Now that you've got a rough picture of what types of dividend stocks to look for, We'll now go into the types of return you can get out of investing in them. Number one, the dividend yield. Of course, the very reason why you're interested in dividend investing is the dividend yield itself, which is dividend per share divided by the share price. dividend yield here represents cash dividends, but the yield isn't as simple as it seems. There are a few exceptions to this. For example, one common misinterpretation to which many new investors fall prey is that when they see a company yielding 8.36%, and paying out 24 cents annually, they assume that they will receive that 24 cents at the end of the year.

Contrary to that belief, that 24 cents might refer to the four payments of six cents each quarter if the dividend payout is cool. Or about 12 cents every six months if the payout is semi annual. Most companies pay out cash dividend to their shareholders on a regular basis, depending on the country. In the United States, for example, cash dividends are paid on a quarterly basis in your venture pan. Those dividends are paid on a semi annual basis. And as with other Asian markets paid on an annual basis, other than the issue with payout frequency, the amount of 24 cents is an expected annualized payout.

Meaning to say that there is no 100% certainty that you will get the full 24 cents, you may get more you may get less that is what the word expected implies. Furthermore, take note of the website that you use to observe the expected yield. Many financial websites do not separate or take into consideration special dividends or one off dividends. For example, if New Star logistics all the while has been paying $1 11 cents. But last year FYI 2017 due to selling off one of their subsidiaries, they decided to increase the dividend payout by one more dollar to a total of $2 11 cents. The website might just assume that for this year FYI 2018 new star will continue to pay $2 11 cents instead of the usual one dollars 11 cents.

In addition, that dividend yield itself also depends on the observed price point. What is the 8.39% yield based on the current price today or last year's year and price or the company's financial year end? So, you see the ballpark yield figure doesn't give you the whole picture. Find out more and set your expectations right. Beginners will see dividend yield as this simple formula dividend divided by share price But a better way of observing dividend yield is this formula. dividend yield equals to expected dividend per share, which may include one off dividends divided by observed current price per share or an average of share prices.

This is how a dividend expert sees it, and you should too. Okay, now for number two property dividends other than cash dividends some dividend stocks can also compensate their shareholders in other ways, such as rewarding them with property dividends. The company makes the payment in the form of assets coining this term as property dividend. The asset could be equipment inventory, a vehicle or shares of a subsidiary company. Most listed dividend stocks do not pay property dividends, I'm mostly referring to the ones in the alternative investment round private equity for example, Besides property dividends, there is also share buyback. dividend stocks pay dividends, that is what their label implies, but they can also easily use their cash to buy back their own shares rather than payout as extra or one off dividends.

Many investors would agree that when a company engages in share buybacks, investors like yourself are rewarded through the effects of lowering the number of shares outstanding, which increases the earnings per share EP s for short, the more shares are bought back the more APS increases. Over time, other investors will take notice and the price of the stock will rise. Hence, you will be rewarded with capital gains instead of more dividends. Now despite the common consensus that share buyback equates to an increase in GPS. There are a few assumptions to this and they are as follows if internal funding or company's cash is used to conduct shared buying back ups will only increase if we assume that the cash would not have earned the company's cost of capital if they were retained by the company. If external funding or debt was used to conduct share buyback ups will only increase if after the tax cost of debt is lower than the company's earnings yield.

But bear in mind that it would be incorrect to automatically assume that an increase in EBS indicates an increase in shareholders wealth. The cash used to finance the repurchase could have easily been distributed as a cash dividend. Any capital gains resulting from an increase in epls from share repurchases may be offset by a decrease in the stocks dividend yield and increase in the company's leverage as total debt remains constant. But cash is used to buy back shares. At the risk of going too deep into this topic, the important takeaways in share buybacks under dividend investing is as follows. Eight, a dividend company can choose to buy back shares instead of giving out dividends.

So a low dividend company doesn't mean it isn't a good company to invest, be whether buying back shares leads to an increase in epls depends on the cost of funding used to repurchase those shares. As mentioned earlier, see, note that buybacks may bring about negative effects to the company. For example, a drop in dividend yield plus an increase in the company's leverage will result in an increase in required return, which then offsets the benefits of an increase in APS D. The impact on shareholders wealth through share repurchase is similar to receiving cash dividend, assuming dividends are received as soon as the shares go ex dividend and the tax charges are the same for both cash dividends and buybacks. Okay, so back to The types of return we are at number four scrip and liquidating dividends. We know that most list and dividend companies usually pay off their dividends on a consistent and predictable fashion and occasionally reward shareholders with a special or one off dividend.

