Learn Everything You Need To Know About Canadian Dividend Stocks Before You Invest

What is a dividend? 

If you are new to investing, you might not understand what dividend stocks mean.  That’s okay; there is always a first time for everything. Dividend stocks are those stocks that you buy and get returns in form of cash or stock based on how many you have invested in. 

It’s not the stock that pays you, but the company that you have bought the stocks from. It gives you some payment for being a shareholder. The money given is known as the dividend, which is the company’s profit that is distributed among the shareholders. Sometimes the payments may sound insignificant but when they add up, they become much. 

One of the best ways you can boost your returns over a period of time is to invest in dividend stocks. These stocks offer you a chance to earn extra money from your investments, which might get a good value and result in capital appreciation.   

What are Canadian Dividend Stocks?

When a company has made good profits, some of it is paid to the shareholders. This is an extra payment that is given on top of any capital appreciation that the stock might have. This pay is what is known as the Canadian dividend stocks in Canada.

In most cases, this dividend stock is paid on a quarterly basis based on the number of shares you hold. This money once paid out to you can be treated as income, or you can use it to reinvest in the same company or other big companies of your choice. 

Most Canadian companies will allow you to automatically reinvest your dividends thus helping you increase the number of shares that you already have. If you reinvest, you will have more shares so that the next time your company pays dividends, your payout is bigger as a result of the higher number of shares. If you continue with the cycle of reinvesting your dividends, you will see your portfolio grow faster.  

One thing you need to understand though is that a dividend is not guaranteed! Companies can cut their dividends as much as they want to, therefore making the amount you receive non-assured. The secret here is choosing some of the best dividend stock to invest in because they end up giving you valuable dividends.   

Canadian Dividend Lords

The best way to invest in the dividend stocks is to choose the Canadian dividend Lords.  These are the companies that are seriously growing their profits each year. Such are the best Canadian dividend stocks to buy because for a company to make it to this list, it must have an increased dividend payout for five consecutive years.

With such companies, you see the likelihood of solid growth prospects based on their consistency in paying out a portion of their profits to motivate the shareholders to invest more. Some of these companies have learned the secret of boosting their dividends as a way to attract investors. However, this should not be the reason why you invest in them. Most of these companies do not last; it’s best to go with the solid growing companies.