The goal of this video is to give you all the information you need to know about dividends.

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1. What is A dividend?
– this when a company gives its shareholders some of the profits and they call it dividends
– and some companies pay this dividend out every month and most of them payout every quarter ( so every 3 months )
– and usually, as long you buy the stock before the dividend date, you’ll be able to qualify to get it

So for example:
– Exxon Mobil is an oil company and they pay $3.48 per share, and each share cost around 59.11
– So I invested $10,000 and I bought 169 shares of Exxon, well I get paid 3.48 per share, which means $588 every year in dividend
– However here is the bad news, dividend payments are optional, and if a company falls on hard times, or gets new management, they can choose to stop paying dividends

For example:
– Delta the airline was paying dividend but when the pandemic hit
– They instantly stop paying dividends and that’s obviously understandable
– So keep in mind that dividend should not be the only reason you invest
– It should because the company is solid

2. What is the dividend yield?
– Dividend yield is how much the company pays you per share, divided by the stock price, and then you can multiply it by 100
– Now this is important because it lets you know how the dividend return on an annual basis
– So if a company is growing by 8% but is also paying you 5% in dividends that’s awesome

For example:
– JNJ which one of the best dividend companies according to a lot of investors
– They have a dividend yield of 2.53% not a lot
– But they have been dividend consistently since 1962, and they have been raising the dividend also

3. Why some companies pay and some don’t?
– The answer is because dividend payments are made at the discretion of the board, so they make the decision

But here is an example:
– Amazon and Walmart are both in retail, although Amazon is also into tech and so on
– But Walmart pays a dividend 2.20 per share and amazon doesn’t
– Also Walmart has 17 Billion cash and amazon has 42 Billion ( so they can afford to give dividend but choose not to )

Tip: however, Amazon has made investors a lot of money.

4. Is it smart to reinvest the dividend or should I keep it?
– The answer It depends
– If the company is solid and you want to keep reinvesting money into it ( then yes )
– But if the company sucks and you don’t then yes take your money and maybe take all your money with you too
– But depending on the type of business like Coco or Walmart, it might be okay to take your dividend payments once you already got to your investments goal

5. Taxes on dividends
– Qualified vs ordinary dividend
– Qualified get taxed at capital gains level so no more than 20%, while ordinary dividend can get taxed as federal income ( so as high 37%)

Qualified:
– Usually have had the stock for more than 61 days out and had it 60 days before the dividend payment was made

And obviously for ordinary:
– If you don’t meet the holding period
– Then it’ll get charge to your normal ordinary income
Tip: don’t overthink it, think if I hold on to stock for the long term, I will be taxed with capital gains eventually by 2nd dividend payment.

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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