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Dividend Investing for Beginners: How to invest in the Stock Market for Income

there are two very distinctive

approaches to actually making an income

through using the stock market the first

one is a growth strategy which is where

you ultimately grow a pot big enough a

large investment pot that you could

withdraw a little bit of money every

single year to live off based on the

increase that you're getting from the

stocks year on year the second approach

that I'm going to cover in this video is

called dividend investing and that

essentially is where we buy stocks and

companies that issue dividends which are

part of their profit every single year

usually on a quarterly basis and that

dividend that payment from owning that

stock actually is our income so today's

video I'm actually going to break down

the basic concepts and the things you

need to understand before you dip your

toes in dividend and vase ting so if

you're brand new to my channel today be

sure to stick all the way to the end

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hi there welcome back to my channel my

name is Jennifer from I'm AFRICOM I make

videos all about personal finance

investing and success main set here in

the UK

today's video we're going to be focusing

on dividend investing so my favorite

type of investing is actually in index

funds we buy them for that long term

growth port however if you also wants to

consider getting income regularly from

dividend investing this video is going

to be invaluable for you to break you in

to some of the basic concepts so let's

get stuck right in so this is dividend

investing for beginners with me Jennifer

Kempson from Mama Farrakhan so

essentially to make money as an income

from a stock market there's two very

distinctive approaches we have a growth

strategy which is based on a large

income pot that we basically ticker

withdrawal from every year or we can use

dividend income as a strategy so the

first strategy I mentioned was using

growth and that is achieved by using

index funds buying these long-term and

holding them till a pot of money allows

us to basically withdraw a small

percentage of that total pot every

single year you buy early and the sale

after long term we grew our wealth by

the total amount then sale part of it

for income you would buy such things as

a S&P 500 as an example so how we would

actually do this is by having that one

account that we can eventually grow

large enough to withdraw income this to

the investment eisah

lifetime I sought pension through your

employer or a private one I've got more

videos about that topic later in this

channel the second option is that

dividend income strategy essentially it

means we buy stocks that we know pio a

proportion of income every single month

or year to their investors we're a stock

owner in a specific company the profits

from the company without selling this

years is how we ultimately make an

income so let's go into this a little

bit more detail what is a dividend well

a dividend is a portion of the profits

as a shareholder in that

it's a slow way to get rich it's a form

of income though with Oh exchanging our

team for money

that company's working in the background

for our behalf and then giving some

other profits back as a thank you for

investing in them big corporations tend

to be more stable so that means if

actually once you buy that stock that

has a dividend payout then you hopefully

we begin to for many years in the future

depending on how long you kept that

stock before you eventually sold it all

so a couple of terms are really

important to understand with dividend

income the first thing what is the

percentage dividend yield well that is a

percentage returned back to you based on

how much of current investment value is

as a percentage effectively it's your

yearly growth payment compared to your

investment so for example if you had a

4% yield that means you would get 4%

back in dividends for every pound

invested now however a high percentage

dividend yield does not mean this is

nest of the best investment you could

make that could be potentially a high

risk for that level of investment so

you've got to look at the share price

the company's basic information about

their business to get clues why they've

got a high percentage yield don't just

go for the highest thinking it will make

you the most money it may return the

most value perhaps in the first year but

we need to make sure that this is going

to be a long term income for us for that

investment and we'll minimize our risk

of actually losing an investment that

we've made the let's go over some

important information you need to know

about your dividend company you need to

know how and when you will get paid is

that's going to monthly quarterly or

yearly and the specific dividend

ownership deeds so for example you need

to know what's the trade date that is a

date you place your order to buy the

stock

what's the settlement date that's the

date that you own the stock officially

on the books the ex-dividend D is a date

which you must complete the sale by and

if you place an order or not d are after

you will not be paid the next dividend

payments are really important one to

understand

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the record D that is the cutoff date

