3 Important Rules for Dividend Stocks

“Travel the world and meet new people…”

“Enjoying life with my loved ones without the need of having a 9-5 job…”

“Live purely on passive income.”

If we are to ask 10 people on the streets, what they would like to do when they are financially-free, 7 or 8 of them will most probably tell you one of the above.

Sadly though, it remains a dream for most people, simply because they do not have the right knowledge and tools to get them moving and achieve what they want.

It can however, become a reality, once we understand how to build a sustainable stream of passive income.

And one of the easier methods, is to build a portfolio of good dividend stocks.

As a rule of thumb, there are only 3 things that we need to look out for when it comes to picking out good dividend stocks:

1. Free Cash Flow – Only companies that are capable to generate strong and consistent free cash flow, would be equally capable of distributing increasing dividend overtime.

2. Dividend Pay-out History – Ensure that the company has a consistent dividend pay-out history. Has their dividend pay-out ratio been consistent or has it been growing for the past 5 years?

The last thing we want, is for the company to be issuing inconsistent dividends, which would affect our passive income.

3. Dividend Yield – Depending on your location, the global inflation rate generally ranges from 3% – 4%. So, to grow your wealth, make sure your dividend yield is higher than your country’s inflation rate by at least 2% or more.

For example, for each dollar the company earns, they should at least pay out 6% (4% + 2%) of those earnings as dividends.

Now… not only it is important to know that you are being paid, it is also important to know WHEN you are getting paid!

When it comes to dividend stocks, there are 3 important dates all shareholders should be keeping an eye on:

1. Declaration date – This is the date when the management announces their intention to pay a dividend.

2. Ex-Date: Only shareholders who purchase their shares on or before this date will receive the dividend.

If you purchase the shares only after the Ex-Date, you will not receive the upcoming dividend pay-out.

3. Payment date: The dividend will be paid to the shareholders of the company on this date.

Our team then did a quick scan through WealthPark and found 5 dividend companies which could kick-start your dividend stock portfolio!

*(dividend yield as of 14 November 2018)

1. Tang Palace (China) Holdings (SEHK 1181): Dividend Yield – 10.23%

2. VICOM Ltd (SGX: V01): Dividend Yield – 6.05%

3. AT&T Inc. (NYSE: T): Dividend Yield – 6.59%

4. Cocoaland Holdings (KLSE: Cocaland): Dividend Yield – 6.50%

5. Dong Yi Ri Sheng Home Décor (SZSE:002713): Dividend Yield – 6.46%

**Images are taken from WealthPark’s StarChart feature, showing the respective companies’ strength from 5 different aspects; 6 points being very strong, 0 point being very weak

Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author(s) involved in the writing of this piece do not have current vested interest of the company. Please consult a competent professional for expert financial or other assistance or legal advice.

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Yen Hung Chua

Yen Hung Chua

I became an advocate of money management and value investing at the age of 27 for a simple reason. Money management, investing and MOST IMPORTANTLY, emotional stability – was never something that was taught in school. We end up a bunch of workers who are taught to only work for money but not the other way around, and to treat investing like a game of chance. And it was time to change that. Being with WealthPark, not only do I have the opportunity the spread the money-consciousness further and wider, but the platform on its own, is also wickedly useful for anyone who wants to invest in stocks.

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