"Your Future Paychecks And Raises: Get Dividend Checks In Your Mailbox Paid To The Order of You!"
A Summary of John Roberts's Book
“[T]here are only a few ways in life that you can get passive income. And investing in dividend paying stocks is one of them. And the easiest one too.”
—John Roberts
Chapter 1: “Introduction”
What if we could receive regular paychecks from companies we don’t even work for? While that might sound too good to be true, dividend stock investing makes it possible! John Roberts, a former financial consultant and licensed stockbroker, wrote this book to teach us about dividend stocks and how they can help us build a more secure financial future.
Chapter 2: “What Is Dividend Stock Investing?”
To incentivize investment in their stocks, many companies share their profits with shareholders through regular payments called “dividends.” Unlike speculation, where the goal is to profit from stock appreciation, dividend stock investing is about accumulating enough shares of dividend-paying stocks to draw sizable “paychecks” from the companies we invest in. Those of us who don’t yet need this income can reinvest the dividends to accelerate the growth of these payments.
Chapter 3: “Why Invest In Dividend Stocks?”
Besides getting paid to hold them, there are other reasons to invest in dividend stocks. They deliver quick results. They’re as easy to buy as other stocks and even easier to manage. They don’t require us to “time the market” to make a profit. Many of them consistently raise their dividend every year—some by large amounts. They pay for themselves if we hold them for long enough. Their value can grow and is more stable than that of other stocks during economic downturns. They can help us keep up with or beat inflation. They incentivize companies to be honest and frugal. And they simplify retirement finances.
Chapter 4: “Key Dates For Your Big Payday”
Dividends are typically issued on a monthly, quarterly, or annual basis—although a company may issue an additional, unscheduled dividend in special circumstances. Each dividend is announced by the company’s board of directors ahead of time, and each announcement usually includes the following information: the amount of the dividend, the announcement date, the ex-dividend date, and the payable date. To receive the announced dividend, we must own the stock at the end of the trading day before the ex-dividend date. The dividend will then be paid to us on the payable date.
Chapter 5: “How To Find Good Dividend Stocks To Buy”
Lists of dividend-paying stocks are readily available online. To determine whether a specific stock is worth buying, we need to assess its history of consistently paying and raising dividends, whether the dividend and its growth rate meet our financial goals, and the likelihood of the stock continuing to pay dividends in the future. Websites such as DividendChannel.com can help us find this information. Professional stock recommendations can also be valuable, especially those that describe the research behind them and offer detailed and instructive stock-buying advice—including what stocks to buy, how much to pay for them, and when to sell them. Roberts recommends a couple of paid newsletters: The Oxford Income Letter and The Daily Paycheck.
Chapter 6: “What You Need To Get Started”
Before we can invest in stocks, we must open a stockbroker account. We can use either a full-service broker, to whom we’ll pay commission fees to buy and sell stocks on our behalf, or an online discount broker, to whom we’ll pay reduced commission fees to carry out transactions we’ll conduct ourselves. Roberts writes that our “level of confidence” should influence this decision. He recommends the following brokers: TD Ameritrade, Scottrade, E*Trade, Fidelity Investments, and Charles Schwab. As far as he knows, opening an account with any of them is free but requires that we submit some basic information about ourselves.
Chapter 7: “Smart Ways To Buy Dividend Stocks”
When buying a stock, we can place either a market order, in which we buy it at whatever price it happens to be when our order is filled, or a limit order, where we specify the maximum price we’re willing to pay. Roberts recommends using limit orders to avoid the risk of overpaying for a stock. He also suggests placing limit orders below the market price or splitting a stock purchase into multiple orders—buying some shares at one price, some at a lower price, and others at an even lower price. Additionally, we’re advised to reinvest our dividends and regularly purchase a similar dollar amount of stock, which we can do by enrolling in a stock purchase plan.
Chapter 8: “Protecting Your Dividend Stock Investments”
We should periodically check on our dividend stocks to ensure we’re still receiving a dividend, that the dividend is increasing, and that the stock price hasn’t dropped too low. If the price falls significantly, the dividend we receive might no longer justify our continued investment and could even be at risk of being reduced or eliminated. To manage potential losses, Roberts recommends using a “stop loss,” where we commit to selling a stock if its price drops 25% from either our original purchase price or its highest price since we bought it. We’re also advised to build a diversified portfolio by investing in a variety of stocks across different sectors.
Chapter 9: “Conclusion”
Roberts encourages us to act quickly on the knowledge he has shared. We’re advised to open a stockbroker account (if we don’t already have one), read some dividend stock recommendations, and buy our first dividend stock.