Dividend Investing

Parent Strategy

Dividend Investing is an investment strategy that investors use to generate regular income from their investments. It is a strategy that revolves around building an investment portfolio composed primarily of stocks or a basket of stocks that pay regular dividends, providing a regular stream of income to the investor. It is a commonly used strategy for income investors who are looking to build a secondary source of passive income, savings for their retirement or other purposes. Dividend investing is commonly viewed as a long-term approach, where investors aim to hold their dividend-paying stocks for extended periods, benefiting from both the consistent income stream and the potential for capital appreciation. Diversification also plays a significant role in this strategy to mitigate risk, as dividend investors often spread their investments across various industries and sectors.





This is the annualized dividend represented as a percentage of the stock price. Yield is useful as a valuation metric when you compare a stock's current yield to its historical levels.

This is the dividend as a percentage of a company's earnings. In general terms, the lower the payout ratio, the more sustainable a dividend.

This is the dividend as a percentage of a company's operating cash flows minus capital expenditures, or free cash flow. This variability can render a company's payout ratio misleading at times.

  • Earnings per shares (EPS). 

The EPS metric normalizes a company's earnings to the per-share value. A history of earnings growth is often evidence of durable competitive advantages.

  • P/E ratio. 

The price-to-earnings ratio is calculated by dividing a company's share price by its earnings per share. The P/E ratio is a metric that can be used along with dividend yield to determine if a dividend stock is fairly valued.

This is the increase in stock price (known as capital gains) plus dividends paid.