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I've been reading about dividend stock and identified some possible candidates.

However I'm still not sure I understand how it works and which one to buy:

  • Some companies list more than one stock (e.g. Sanofi has SAN, SNY, SAN,CHF...)
  • Once I buy the stocks, how do I get the dividends? Are they paid automatically or I need to make a request to the company?
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    "Are they paid automatically"? Yes. (I think it would be simpler and get you more diversity to buy an ETF of dividend stocks.) – RonJohn Feb 11 '20 at 16:25
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    If you have a brokerage account, the money or stock is electronically transferred to it. I'm not sure how it happened in the OLD days. or if you retain paper stocks. – Clint Eastwood Feb 11 '20 at 16:26
  • @RonJohn how do ETFs work? The income of the fund are the dividends and they share it with the subscribers? – algiogia Feb 11 '20 at 16:30
  • My wife's grandfather primarily invested into dividend stocks during the great depression. He would not sell the stocks, but would then use the dividends to buy the best paying dividend stocks. He did quite well investing in stocks. I have made use of a dividend fund in my 401(k) after the dot-com bubble burst. It is my understanding that having the dividends inside of a 401(k) would be beneficial for taxes (as opposed to paying taxes on dividends outside of a 401(k)). If memory serves I think that I did quite well. Apparently dividends make up good portion of the S&P 500's return. www – Rich Gray Feb 11 '20 at 16:38
  • A fund is where a management company says "invest a bunch of money with us, and we'll buy securities that match the stated purpose of the fund". The management company decides how much each share costs, and you buy as many as you want. When a company like Sanofi issues a dividend, it gives the money to the fund management company, who then passes some of that money on to you. If Sanofi's share price rises or falls, the share price of the fund also fractionally rises or falls. An ETF is a fund who's shares are traded on an Exchange. Thus, an Exchange Traded Fund. – RonJohn Feb 11 '20 at 16:43
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Some companies list more than one stock (e.g. Sanofi has SAN, SNY, SAN,CHF...)

You will need to research that on a case-by-case basis. Some of it has to do with different classes of stocks, where others have to do with stocks being on different exchanges, and some of that has to do with listings in multiple countries. Related to dividend stock are a class of stocks known as preferred shares. They are like stocks, but also viewed to be very bond like as their yields are more secure.

In this case it looks like the symbols relate to the different international exchanges the stock is listed on.

Once I buy the stocks, how do I get the dividends? Are they paid automatically or I need to make a request to the company?

This will depend a bit upon who you buy the stock from, but there are two dates that are important to this. The first is the ex-dividend date, which is that date that you must own the stock before to get the next dividend. The other date is the payment date which tends to be about a month later, YMMV.

In a traditional broker the money appears on the payment date. If you use a Dividend Reinvestment Plan (DRIP) then frequently your dividends will buy more shares of the same stock. Some brokers allow your dividends to be reinvested and this tends to be the default for mutual funds. With mutual funds it is allowed to own fractional shares where this is not always allowed with stocks. For example, if your dividend payout is $10, but a share of stock is $30, it is only enough to buy .3333 of a share, provided there are no commissions.

In the case of DRIPs or mutual funds, you can frequently select for the dividends be transferred to you, including deposited to your checking account.

Editorially, I would recommend against single stocks unless you have a lot of money to invest. There are ETFs like DGRO that focus on dividend paying stocks, and PFF that focus on preferred stocks. Many brokers offer these ETFs purchased without commission. Additionally, a S&P500 index fund will also pay dividends.

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  • FWIW, PFF is a laggard in preferred stock ETF category. AFAIC, if dealing with investment grade preferred stocks, using single stocks presents the opportunity to effect swaps, bumping up the yield, sometimes significantly. It's a mostly mechanical strategy. – Bob Baerker Feb 11 '20 at 18:11
  • If you put in the due diligence, I believe you can start investing in individual stocks with any amount. And now days almost all brokerages have switched to commission free so that is basically a non-issue. I started with 5k and have now sold all my mutual funds and buy only stocks that pay and raise their dividends every year. – dmikester1 Feb 11 '20 at 21:08

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