How to Get Income From Dividend Paying Stocks

by Scott Damon ; Updated April 19, 2017
Purchase stocks that pay dividends to bolster your income.

An investor has many possible ways to make money when investing in the stock market. One way is to derive income from stocks that pay dividends. You can offset stock losses or improve stock gains with companies that pay you over the course of the year for simply investing in their stock. Deriving income from stock dividends takes just a few steps.

Step 1

Find stocks for your portfolio which pay dividends. Not every stock pays dividends, so you want to be sure to select the stocks that do. When looking at a stock snapshot, look for both the dividend and the dividend yield.rnrnThe dividend is the actual amount of money the company pays you per year. The dividend yield is the percentage of the dividend when divided by a company's share price. For instance, if a company was trading at $10 per share and paid a dividend of $1, then the dividend yield would be 10 percent of or 1/$10.

Step 2

Research the stocks before buying them to make sure that they fit your investment goals. Many investors have gone broke while waiting for dividend payments; for example, if a stock pays a handsome dividend of $5 per share while you own it, but loses 50 percent of its value during that time, you have probably lost a lot of money. rnrnTherefore, research a dividend stock as you would any other stock, comparing p/e (price to earnings) ratios. Make sure that you understand their business model and that they have relatively low debt, and ensure that they are a solid player in their market sector.

Step 3

Choose to receive the dividends in payment form. When you purchase the stock, or when you set up your brokerage account, you will be asked what to do with dividends. Some investors like to reinvest them into purchasing more stock, while others like to receive the income. For your purposes, select receive the income.

Step 4

Build your dividend income over time. A dividend income stream can be a great way to supplement your retirement income or even add a little extra money to the family till each month. If you simply purchase $3,000 in dividend-paying stock per year, and that stock has a dividend yield of 10 percent, after 10 years, you will have $30,000 in stock (minus or plus market fluctuations) and be receiving $3,000 a year in dividend payments. This illustrates how even a small investor can build up a significant dividend income stream for her retirement after 30 or 40 years.

Step 5

Learn when the dividend payments will occur. Dividend payments may occur at any time, but usually occur yearly, bi-yearly or quarterly. Plan on when those payments will be coming in so that you can adjust your income strategies accordingly.


  • While you hold voting rights as a holder of common stock in a company, ultimately it is up to the board of directors to approve, increase, decrease or suspend dividend payments.

Video of the Day

Brought to you by


About the Author

Scott Damon is a Web content specialist who has written for a multitude of websites dating back to 2007. Damon covers a variety of topics including personal finance, small business, sports, food and travel, among many others.

Photo Credits

  • stock image by Michael Shake from
Cite this Article | A tool to create a citation to reference this article Cite this Article

Related pages

what percentage of tax is taken from paycheckhow much are fha closing costssingle step or multi step income statementirs e-file pinmax pain options calculatorsecuritized debtwhat can pell grants be used forhow to deposit tax refund checkmortgage explanation letter samplebuying prepaid credit cardsonline banking advantages and disadvantagesthis withholding tax percentage is deductedquick trip money ordersgrace period for car paymentesthetician grantsdefine exemptions on tax returnbactrim for skin infectioncalculating compound interest quarterlydoes medicare cover co pays from primary insurancelegal separation nysfederal seogmilitary schools in georgia for boys for freessi benefits and marriagequestions to ask tenant referencesturbotax 1041what happens if you overdraw your checking accountcalculating bi weekly payhow to cosign for a carcsl plasma timesdifference between disposable and discretionary incomedumps synonymnon qualified annuity beneficiary optionsdividend payout ratio formulacincinnati income tax divisionstate of wisconsin unclaimed propertyland donation tax deductionscrap price for sterling silverfiling illinois state taxesdifference between dividend and capital gainare irrevocable trusts taxablenyc tax percentage1041 k 1 instructionskohls credit card applyhow to write a letter of reprimand for an employeedmo dentalescrow account shortageirs 590 table1040ez eligibilitywhat happens during a foreclosurecrediting a credit cardvaluation of treasury billsforfeited stock optionsinstructions for form 1310student loan garnishment hardshipnet asset turnover formulaenlisting in the army reserveshow to calculate capital expenditure from cash flow statementwisdom tooth extraction no insuranceirs publication 947max roth 401k contributionavoiding capital gains tax propertyh&r appointmentmortgage front end ratioscholarships for native american descendantshow to combine gift card balancessynonym for autobiographyhow much of a hold does hertzsalvage title motorcycle insurancesbi atm card registrationw4 kansaswhat does 30 coinsurance after deductible meanwalgreens internship pharmacythe use of cash budgeting proceduresinherited mutual fundscostco membership cancellationwithdraw cash from capital one credit cardcalifornia bic cardbreaking the lease of an apartment