How to Invest in Dividend-Paying Stocks

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Famed Berkshire Hathaway investor Warren Buffett once said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

Why would an investor want to hang onto his stocks for so long when the internet has made day trading easier and more convenient than ever before? For many investors, the answer is dividends.

Dividends are payments made by a corporation to its shareholders, typically as a form of profit sharing. The payment of dividends is not required by law, but many companies choose to pay stockholders a portion of the money earned as either a cash option or through a reinvestment plan. Dividends can be paid out on a quarterly, annual, or biannual basis—it all depends upon the specific policies put into place by each individual corporation.

Dividend-paying stocks can be a great long-term investing strategy. Use our step-by-step guide to add dividends to your portfolio today.

Why Do Some Companies Pay Dividends?

Dividends are the most visible and direct way that corporations can share profits with stockholders. This makes dividend payments attractive to high-income investors—especially if the stock is rising, the company is producing a reliable product and investors see long-term potential in the sector, product or management team.

These ideal investors are often retirees who are looking for a reliable source of income for themselves now or as an investment for their children and grandchildren.

If a corporation can attract these types of investors through dividends, the situation is win-win. The investor receives a cut of the company’s profits, the company gets positive PR and a cash injection to reinvest in the company.

How to Invest in Dividend-Paying Stocks

Take a look at the 5 steps to get started.

Step 1: Research quality stocks with low volatility

If you’re looking to collect dividends from your stock purchases, you’ll have to think big—big business, that is. Large corporations with a long history of financial stability and low volatility are the most likely to pay out dividends because they are more likely to be in a position where enough capital is stored to handle market fluctuations and keep day-to-day operations running in the event of a bad quarter.

Make a list of large companies that you’d like to own a piece of—a great place to start is to think about corporations which produce products that you use in your daily life and whose mission you believe in.

Some of the current highest dividend-payers on the market include the Apple Hospitality REIT, Equinix and the Apple Corporation.

Step 2: Read the stock’s quote

You can learn more about the dividends a stock pays out by looking at a stock’s quote. A quote is a summarization of all the major information you’ll need to know before you invest.

Free stock quotes can be found by searching for your stock of choice’s ticker on most of the internet’s top providers of stock and financial news, including Google Finance, Yahoo Finance and NASDAQ.com.

Search for your stock’s quote and look for the information labeled “dividend” or “annualized dividend.” This will show you how much money the stock paid out per-share last year to investors. If your quote does not include information on dividends, the stock may not currently be offering profit-sharing to investors.

Still searching for the perfect stock quote site to bookmark? Check out Benzinga’s roundup of free sources for stock market quotes.

Step 3: Purchase the stock through your broker of choice or directly through the company

Once you’ve found a stock, you’ll need to purchase the stock either through a broker or directly through the company. To get an idea of which companies offer direct purchase programs, you can browse through the database run by ComputerShare.

It’s important to note that when you purchase stock directly through a company, you may be required to make a minimum investment between $25 to $500, depending on the corporation’s policies and the price of each individual share.

If you don’t want to make a minimum investment or the stock you’re looking to purchase is not currently offering direct purchase options, you’ll need to open an account with a brokerage firm to facilitate purchases for you. There are a large number of brokerage firms operating online, each with their own set of minimum account balances, commissions, fees, and research tools. To learn more about choosing a stockbroker, take a look at our review of the best brokers currently online.

get started securely through Webull’s website
Best For
Intermediate Traders and Investors
N/A
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in mutual funds, bonds or OTC stocks
get started securely through Moomoo’s website
Best For
Active Traders
N/A
1 Minute Review

Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.

Get started right away by downloading Moomoo to your phone, tablet or another mobile device.

Best For
  • Cost-conscious traders
  • Active and Advanced traders
Pros
  • Over 8,000 different stocks that can be sold short
  • Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
  • No minimum deposit to open an account.
Cons
  • No chat support
Get started securely through Axos Invest’s website
Best For
Sign Up Bonus
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1 Minute Review

It seems like new digital investment management platforms are sprouting up left and right, and for good reason — there’s a great need for easy, straightforward investment management that doesn’t cost an arm and a leg in fees or to get started. If you’re new to investing or an old hat who wants to make the switch to a virtual manager, deciding which features you need can be confusing if not overwhelming.

If you want a no-frills financial management platform, Axos Invest (formerly WiseBanyan) takes a traditional but sophisticated approach to automated online investing.

Best For
  • Traditional investors trying out an automated investor for the first time
  • New investors that want to take a hands-off approach to portfolio management
Pros
  • Straightforward automated investing
  • Relatively low account minimum and automated investing fee
  • A solid roster of available investment account types
Cons
  • Not a stand-out from other services if you’re someone who likes all the bells and whistles with your digital financial platform
  • No direct relationship with a human financial advisor
get started securely through Interactive Broker’s website
Best For
GlobalAnalyst Product
N/A
1 Minute Review

This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.

Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.

Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.

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  • Price earnings growth valuations
Pros
  • Easily evaluate investment opportunities
Cons
get started securely through eToro’s website
Disclosure: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
Best For
Copy Trading
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1 Minute Review

eToro is a broker that offers access to over 25 of the world’s most popular cryptocurrencies, forex and over 1600 stocks. They have a few unique education and useability tools. Traders can begin buying and selling in as little as 10 minutes.

eToro’s unique CopyTrader feature allows new investors to “copy” the buy and sell orders of professional investors, while the company’s eToro Club feature provides investors with a range of additional education tools and resources. 

Best For
  • Traders looking for an easy-to-use platform
  • Traders who want to practice their trades using a virtual account before entering the market
Pros
  • Simple platform that is easy to master
  • CopyTrader feature that allows new traders to copy the same strategies used by professionals
  • Virtual dummy account that gives you $100,000 to practice trades
Cons
  • High non-trading fees

After you’ve opened an account with your broker’s help, you can request a buy through your brokerage firm’s website or mobile platform. Your broker will facilitate the transaction and you’ll become a partial owner of the corporation whose stock you’ve bought.

Step 4: Reinvest your dividends through the company’s DRIP

You have 2 options when it comes to collecting your dividends: a direct cash payment or a reinvestment into the company through a dividend reinvestment plan (DRIP).

A DRIP will automatically reinvest your dividend payments into more shares of stock on payday. If you’d like to enroll in your stock’s DRIP, contact your broker. If not, you can choose to have your dividends deposited into a checking or savings account directly through your brokerage account.

Step 5: Track your dividends

Companies are not required to pay their shareholders dividends—this means that a corporation can choose to raise, lower, or eliminate dividends at any time. Track your dividends through your brokerage account and consider selling your stock should dividends fall to a threshold that’s below your needs.

Best High-Dividend Stocks Right Now

Take a look at 3 high-dividend stocks available now. We’ve included details about each company, so you can compare your options and find the right investment.

1. Altria Group (NYSE: MO)

Altria Group (NYSE:MO)

51.190

-2.01 [-3.78%]
51.11 – 52.78
42.53 – 57.05
52.59
1.81B
6.45M/9.95M
92.68B
1.81B
3.6/6.77%
215.760
1.81B

Altria Group and its subsidiaries manufacture and sell cigarettes, smokeless products and wine. Its best-known cigarette brand is Marlboro, and you might recognize the Black & Mild cigar brand and smokeless tobacco products like Copenhagen, Skoal, Red Seal and Husky brands.

The company also produces and sells varietal and blended table wines, and sparkling wines under the Chateau Ste. Michelle and 14 Hands names. It owns other wine cellars and brands and imports wines to the U.S.

Altria also provides finance leasing services in transportation, power generation, real estate and manufacturing equipment industries.

Altria pays a 6.84% dividend and it is one of the top dividend stocks to watch this year.

2. National Health Investors (NYSE: NHI)

National Health Investors (NYSE:NHI)

55.980

-0.47 [-0.83%]
55.78 – 56.74
50.22 – 69.23
56.35
45.85M
11.74K/26.74K
2.57B
45.85M
3.6/6.38%
195.650
37.44M

National Health Investors is a real estate investment trust specializing in sale-leaseback, joint-venture, mortgage and mezzanine financing of need-driven and discretionary senior housing and medical investments.

Its portfolio consists of independent, assisted and memory care communities, entrance-fee retirement communities, skilled nursing facilities, medical office buildings and specialty hospitals.

Dividend yields have approached 7% this year, and dividends are more than $1.

3. LyondellBasell Industries (NYSE: LYB)

LyondellBasell Industries (NYSE:LYB)

108.595

-1.715 [-1.55%]
107.54 – 110.03
84.17 – 118.015
108.75
327.59M
1.62M/2.38M
35.57B
327.59M
4.52/4.1%
25.710
256.46M

LyondellBasell Industries operates as a chemical company in the United States, Germany, Mexico, Italy, France, Japan, China and the Netherlands. It produces and markets olefins and co-products, as well as polyolefins and polyethylene products.

The company also produces and sells propylene oxide and its derivatives, oxyfuels and intermediate chemicals such as styrene monomers, acetyls, and ethylene oxides and derivatives. In addition, it produces and markets compounds and solutions.

It also refines crude oil and other crude oils of varied types and sources into gasoline, diesel, and jet fuel. Dividend yields have group to nearly 6%.

Find Dividend-Paying Stock Now

Though dividends may seem like a massive incentive for investment, even successful companies may choose not to pay out dividends if they believe that they can better increase stock value by retaining earnings.

Dividend payment should not be considered a holistic picture of a company’s fiscal health. A stable company may choose to withhold dividends to branch into a new sector or product, and a failing company may pay out dividends to project an illusion of success to attract new investors.

Start with our list of dividend-paying stocks to find your next investment today.