When you think about building wealth, especially during uncertain times in the stock market, one strategy often overlooked is dividend investing. While many see red in their portfolios when markets dip, dividend investors continue to receive steady payouts. That’s because dividend-paying stocks generate income regardless of market swings, a smart move for long-term wealth building.

So, what exactly are dividends? 

Dividends are a portion of a company’s profits distributed to its shareholders, typically on a monthly, quarterly, or annual basis. The amount you receive is calculated as a dividend yield, which is the annual dividend divided by the stock’s price. 

The dividend yield helps you measure how much income you’re earning to what you paid. In this case, $4 from a $100 investment equals 4%. If another company offers $5 annually on a $200 stock, that’s only 2.5%. So even though $5 sounds like more, the yield is actually lower.

Now, not all dividend-paying stocks are created equal. High yields can be tempting, but they may signal financial instability. Some companies slash dividends or go bankrupt altogether. That’s why researching a company’s financial health is crucial. 

One of the easiest and most diverse entry points is through Dividend Exchange-Traded Funds (ETFs). Many investors interested in passive income explore dividend-focused ETFs (Exchange-Traded Funds). These funds generally aim to track companies with strong, consistent dividend histories.

Some commonly discussed dividend ETFs include:

1. HDV (iShares Core High Dividend ETF) – Known for including large, stable companies from sectors like healthcare and energy.

2. SCHD (Schwab U.S. Dividend Equity ETF) – Popular for its focus on sustainable dividends and relatively low fees.

3. SDY (SPDR S&P Dividend ETF) – Features companies with long-standing dividend growth, often over 20+ years.

4. VYM (Vanguard High Dividend Yield ETF) – Offers broad exposure to dividend-paying stocks, with over 400 holdings.

This isn’t investment advice, but exploring ETFs like these can be a great starting point for those curious about dividend income. As always, do your due diligence!

Why it matters for Black investors: Black Americans make up more than 12% of the U.S. population but own just 3.4% of the nation’s wealth as of Q3 2024, according to the Federal Reserve—down from 4.7% in 2017. Despite a 3.4% increase in Black-held stock and mutual fund wealth over seven years, the gap is vast. White Americans hold $41 trillion in stock-market wealth, up 91% over the same period.

Bottom Line: Don’t invest without a plan. Whether you’re chasing passive income or diversifying your portfolio, dividend investing can be a cornerstone in your financial independence journey. For Black millennials striving for generational wealth, this strategy offers stability, predictability, and long-term growth.

Your financial freedom won’t be handed to you, it’s built, one smart decision at a time.