends, which is a win-win strategy for investors.

Who pays the most and the longest

To assess the dividend yield, you should refer to popular information resources like Yahoo finance, where each stock indicates the size of the future dividend, the ex-dividend date, and other necessary indicators. There are also specialized resources, in particular the site dividend.com, which has stock ratings by dividend attractiveness, and many other useful analytical services.

When choosing stocks with an eye on dividends, investors are interested in yields above 3%. Of the S&P 500 index, four sectors now have a similar figure: telecommunications, energy, real estate and utilities.

Telecoms show a dividend yield of more than 7%, energy companies - more than 3%. Oil giants, including Exxon Mobil and Chevron, are in no hurry to invest in new projects, mindful of the dramatic fall in energy prices in 2014. As a result, companies prefer to distribute the growing profits from the oil rally among shareholders, in particular by increasing dividends. The average yield of the real estate sector is almost 4%.

The utilities sector deserves special mention. Companies from this segment are little known to a wide range of investors, but show an average dividend yield of more than 3.5%. The utilities sector is weakly correlated with the dynamics of the broad market, and this will suit investors who are afraid of a fall in the stock markets. It is worth highlighting the shares of AES and FirstEnergy, which show the best dynamics against the backdrop of a falling sector and also have a dividend yield above 4%.

The information technology sector traditionally shows the lowest dividend yield - about 1.2%. Most IT companies are young, so they tend to spend their earnings on development. The exceptions here are IBM and Qualcomm, which have a dividend yield of more than 4%. IBM pays so much to shareholders because of their age, and Qualcomm because of a business model that involves selling licenses to other customers.

If we take large companies from the Dow Jones industrial index, then the average dividend yield is 2.5%. All companies in this indicator pay out profits to shareholders. If you buy one share of all companies from the Dow Jones index, you can get about $21 per quarter. On average, it turns out about $0.7 per share.

Dividend policy may vary, but once a company starts paying dividends, it becomes a long-term solution with predictable and sustainable increases. In the US, many companies have been paying dividends for over 20 years and increasing them.

There is even an exchange-traded fund (ETF) that brings together similar companies. It's called the SPDR S&P Dividend ETF (SDY) and includes 18 dividend stocks, including well-known companies such as AT&T, Exxon Mobil, Coca-Cola, Procter & Gamble, and four real estate companies. The average dividend yield for companies in this ETF is 4.34%. By the way, Coca-Cola has been paying dividends for over 40 years.

Dividend funds

In principle, any exchange-traded fund receives and pays dividends to shareholders from the shares of the companies included in it.

However, these dividends can be distributed in two ways: cash, which is transferred to investors, or reinvestment in the underlying assets of the ETF. The timing of these dividend payments differs from those for company stocks and varies by ETF.

Like company stocks, exchange-traded funds are assigned an announcement date, an ex-dividend date, a record closing date, and a payout date. On the day of the declaration of dividends, the ETF or the company declares the amount of the dividend, the next day is usually the ex-dividend date, on which the buyer of the shares will no longer be entitled to receive dividends, and after a day or two the register is closed.

Thus, if an investor wants to buy shares in order to receive a dividend, this must be done the day before the ex-dividend date. A month or two later, shareholders will receive their dividends, the company announces the date of payment on the day of the announcement. As a rule, payments are made quarterly.

For example, SPY (an S&P 500 ETF) has an ex-dividend date on the third Friday of the last month of the quarter. The last such date for SPY shareholders was March 16, and on April 30 dividends were transferred.

SPY collects all dividends received from companies into a separate interest-free account and distributes the resulting amount proportionally among investors at the end of the quarter. The fourth quarter is usually paid more than the other quarters due to the distribution of payment dates.

Some other ETFs may temporarily reinvest dividends in the fund's underlying assets until it's time for a cash payout. Naturally, this creates a leverage effect in the fund, which can slightly improve its performance in bull markets and slightly decrease it in bear markets.

Funds that do not pay dividends in cash provide their clients with their shares. This method allows investors to save on brokerage commissions compared to self-reinvestment, but does not exempt from paying taxes. Taxes are calculated on both reinvested dividends and cash payments.

Decision to start payments

Opponents of dividend payments call them worthless and believe that the company can spend these funds on investments that will increase its value and the market price of shares and, as a result, will positively affect the welfare of shareholders.

However, when a company reaches a size where aggressive growth rates are not expected, but large investors need to be interested, a decision to pay dividends may be made. This happened to Apple, which for a long time did not pay profits to shareholders and accumulated a large amount of free funds.

Steve Jobs opposed the idea of ​​paying dividends because he thought it was better to save money for new projects. In addition, the head of the company had a sad experience in 1997, when the corporation was on the verge of bankruptcy and stopped paying dividends. Nevertheless, when Apple's free cash exceeded $100 billion in 2012, the IT giant decided on the long-awaited resumption of the dividend program.

Payout decisions are generally indicative of a company's sound financial condition and are taken seriously and for the long haul. In the United States, situations rarely arise when an issuer that has previously paid dividends decides to refuse to do so or reduce payments. This usually signals a deep crisis in the company.

