Think You Don’t Earn Enough To Invest In Dividend Stocks? Read This Now

Here’s how you could maximise your returns on dividend stocks.

STACKED COINS DEPICTING MONEY GROWTH

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

For many people, generating a second income through buying dividend stocks may seem to be an unrealistic aim. After all, they may feel that the cost of buying and selling stocks makes it prohibitively expensive given their income level. And with there being such a wide range of stocks available on indexes around the globe, working out where to start investing may also be tough.

The reality, though, is that anyone can now generate a second income stream through dividend stocks. Here’s why now could be a good time to start.

Charges

The internet has fundamentally changed the investment industry. In terms of fees, it has undoubtedly been a positive thing. While in the past investors may have been required to pay a percentage of the amount invested alongside a minimum charge, today online sharedealing can be undertaken at a relatively low flat fee.

Furthermore, aggregated orders mean that some online sharedealing providers will include a range of client orders in the same security in order to reduce their own costs, which are then passed on to investors. Although this reduces the control an investor has over when their trades are undertaken, for long-term investors it is unlikely to make a large difference to their overall returns.

Therefore, it is possible for smaller investors who in previous years may have been priced out of the stock market to build an income portfolio. Doing so via a few clicks of a mouse makes that process even simpler and less time consuming.

Stock selection

The internet has also helped to level the playing field when it comes to deciding where to invest. Today, it is possible for small investors to access the same level of information as seasoned investors, since a large proportion of it is available over the internet for free.

For example, an investor can obtain annual reports going back a number of years in order to determine the reliability of a company’s dividends. There are also various websites available which provide guidance on how affordable a stock’s income returns may be in future given its profit forecasts. And with it being possible to reinvest dividends with minimal charges through sharedealing providers, it is perhaps easier than ever to capitalise on the potential which compounding provides over a long time period.

Income potential

As a result, it is possible for almost anyone to put in place a portfolio of dividend stocks. Doing so can be relatively cheap, while the information on where to invest is readily available online.

Of course, this does not necessarily mean that being a dividend investor is now easier than it has been in the past. The world economy faces a number of risks such as a rising US interest rate and a possible trade war between the US and China. Therefore, even dividend stocks may experience an uncertain period.

However, they have historically delivered sound returns for investors who have continued to buy through challenging periods for the world economy, and held on long enough to reap the rewards.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

thinking
Investing

Stocks, Bonds, or Real Estate: What’s the Best Way to Prepare for a Recession?

Recession worries could push investors to bonds.

Read more »

Oil pumps against sunset
Energy Stocks

How Would a Price Cap on Russian Oil Impact Canadian Energy Stocks?  

Canadian energy stocks surged in the last three days, as G7 countries proposed a plan to impose a price cap…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

3 Growth Stocks Worth Buying Today

With the volatility of the stock market, many investors continue to avoid growth stocks. However, here are three stocks worth…

Read more »

money cash dividends
Dividend Stocks

Market Correction: 2 Oversold TSX Dividend Stocks to Buy for Total Returns

These top value stocks pay attractive dividends and look cheap to buy for a TFSA or RRSP focused on total…

Read more »

Volatile market, stock volatility
Investing

Safe TSX Stocks to Buy in a Volatile Market

Are you looking for safe TSX stocks to buy in a volatile market? Here are three top picks!

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Should You Buy Canadian Bank Stocks After the Recent Correction?

Dividends and fairly valued Canadian bank stocks look attractive. But the macro picture could be a spoiler!

Read more »

Knowledge concept with quote written on wooden blocks
Investing

The 2 Best Stocks to Own in a Recession

Recessions cut demand, but essential services like Metro (TSX:MRU) could fare better.

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

2 Energy Stocks (With Dividends) to Buy Amid the Market Correction

These dividend-yielding energy stocks look attractive to buy for the long term after their recent dip.

Read more »