established by the company for what

shareholders qualify for the next

dividend payment and then the period the

most important date for you as an

investor when and how often will you

actually get that PA from your dividends

so let us know cover up some key metrics

that we need to understand when we're

choosing and competing companies this

would be the PA ratio the EPS growth the

Pte ratio and the yield return so for

example P ratio this is the amount of

dividends paid to the shareholders

relative to the total net income of a

company we ultimately don't want less

payout ratio to be too high because that

would mean a lot of money is being spent

just rewarding the shareholders we want

to actually see that company investing

back on itself in actual development and

research to better their products that

they're giving their customer so the

parent ratio allows us to see what our

actual the priorities of this company

are they looking just to keep

shareholders happy or are they actually

looking to develop more products to

develop their business for the long term

what is the EPS growth well that is a

percentage change in share price over

the last year now ideally we want to see

profits growing and that being returned

back to the share price so for example

if there's a consistent growth over time

that means that company is effectively

being seen to be in demand and it's

doing well people want to own stocks in

them so what is the PT II ratio well

this is a price per share divided by the

earnings per share essentially it means

the higher the PT ratio generally

investors anticipate a high growth and

future perhaps the praised rate now has

reached its lowest point for a good

number of years and people actually

believe that it can increase quite

considerably in the future the average

ratio is between 20 to 25 on

accompaniment generally doing well if

you're seeing higher than that it could

suggest that there is anticipated high

growth in the future for this company if

a company is losing money however it

will not have a Pte ratio

what is the return yield well that is

income returned on investment annually

as a percentage so for example you may

see a four percent return 10 percent

whatever they are returning back to

their shareholders and this is

essentially the key information you need

to be a weird or potato based on

everything else if you're still

interested in this company as a

potential choice for your investment

money this payment percentage will

actually see how much income can you

expect this year the next year ahead and

potentially is it something that could

drop down in the future if it's

particularly high so there you have it

that's an overall view on dividend

investing so let us take a look at a

company to actually understand the

basics further and apply this to a

real-life selection for our investments

so overnight at the computer and as I

mentioned I want to show you a real life

example so I'm actually going to jump on

and show you an example using Vodafone

so I very well know obviously British a

telecom company I have pulled up their

details with and Hargreaves Lansdown

which is obviously I share an investment

platform at the woman they allow you to

buy individual stocks and shares and

particular companies as well as have an

investment eisah Vanguard how I use for

my investment is at the moment they

don't allow you to buy individual stocks

and shares it's only their index funds

and their ETFs and their mutual funds

they allow you but as an example I

wanted to show you how to analyze stock

information so that you can make an

informed choice as a potential dividend

investor all right here we can see a

couple of clear bits of information so

it will obviously give you the buy-in

the sale price

now the sale price is actually if you

wear obviously to sell the stock today

at this exact moment of time what Bower

you would get if you wanted to buy

there's obviously a difference in price

it's going to cost you more to buy it

today than it would be to sell it

however there are other important

information in this particular

breakdown which I really love is we're

talking about a couple of those ratios

and important matrix that we mentioned

in the information before so we see it's

going to give you a lot of financial

information about you know what is the

market capitalization but here are the

important ones for us we have the

dividend yield so in this particular

case they get five point three four

percent as a dividend currently to their

shareholders the Pte

she is thirty three point three seven

and as explained and the earlier

animation most companies set between

twenty to thirty so when we're seeing

over thirty that doesn't necessarily

mean it's a good company to buy and what

it does mean is that people predict that

it's worth more than perhaps the

earnings per share so that means that is

potential for this company to be worth a

lot more that means effectively your

stock could be worth a lot more in the

future

now I always take that ratio and check

out the the share prices they always

default usually to one year analysis I

would like to zip right over to taenia

let's get this broad as we can so if we

look at this we can see quite clearly

2009 we were looking at roughly the same

prices as we have know and they took a

huge uplift towards 2014 then we had

this dip happening in about 2017 2018

but they're really the took aren't sharp

increase again so I actually think

potentially based on the peony racial

and the fact that we're quite long with

our share market right now the price

that could suggest that we will build up

in price it may not ever get as high as

2014 prices it may take at least 10-15

years but this stock has the potential

to at least increase it's a good solid

company they haven't been involved with

any scandals or anything to worry about

recently so certainly from my

understanding you I like the fact that

the dividend yield is five percent I

tend to go for between three and five

percent if I can if you're getting more

let's say seven or eight ten percent

it's incredible but then you tend to

pain that stock could be quite volatile

is really up to you about your risk

tolerance so we can see the buy price

right now is obviously one with paint

fifty if we did want to purchase it's d

obviously with the independent on when

we actually make that final sale the

course that we would tab there's going

to be fees involved as well so if we go

into the course panel so if you were

using Hargreaves Lansdown they would

actually give you the breakdown of how

much investment charges are and such

like if you're invasive five thousand

pounds they obviously have an annual

charge as well then you have to pay

their own 0.63 the nest a bone

particular you can download the reports

indicates get more information about the

company they also have the full

breakdown of your actual logged accounts

now the great thing also bitless if we

go to the dev adenine tab you're

actually going to see when the PIO there

dopa deans it's actually gonna have it

quite easily laid out and we can see

that they have actually issued the

dividend once a year for their

shareholders if they were doing every

quarter it would shorten that so we can

see also do some analysis actually how

much does evidence yield has been so the

great thing is will be actually show you

that dividend growth so how much has an

increased year-on-year and you can see

that quite clearly as well obviously in

2019 we had a decline which was what

expected they actually made a loss when

we look at the P&L she however because

we're seeing that people actually think

they're going to be worth a lot more in

the future because they're quite low in

their market value then they recommend

that it could be a good buy option for

us so as you see it's really easy and

straightforward to understand the basics

of a company I would recommend

downloading the full PNL sheet to really

get that full breakdown of how our

company is performing however the steps

are an example of how easy it is

actually to understand most of the

values most of the terms are actually

listed and the main ones to be concerned

with I really also like the fact that

actually got company new so even more

information that you can make as an

informed investor so I have just

scratched the surface a bit investing

particularly dividend investing and I'm

going to create a lot more videos about

this particular topic however if your

interest also I'm just getting started

with the stock market I want you to

check out some other on my videos I have

one that covers the basics of the stock

market talking you through our index

funds bonds stocks shares

great video I'm gonna link all the

videos I think a relevant down below

including a way to actually invest

that's tax-free up to 20,000 pounds

currently in the UK it's called an

investment I site you can go and check

it how to open one how to understand it

even how to use it to retire early so

the whole host of information on this

channel I'd like to think you can maybe

binge watch a couple of great videos

after this one so go and check out my

base top playlist I'm going to have a

rummage

on what topic seems to jump out at you

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