Although it may sound nice to receive one off dividends, there are certain one offs that you should be aware of and they are script and liquidating dividends. A script dividend is a promissory note to pay the shareholders later. This type of dividend is used when the company does not have sufficient funds for the issuance of dividends, and hence they reward you with either debt liability dividends or more of the company's shares. To paint a dire picture, there was also something called liquidating dividend. This occurs when the company returns the original capital contributed by the equity shareholders as a dividend. It is often seen as a sign that they plan to close down the company script and liquidating dividends are not what long term dividend investors want to see.

So again, simply looking at the yield of a company is not enough when it comes to proper dividend investing. Here are more information on how to identify liquidating dividends. All right, now we move on to the dividend paying process. Whenever a company decides to pay dividends or not too bad decision must first be approved by the board of directors. This process has a few key dates that you should take note of and they are firstly the dividend declaration date. This is the date by which the board of directors announced that a dividend will be paid.

From an accounting perspective the dividend to be paid is recorded as a liability in the business's accounts and paying the shareholders becomes an obligation. For the company. Secondly, the last day to trade also known as LD t. This is the last date on which an investor can acquire shares in order to qualify for or participate in the dividend. This period falls just before the ex dividend date. As for the ex dividend date, this is the cutoff date by which an investor must become a shareholder to be entitled to the dividend. And example, company x announces a dividend to its shareholders.

If you purchase the stocks of company x after the ex dividend date, you will not receive the dividend payout in the coming round and said the person who sold the stock to you will receive it on or after the ex dividend date the stock price usually drops. This drop is due to new investors no longer being able to get dividends for that period when they buy stock they will be less willing to pay the original price of the stock hence The stock price will drop to reflect this fact and the market. Turning our attention to the date of record. It is the date when the company looks at its list of shareholders to determine who will receive the dividend. It is the number of days between the ex dividend date and the record date, which is usually five business days in the US and two days for Asian countries like Singapore.

Lastly, the payment date, which is simply the date when some dividend investors laugh their way to the bank so to speak, and it's the day you will receive your dividends. But instead of putting the money into your bank, here is what you ought to do. What to do with the dividends you receive? The answer is simple. reinvest. One of the major advantages of dividend reinvestment is how easy it is to implement US companies often the large ones offer automatic dividend reinvestment plans, also known as a drip, drip allows you to use your allocated dividends to purchase additional shares on the dividend payment date.

In other countries like Singapore, there may not be a drip program per se, but many companies listed there will give you the option to either receive more of their shares or in cash, so to reinvest choose to receive in shares rather than cash. Now as to why reinvestment is important, the answer should be obvious by now. The biggest case for reinvesting dividends is allowing time and the power of compounding to charge up your returns. I don't want to overhype what the power of compounding can do for your financial freedom and dividend flow. There are already a lot of materials online overselling this concept, but I just want you to know that if you invest in high quality dividend paying stocks You will not be disappointed. But there are some situations where reinvestment or buying more shares using dividends may not be wise for some investors.

Here are three situations when reinvesting dividends may not be for you. Situation one reliance on dividends to pay off a need or debt. If you are close to retirement or already retired and depend heavily on dividends to cover certain needed costs, then you should consider taking the cash instead of more shares. In addition, if you're relying on dividends to pay off debt and the interest that comes along with it, then again, take cash not extra shares. Situation too. If the reinvestment price of the dividend company is overvalued, value investors know this well only invest in companies whose current share price is below their intrinsic value.

Determining a dividend company's intrinsic value here it can be as simple Comparing its p E and p b with a peer group or as comprehensive as using the dividend discount model. If the price or ratio of a stock is higher than your intrinsic value, and as a result, you may not believe that reinvesting dividends at that price is an optimal strategy, then save your cash and wait for a price correction or look for another dividend paying company. Situation three if your tax bracket says otherwise. To add on to what I've mentioned earlier about double single or no tax regimes, at least for Americans, citizens of the United States, your dividends might be taxed. Dividends fall into two categories for tax purposes, qualified and ordinary. Here I'm referring to qualified dividends.

Those are dividends that meet the requirements to be taxed as capital gains. For a dividend to be qualified. It must be paid by a US corporation or by a foreign incorporation that is readily traded on a major US exchange. In addition, you must have held the stock for more than 60 days of the 121 day period around the ex dividend date 60 days before through 60 days after. For preferred stock you must hold for 90 days of the 181 day period around the ex dividend date. Under today's us investment laws, qualified dividends are taxed at a 20% 15% or zero percent rate depending on your tax bracket.

Whatever I mentioned above might change especially given today's unstable political environment. But the idea here is to be aware of where you lie in your tax bracket. Whether you are a US citizen or non US citizen holding the shares for the long or short term will affect your decision as to whether to take up more shares or receive cash dividends. So there you have it, the basics of equity. dividend investing. In the next video we will be talking about common misconceptions, the important ratios, screening application and so forth.

Lots of interesting materials ahead, but before that, Enjoy the summary I have provided here cheers