Dividend stocks: How to buy the best dividend stocks in 2024-2025

Navigating the financial waters of 2023-2024 demands a keen eye, especially for those investors drawn to the allure of the best dividend stocks. But securing these gems isn't only about their attractive yields, but also about spotting companies with strong revenue growth potential. For traders and financiers eager to delve deeper, this article will unravel the details of how to buy dividend stocks, the nuances of calculating dividends, the promise held by Polish dividend stocks, and more.

Table of Contents

Which companies pay dividends?

How to buy stocks of a dividend company?

How do dividend companies calculate dividends?

When do dividend companies pay dividends?

Potential Polish dividend stocks 2023-2024

Potential dividend stocks in the US 2023-2024

FAQ

Dividend Paying Companies: What Are They?

Dividend stocks have always been the cornerstone for investors seeking regular income alongside capital appreciation. Often, well-established firms with consistent earnings histories choose to share a part of their profits with shareholders through dividend payments. This move not only reflects the firm's robust financial position, but also showcases its belief in ongoing success.

While the tech sector is known for its growth-centric approach, several big players have initiated dividend payouts, joining traditional sectors like utilities, real estate, and consumer staples. For traders, tracking companies with consistent dividend histories can offer both stability and attractive returns in a diversified portfolio.

How to Buy Dividend Stocks

Dividend-paying companies hold a special place in the financial world. Their consistent payouts can serve as a stable income stream for investors. But how do you go about buying these stocks and ensuring you get your slice of the pie? Let's dive in.

Stock Purchase Process

While investing in dividend stocks has its unique aspects, the initial steps are largely similar to buying other types of stocks. Let’s have a closer look.

1. Open an investment account. Start with establishing an account at a reliable brokerage firm. This account acts as an intermediary between you and the stock market. 
2. Fund your account. Once set up, deposit funds to cater to your intended stock purchases and handle any potential fees. 
3. Search for dividend companies. Leverage the platform's tools to pinpoint dividend-paying companies that match your investment criteria. 
4. Place a buy order. Determine the number of shares you want and place an order. There are two main choices here: a market order lets you buy at the current market rate. By using a limit order, on the other hand you can set the maximum amount you're willing to pay per share. 
5. Monitor your portfolio. After your order is executed, the shares appear in your account. It's prudent to regularly track your investments and their performance.

Understanding Dividends Basics: Key Definitions

Owning stock doesn't instantly guarantee dividend payments. To be in line for a payout, you must be registered as a shareholder by a particular date, termed the ex-dividend date. Buying shares after this date means missing the imminent dividend while selling pre-ex-dividend date results in a lost dividend for that period.

Navigating the landscape of dividends involves understanding some other fundamental definitions. Let’s have a closer look at them.

1. Dividend payout ratio represents the percentage of a company's earnings paid out as dividends. A high ratio might indicate a generous company, but could also signal limited reinvestment in growth. Conversely, a low ratio may suggest a potential for dividend growth, or that the company is reinvesting heavily in itself. 
2. Dividend frequency. Companies differ in their payout schedules and dividend days. Some disburse dividends quarterly, while others might do so monthly, semi-annually, or annually. 
3. Shareholder of record is an investor who is registered as the owner of shares on the company’s books on a specific date.

Example

Let's say you decide to invest in XYZ Corp., known for its steady dividend payments. After researching, you buy 100 shares at $50 each, costing you $5,000. XYZ Corp. announces a quarterly dividend of $1.50 per share. Being a shareholder of record before the ex-dividend date, you qualify. By the end of the quarter, you receive a dividend payment of $150 (100 shares x $1.50). If XYZ Corp. maintains this dividend rate, your annual income from this investment alone would be $600.

Shareholder rights

Shareholders can wield various rights, whether they invest in USA or Polish dividend stocks. Some key rights may include:

1. Voting rights. Shareholders often have the right to participate in a general meeting of shareholders and vote on critical company decisions, such as electing directors or approving mergers. Typically, each share equals one vote, though this can vary. 
2. Right to information. Shareholders are usually entitled to access certain company information. This can range from annual reports to details about financial performance. 
3. Right to transfer ownership. Shareholders have the flexibility to sell or transfer their shares, giving them liquidity. 
4. Rights on liquidation. If a company is liquidated, shareholders might have a claim to its assets. However, they fall behind creditors, bondholders, and others in the pecking order.

How do dividend companies calculate dividends?

The procedure to determine the dividend amount is a complicated process that encompasses various factors, honed by the company’s dividend policy.

The primary step in this process involves analyzing the company’s financial performance. Entities diligently review their net income and gauge the portion that can be distributed as dividends, ensuring a balance between rewarding shareholders and retaining enough capital for future growth and operations.

Moreover, a company's dividend payout ratio is a critical metric in this process. This ratio, expressed as a percentage, showcases the portion of earnings destined for dividend distribution. A lower ratio may signify a company's preference for reinvesting earnings, whereas a higher ratio may reflect a strong commitment to return value to shareholders.

The board of directors also plays a pivotal role in the dividend declaration. It's the board that ultimately approves the dividend amount per share, considering not just the present financial standing, but also the long-term strategic goals of the company.

When are the dividends paid out?

The dividend payout schedule is a well-orchestrated routine, often mirroring the fiscal policy of the company.