Recent examples include General Electric, which cut its dividend at the end of 2017. Within two days of the announcement of the decision, the company's shares fell more than 12% to $17.9. General Electric still can't recover from the problems with the insurance business and is restructuring, its shares are trading at about $15.

American companies care about the predictability of their dividends to please investors. In Russia, situations are not uncommon when a company stops paying profits to a shareholder, then resumes payments and then suspends them again, which is difficult to predict and adds to investors' unrest.

So, Megafon in October 2017 and March 2018 decided to suspend payments, although it showed an increase in revenue and profit. It is hard to imagine that AT&T shareholders with one of the highest dividend yields (over 6%) would suddenly stop receiving dividends.

Bashneft suspended the payment of dividends in 2011, then resumed it the following year, and in 2017 decided to postpone it again. For comparison, Exxon Mobil and Chevron did not cut dividends even in the crisis years of 2008 and 2014.

If an investor has made a choice in favor of dividend stocks, then in order to form a good portfolio, it is necessary to take care of risk diversification, so it is worth including companies from different sectors in it.

For example, a dividend portfolio can be made up of AT&T, AES, Chevron stocks as representatives of sectors with the highest yield. At the same time, you need to add securities of companies that represent other industries, but pay good dividends, in particular, Blackstone is suitable for this with one of the most attractive yields, exceeding 11%. Also, for diversification, it makes sense to buy shares of CME Group, United Parcel Service (UPS) and IBM, which have a stable business and a dividend yield of more than 3%.

The purpose of the dividend portfolio is to preserve the invested funds. A good dividend portfolio will protect against inflation and sharp market fluctuations.

Dividend Portfolio Example

In the age of high technology, every person has ever heard of stocks and dividends, but not everyone understands what their significance is. For many, this is an incredible rotation of something terrible. And someone, having once understood the intricacies of the securities market, earns good capital on dividends.

What are dividends?

To understand the concept of "dividends", you should first understand the term "shares".

When a company needs financial resources for its further existence and development, its top management decides to attract investors. Those, in turn, in return for the money provided, receive a part of the profit of the enterprise, which is expressed in the form of a share.
Thus,

A share is a type of security that allows the holder to participate in the activities of the organization, as well as receive part of its distributed profits - dividends.

Anyone who has enough money can buy shares. It can be either a legal entity or an individual. The value of shares largely depends on the rating of the company in the market, but the total nominal value is equal to the size of the company's authorized capital.

Payments on shares can be annual - based on the results of one calendar year of activity, and intermediate - based on the results of a quarter or half a year. The decision on such in the first case is made by voting of the participating shareholders, in the second - by the board of directors, which also decides the following issues:

• Determining the amount of dividends.
• Form of payment - in cash or in other form.
• Date of closing the register of shareholders (date of payment).

The entire payment system is transparent and information on it is available to any actual and potential shareholder.

It should be added that the top management of the company may refuse to pay dividends to its shareholders on the current date and direct the profit from the activity for reinvestment, that is, further development.

A shareholder (owner of a share) has the opportunity to receive income not only from dividends, but also from the resale of their securities. Such investment is considered to be a very profitable business and today it is gaining more and more popularity in the financial market of our country.

How to buy stocks and who are brokers<

Shares are divided into two groups:

1. Ordinary shares giving the right to participate in the activities of a joint-stock company. Holders of such securities have certain risks, since payments are made in accordance with the coefficient, which is set by the board of directors from year to year. It directly depends on the profitability of the enterprise, and in case of insufficient profit, dividends may not be paid.
2. Preferred shares are higher in status. Payments on them are fixed and regular, the percentage is quite high. However, holders of preferred shares do not have the right to vote in making management decisions.

The acquisition of securities is a whole science that needs to be carefully studied in theory, and then the acquired knowledge should be applied in practice. Let's take a step-by-step look at how to properly invest in stocks.

starting amount

First you need to decide how much money a person is willing to spend on investing. For beginners, an amount of 50 to 100 thousand rubles is suitable, and then it is recommended to invest no more than 1/3 of your savings. Of course, there are risks of losing the invested money, but high interest rates cover them.

Terminology

Before buying securities, it is necessary to understand the work of the stock market: to study the terminology associated with the purchase / sale of shares; rating of joint-stock companies; principles of operation of securities. All this will help you navigate the world of finance and communicate competently with brokers and other interested people.

How to buy shares

Decide how the shares will be acquired. There are several ways:

1. On the stock exchange with the help of a broker.
2. In the bank.
3. From holders of securities.
4. Issuers issuing securities.

Brokerage services

The best way to deal with securities is to use the services of a broker. A broker is an official person or a group of persons (company) that has access to stock exchanges.. The fact is that, by law, individuals do not have direct access there. Therefore, it is important to find a reliable experienced broker who will be the representative of the future shareholder.

To select such a specialist, you need to be guided by the following criteria:

• Many years of experience in the stock exchanges. It is better not to cooperate with young representatives.
• Positive feedback from other users of brokerage services.
• High success rate.
• Constant communication with clients.
• Detailed reporting on the state of affairs on the stock exchange.

