Last Updated November 4, 2020
I love writing about the basic principles of dividend investing, value investing and defensive investing.
So I thought I’d take a step back and write a meat-and-potatoes beginner’s guide to dividend investing containing just a handful of the most important points.
It isn’t rocket science, and the basic principles are:
- Invest in lots of dividend-paying companies at the same time
- Invest in companies with steady long-term dividend growth (supported by revenue and earnings growth)
- Invest in low risk companies with strong balance sheets
- Invest when share prices are low and dividend yields are (relatively) high
- Sell companies when their combined growth rate, risk profile, share price and dividend yield are no longer attractive
It’s simple, but not necessarily easy.
One of the major ‘not easy’ bits is finding dividend-paying companies worthy of further analysis. There are paid services that can help with this (including my own investment newsletter) but there are some free options too.
Some of the best ones are:
- Dividend Champions UK – For lists of UK stocks with long histories of dividend growth.
- London Stock Exchange Companies and Securities spreadsheet – A list of UK stocks along with their industry, sector, index and market cap.
- Morningstar – Search Morningstar using a company’s name or ticker code and get a comprehensive set of five-year accounting data. For example, here’s the page for BT Group.
- FE Investegate – This site has ten years of data (although not as comprehensive as Morningstar) and regulatory news announcements for hundreds of companies. Here’s the fundamentals page for BT Group.
- Company analysis spreadsheets – My very own spreadsheets where you can calculate all manner of long-term dividend investing-related metrics.
The rest of this beginner’s guide to dividend investing is in this month’s Master Investor magazine.
You can download the full article and the magazine below:
Note: If you’re an old hand at the dividend game then you might still want to read this guide because it’s always good idea to revisit the basics.