Typically, dividends are distributed on a quarterly basis, aligning with the close of the financial quarter. However, the exact timing can be company-specific, with some opting for monthly or even annual payouts. The board of directors plays a pivotal role in determining the dividend timetable, ensuring it reflects the financial robustness of the company.

Potential Polish dividend stocks: 2023-2024

The potential for dividend stocks among Polish companies remains solid going into the years 2023 and 2024. Here's the outlook for some promising options.

PKN Orlen dividend

PKN Orlen is a leading player in Central Europe's energy sector. It has shown consistent growth over the past years, which has bolstered its dividend outlook. Riding on the wave of higher crude prices and strategic expansions, the company has positioned itself well in the downstream oil sector. For investors, its past dividend history and forecasted earnings growth highlight PKN Orlen as a potential cash cow. However, it's essential to keep an eye on global energy trends that can influence its profitability.

Kęty Group dividend

Kęty Group, a giant in the aluminum sector, has been expanding its footprint both domestically and internationally. Diversification in its product offerings has been a hallmark of its growth strategy, enabling the company to tap into newer markets and revenue streams. Given its solid balance sheet and emphasis on shareholder returns, Kęty Group's dividend proposition looks attractive and promising. Potential investors might want to dig deeper into the global aluminum demand, especially in the automotive and construction sectors, before jumping on board.

PZU dividend

PZU is Poland's largest insurer, and has been a steady performer in the financial arena. With a robust portfolio that ranges from life to non-life insurance products, the company has showcased resilience even in turbulent times. Its commitment to return value to shareholders is evident in its consistent dividend payouts.

XTB dividend

XTB is a prominent online trading platform that has significantly benefited from the surge in retail trading. With an expanding user base and increased trading volumes, the platform's revenue generation has seen a notable uptick. This, combined with its tech-savvy infrastructure, positions XTB as a dividend contender for the future. As with all fintech players, the evolving regulatory landscape and competition should be factors to consider for prospective investors.

CD Projekt

CD Projekt is a company from the gaming industry known for its blockbuster titles like “The Witcher” and “Cyberpunk 2077”. Over the years, the company has successfully leveraged its intellectual property to derive both gaming and merchandise revenues. Its focus on high-quality production and storytelling has fostered a loyal customer base, which bodes well for consistent revenue streams. As CD Projekt invests in new titles and continues to milk its existing franchises, the potential for dividend distribution remains optimistic.

Potential dividend stocks in the US: 2023-2024

The stock market's dynamism has always required investors to keep an eye on companies that promise to pay consistent dividends. While growth stocks have their allure, dividend-paying stocks offer a steady source of income. Let’s take a look at some promising USA dividend stocks for 2024.

Tesla

The electric vehicle giant, Tesla, has undergone massive expansion and holds an unprecedented position in the EV market. While traditionally known for its impressive capital gains, Tesla's recent discussions on initiating dividends reflect its strong financial position and maturing profile.

Amazon

Amazon's continuous expansion into various sectors, from e-commerce to cloud computing with AWS, has established its position as a giant among technology companies. Although not a traditional dividend payer, the company's sustained revenue growth, coupled with its significant cash reserves, hints at a potential future where dividends might become part of its investor reward strategy.

Microsoft Corporation

In the tech sphere, Microsoft stands out with its consistent growth and shareholder value. Beyond its dominance in the personal computing OS market with Windows, the company has made significant inroads in cloud computing through Azure, gaming with Xbox, and productivity with its Office suite. As part of its commitment to shareholders, Microsoft has paid dividends since 2003. Moreover, it is known for a steady increase in dividend payments.

FAQ

What are dividend stocks?

Dividend stocks distribute a portion of a company's profits to investors, providing a potential income stream. Variability in yields between regions, like the USA and Poland, necessitates strategic selection and analysis of dividend policies. Typically, dividend rates and payment decisions are finalized during a general shareholders' meeting, aligning with the company’s financial status.

What stocks pay dividends?

Dividend-paying stocks, like those of Procter & Gamble, Johnson & Johnson, and McDonald’s, offer investors both capital appreciation and income through regular dividend distributions. These companies typically showcase a noteworthy dividend yield, signifying a robust annual dividend relative to the stock’s price. Established corporations, especially those with substantial financial stability, tend to be reliable dividend payers.

How long do you have to hold a stock to get dividends?

To receive dividends from a stock, investors must own it before the specified ex-dividend date. This date is set several weeks before the actual dividend payment date. Once the ex-dividend date passes, investors can sell their shares and still receive the dividend. Therefore, understanding and adhering to the ex-dividend date is crucial for dividend collection.

Which companies pay the highest dividends?

High-dividend-paying companies, such as IBM, ExxonMobil, and Procter & Gamble, are often termed "dividend aristocrats" and commonly hail from sectors like utilities and consumer goods. Notably, while these firms historically offer consistent payouts to shareholders, a high dividend yield can occasionally signal potential financial troubles.

What does a dividend payment look like?

A dividend payment typically manifests as a cash deposit, credited directly to the shareholder’s brokerage account, in accordance with the number of shares owned.

These payouts, originating from company profits, are typically dispersed regularly, potentially quarterly, semi-annually, or annually, depending on the company's dividend policy.