The easiest way to benefit when "your"
Here's the scenario.
You did your research. You bought some stock. Now you own the
company, or at least part of it.
company does well. Sales are up, costs are down, profit
increases, and even the stock price is up. You're pleased with
your decision to buy the shares. But there's no way to get a
payoff from this success, without selling your investment. Or is
Well, yes, if you
picked a company that pays dividends to its shareholders. Here
are two definitions related to dividends.
A portion of a
company's net income paid to stockholders as a return on their
investment. A stock's dividend yield is determined by dividing a
company's annual dividend by its current share price. So a stock
selling for $20 a share with an annual dividend of $1 a share
yields the investor 5%. Dividends are declared or suspended at
the discretion of the company's board of directors. A prime
benefit of dividends is that once paid, they are money in the
bank and provide your only return when stocks are weak. One
disadvantage is that dividends are taxed as ordinary income,
which, if you're in a high tax bracket, can ramp up your tax
bill. See "Dividend/Yield."
A company's annual dividend expressed as a
percentage of its current stock price. As a stock's price declines, its
dividend yield goes up. So a stock selling for $20 a share with an
annual dividend of $1 a share yields an investor 5%. But if the same
stock falls to $10 a share, its $1 annual dividend yields 10%. Value
investors often see high dividend yields as a sign that a stock is
cheaply priced. A high yield also acts as a cushion in a declining
market, which is attractive to risk averse investors. The downside is
that dividends are taxed as ordinary income. The greater the yield, the
more taxes you will have to pay. See "Dividend/Yield."
definitions are courtesy
of The Money Show's website,
Calendar section for more about
The Money Show.
This definition is pretty easy to
find. Just look at the commission rates your brokerage charges.
Many brokers have a discount if you
qualify as an active trader, and the general consensus is that
an active trader is one who makes 30 or more trades per
quarter. Buying a stock, and then selling the same stock, counts
as two trades.
And read the fine print to see whether
a busy quarter with, say 40 trades, qualifies you for the active
trader discount for your trades during a slower quarter, with
only, for instance, 22 trades.