Best High-Dividend Stocks and How to Invest in Them

Stocks known to give dividends on a regular basis are known as high-dividend stocks. Many companies are known to pay regular dividends and investment in such companies can be considered important factors in getting a fixed income for your day-to-day expenses.

At times, investors invest a certain percentage of their corpus in these high-dividend stocks to earn a regular income and the remainder of their corpus is invested in other kinds of stocks.

Forbes Advisor India studied listed companies in India to evaluate which ones are the best dividend paying stocks and why they should be considered for investment.

What are Dividend Stocks?

Dividend stocks are the ones that are known to provide regular dividends to their shareholders. Though there is no compulsion on any company to issue dividends, it is just an unspoken understanding between the shareholders and company management.

A company can announce a dividend monthly, quarterly, yearly, or just once in any month of their choice—there is no set rule for the timing of the issuance of the dividend.

Dividends are announced by the board of directors, after their monthly, quarterly, or annual meeting with the release of their financial statement. The dividend paid before the final dividend in a year is known as the interim dividend and the final dividend is known as the final dividend. The annual dividend is announced with the final statement and monthly dividend etc.

How to Invest in Dividend Stocks

Investing in stocks that provide a good dividend is very simple—just follow this step-by-step process.

Finding a Broker

Investors need a SEBI-registered broker to invest in the stock market. They can register first with a broker of their choice by submitting the know-your-customer (KYC) documents.

Opening a Demat Account

A demat account is where shares belonging to the investor are stored in a dematerialized or an electronic format. Shares are not in a physical form but in a digital format for the ease of trading. 

Opening a Trading Account

After registering with a broker, investors need to open a trading account. This account works between the bank and the demat account. This gives the investor a trading number, which is used to buy and sell shares. Money from the bank account is transferred to the trading account in order to purchase a share and that share is stored in a digital form in the demat account. 

Procedure

The broker or the brokerage firm executes the buying and selling of the shares at the request of the investors. The money is deducted from the trading account and the purchased shares are deposited in the demat account.

Advantages of Dividend Stocks

High-dividend stocks have two most important advantages:

Income 

These stocks provide income from time-to-time, and this feature makes them attractive even for amateur investors entering the stock market.

Guarantee of the company’s performance 

If a company is giving regular dividends one may very easily conclude that the company is performing well as dividends would not be possible otherwise. Hence investors can keep their money invested and enjoy a regular income. 

It is also seen that when the investors keep their money invested in these stocks, the price of dividend-paying stocks remains constantly maintained.

Frequently Asked Questions (FAQs)