Before reading this guide, you should first read my guide How To Buy Your First $100 In Shares.
What Is A Dividend?
Dividend payments are how companies distribute profits to their shareholders.
One of the benefits of owning shares in a company is being entitled to dividend payments.
You will receive dividends in proportion to your shareholding.
For example, a company might have 1 million shares, and pay a dividend of $1 per share.
If you own 1,000 shares, you will receive $1,000.
Dividend Paying Stocks
Not all companies pay dividends.
It is decided by the board of directors and the management on whether they should pay the profits out as dividends, or keep them in the company to reinvest.
However, the majority of companies listed on the New Zealand sharemarket pay regular dividends.
To see how much each company pays, you can visit their Dividend page on the NZX website.
For example, here is the historical dividend data for Meridian Energy:
You can see the company pays dividends of approximately 17 cents per share each year.
At the current share price of $5.20 per share, this gives you a dividend yield of 3.27%.
Receiving Your First $100 In Dividends
Receiving dividends is very simple.
You just need to be holding the stock on the "ex dividend" date.
For example, we've seen Meridian Energy offers a current dividend yield of 3.27%.
Therefore, in order to receive $100 in dividends, we would need to invest $3,058 in Meridian Energy stock.
$3,058 x 3.27% = $100.
If you do not know how to buy stocks, I recommend reading my guide How To Buy Your First $100 In Stocks.
Dividend ETFs
If you are not confident in picking individual stocks, you can still receive dividends by holding a dividend focused index fund.
A good example is the NZ Dividend Fund from Smartshares.
This fund will invest in a broad range of NZ dividend paying stocks, so your risk is spread across a variety of companies and industries.
Every six months you will receive an aggregate payout of all the dividends you've been entitled to.
Here are the current holdings of the fund:
Simply open a Smartshares account on their website, then you can invest in any of their funds.
You can invest in lump sum amounts of by regular direct debit.
As long as you're holding the fund on the dividend date, the dividend will get sent to your bank account.
Want To Learn More?
If you would like to learn more about picking high quality dividend stocks and building a dividend income stream you can live and retire off, you might want to check out my course Simple Stocks.
Along with dividend investing, I cover everything you need to build a thriving stock portfolio to help you multiply your wealth safely and smartly.