Dividends are one of the easiest ways to make money in the stock market. Dividends are usually paid as a cash payment to the stock holder once a quarter, but they can also be paid in the form of stock, preferred stock, or other types of credits. I am going to give an example of one stock that gives monetary and stock dividends.
Vector Group (VGR) is a company that has holdings in tobacco and real estate. VGR is an excellent example of how to make a profit off of great high yield dividend stocks. You can read more about them at http://www.vectorgroupltd.com/abtus.asp
Vector Group as of January 2012 is trading around 17.50-18 bucks a share. VGR pays an annual dividend of 1.60 a share or 40 cents a quarter. VGR also pays a 5% stock dividend each year. So if you bought 200 shares of VGR five years ago (January 3rd 2007), the price was the same as today, 17.82 a share. The total cost would be $3,564.
Today, you would own 242 shares of VGR at 17.82 a share. The value of the stock would be $4,312. You would have also made $1,764.80 in dividends, which would be taxed at 15% or 10% less than other income. I will talk more on this in a later post. Selling the stock today, which appeared to have gained no value, would net a profit of $2,512.80. That is a gain of 70.5% over a 5 year period. I think most people would be happy with a return like that.
This goes to show that high yield dividend stocks pay big, even though they may appear not to move at all.
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