Brokerage services are paid - a certain percentage is charged for trading. The price is set directly by the broker. After an agreement is concluded with him, it is necessary to open a brokerage account, deposit the prepared amount and start trading.

Buying shares in a bank

Banks such as Sberbank, Gazprombank and VTB sell their own shares in addition to their core business. To purchase securities from them, you need to come to the branch and get acquainted with the offers. The disadvantages of this type of purchase are the limited choice of offers and the cost declared by the bank itself.

Securities holders

Buying shares from individuals is a very risky business. Here you need to be extremely careful, since such activities are classified as over-the-counter. There are no legal obstacles on this path, in connection with which a lot of scammers have divorced, especially on the Internet.

When a profitable offer appears, you need to look at the stock price on the website of investment companies, after which you can call the owner of the securities and make a deal. However, even in this case, you still have to turn to the services of a broker to enter the exchange.

Issuers

An issuer is a person who issues securities and puts them on the stock market. These include the state, joint-stock companies, non-residents of the country, municipal authorities. When buying shares from them, the possibility of bargaining is excluded due to the fixed value of the securities. In Russia, some of the largest issuers are: Gazprom, Lukoil, SeverStal, Aeroflot, Magnit, Rostelecom and many others.

Where to invest – portfolio formation

It is strongly recommended that before investing, review the list of potential “investment objects” and select a few. With such a distributed investment, the risk of losing funds is reduced - if all the money is invested in one company, and its shares fall in price, then there can be no talk of any profit. Or the collapse of the organization may occur, and as a result, the inability to pay accumulated dividends. Otherwise, the losses will be minimal or, conversely, you will get good earnings.

Best buy time

After choosing an investment object, it is necessary to assess its current position in the stock market. For this, analysts' forecasts are studied. It is recommended to seek advice from a broker. If a fall in the value of securities is not expected in the near future, then you can safely buy them. It is permissible to buy shares at certain time intervals, for example, once every 1-2 weeks. You can review your package of papers 2-3 times a month to assess the current situation.

Dividends

Now, becoming a shareholder, you can receive dividends. However, it is worth keeping track of the state of the company whose shares are acquired. If a future loss is forecast, it makes sense to sell shares of this company as soon as possible in order to reduce financial losses.

The difference between dividends and depository deposits

There is no fundamental difference between the concepts of "dividend" and "deposit". In both cases, the investor acts as a lender and lends money to a joint-stock company or a bank. But differences still exist:

1. Depository deposits are insured, but shares are not. However, in the event of a loss-making company and non-payment of dividends, you can resell your shares, thereby recovering part of your losses.
2. Unlike deposits, shares allow you to have two ways of income - dividends and the difference in the value of shares in the process of buying and selling.
3. When applying to a bank, deposit funds are issued on demand in accordance with the law. In the case of dividends, the date of payment is strictly fixed, but in the case of ordinary shares, payments may simply not be made due to losses or reinvestment.
4. The risk of losing funds from the purchase of shares is higher than in a bank deposit.
5. The amount of the dividend may vary depending on the profitability of the enterprise. The income from the deposit is a fixed amount.
6. When opening a deposit, there are no additional costs, while in the case of securities, it is necessary to pay additional brokerage services, thereby reducing your profit.
7. You can get much more income from buying shares than from a deposit. Of course, in this case, you need to purchase such securities, the dividends on which will exceed the income from the deposit.

Which investment method to choose depends on the nature. A brave and decisive person will definitely stop at acquiring securities, while a sedate person will prefer stability in the form of a deposit. Everything is individual, so each way of investing has the right to be.

Diversification

The essence of investment diversification (security portfolio) is the distribution of funds in different assets in order to reduce the risk of the entire investment campaign. On the stock exchange, this is the most powerful tool for protecting invested funds - in order not to play the "lottery" with one ticket, it is reasonable to purchase securities from different sectors of the economy. Thus, low returns on some assets are offset by higher returns on other assets. Experts recommend making deposits in 10-15 areas. This is the most convenient number, because with a larger number, managing deposits will be a rather time-consuming process.

To diversify stock investments, you can use the following methods:

• Deposits on a geographical basis (acquisition of securities on the international market).
• Contributions to enterprises in various sectors of the economy (for example, construction, food industry, metallurgy, mechanical engineering, natural resources).
• Investments in several enterprises of the same sector of the economy.
• Diversification of portfolio securities (acquisition of shares, bonds).
• Diversification on a temporary basis (part of investments work in the long term, part in the short term).
• Random diversification - the choice of stock instruments randomly.

How much money to invest in investing - can only be decided by the investor. The main goal of diversification is the optimal ratio between risk and income for the investor. As activity in the stock market requires a periodic assessment of the portfolio of securities: in the event of a change in the required ratio, the sale of securities for illiquid enterprises is considered.

In our country, the stock market is developing quite slowly and reluctantly. Businesses don't like to pay dividends. But the economy is growing and gives hope that everything is still ahead in our country.