Dividend Investing For Early Retirement

1. Intro: Hello everyone. My name is Zach hardly and welcome to my course on dividend investing for early retirement. In this course, we're going to focus on four main topics, starting with what is a dividend and how do they work that we're going to take a look at how to buy and sell dividend stocks that we're going to start evaluating different companies to make sure that we're actually buying and selling the right stocks. And we're going to finish it off by calculating exactly how much money you need in retirement in order to live off dividends for the rest of your life. And if you're interested in myself, my name is Zachary Lee. I currently manage my own personal portfolio of about $300 thousand, and I have a YouTube channel with about 42 thousand subscribers where I share all of my content and what I'm trading and what I'm investing in. If you want to see any of that information on a day-to-day basis, definitely consider subscribing to the YouTube channel. But for this course, it's very, very exciting. This is actually my fifth course here on Skillshare. Already taught over 13 thousand students on this platform alone. So I am very excited to launch this new dividend investing course and share with you a couple of tricks and a little bit of knowledge that I've gathered over the last few years that I am using in my own personal life to put towards my retirement is I want to share that strategy with you today and if you get any value out of this course, the only thing that I ask is please leave a review for how I can improve it in the future or what you liked best and without any further ado, let's jump right in. 2. Course Project: All right, everybody. So before we get started in less than one, I just want to introduce you to our course project here, this is a very simple PDF that has 10 tasks on it that are designed to make sure you're understanding all of the concepts, as well as setting goals and starting to build your own dividend portfolio. So everything you need is going to be in this document. I've also included all of my resources in the sample portfolios that we're going to use as examples throughout this course. Everything is included in this document and all of those resources are on the last page. So if you have a printing nearby, I highly recommend printing this off and going through it as you go through the course or keep it open on your computer. You'll also be able to click all of the links from there. So I highly recommend it. And without any further ado, let's dive into lesson one. 3. What is a Dividend: All right, everybody, Welcome to Lesson 1. In this lesson, we're going to talk about what is a dividend. So to answer this question, very simply, a dividend is when a company gives money back to the people that own the stock. And so this is quite literally the company taking an amount of cash and giving it back to the people that own stock in that company. And so if you own stock, when the company pays dividends, quite literally have an amount of money deposited into your account that you can use to pay for your expenses, go into retirement by other investments with you can do anything you want with it. And when that company gives you that money, it's kinda like no strings attached, then basically paying you back and thanking you for investing in their company. Now, what is a stock and how do you buy the stock? Very simply, stock represents ownership in a company. And so when you go out and you buy stock, that literally means that you are now becoming an owner in that company because that stock represents a portion of ownership in that company. So for instance, if we have Company XYZ, so that'll just be the name of the company for this example, Company XYZ has 100 shares and you own 400 of those shares. So that means that there's a 1000 shares and the total pie and you own 400 of those shares, that means that you own 40% of the company and that's how your stock is broken up. You could also call that equity, you could also call that shares. You would call that a percentage of the company. There's a variety of different terms for it, but it basically means that you own for 100 shares or 40 percent of the outstanding shares, or the total shares that represent the ownership in that company, where you own a higher percentage of the company, you will receive a higher percentage of the dividends. And so for instance, company decides to pay $100 in dividends and you own 40% of the company, you would receive $40 in dividends. And that is why dividends are so attractive because they usually represent a steady source of income that anybody can generate, anybody can establish for themselves without having to do much work. In the meantime, all you have to do is own the shares and buy the stock. And it's very simple to do because in the rest of this course, I'm going to walk you through everything you need to know. Now, in the next lesson, we're gonna talk about how to tell if a company actually pays a dividend. So I hope to see you there. We'll see you soon. 4. How to tell if a company pays a Dividend: All right, You guys, welcome to lesson 2. Thank you so much for sticking with me in this lesson, we're going to start to talk about how to tell if a company pays a dividend. So by the end of this video, you should be able to look at your favorite companies and understand whether or not owning them will get you a dividend. Let's dive right in. Okay, so to start us off here, let's just talk a little bit more about dividends because there's a couple of things you need to know. First of all, not all companies pay dividends. That's really important to know. Some companies decide to pay dividends, some companies decide not to pay dividends. We're going to talk about the reasoning behind that in just one minute. Let's move on for 1 second here because dividends are paid out of the profits that a company generates. So that can shorten the list of companies that pay dividends because some companies are not profitable in the early days, a lot of growth companies and startup companies operate at a loss for a few years until they become profitable. And so not all companies are profitable and most dividends are usually paid out of profits. If a company is paying out a dividend and they're not making money, that's a very bad sign and it's something that we want to avoid. And lastly here, paying out dividends means that the company is not investing that money back into growth. So when a company generates profit, they have two things that they can do with that profit. They can either decide to invest it back into the company and create a new warehouse or add a new shipping line or create new products, or put it into research and development. And they can basically invest it back into the company. Or they can take some of that profit and they can give it back to shareholders. And that's how they reward shareholders. And then shareholders can do whatever they want with that money. And that transition from the company to the shareholders is called the dividend. And so when a company issues a dividend, that means that they are giving up the ability to invest that money back into the company. And it needs that they might grow a little bit slower compared to if they had invested that money into the company. So it's something to keep in mind here because It's kind of like an opportunity cost. If you have a $1000, you can give it back to shareholders, but it means that you cannot invest it into yourself. Or you can invest it into yourself. But it means you cannot give it back to shareholders or you meet somewhere in the middle, which is where most dividend-paying companies meet. They pay out a portion to shareholders and they put a portion of it back into the company. Now, there's also some companies that are profitable but don't pay a dividend. And those companies are usually what we call a growth stock and a growth stock invest all of their profits back into growing the company. And so this is a company that let's call it Uber, for instance, oversees a massive opportunity to expand worldwide right now. And so all of the money that Uber generates and all of the money that Uber makes, their putting it back into the company to grow and try and basically take over the world. They don't want to give that money back to shareholders right now because they can use that money for growth and they know that they have some competitors out there. And so there are some companies that people by thinking that the price is gonna go up over the long-term and somebody else is going to buy it from them at a higher price. Other companies are more focused on dividends. Other companies really pride themselves on having a steady Dividend and making sure that they're giving cash back to investors pretty consistently. And so we have gross stocks on one side and we have dividend stocks on the other side. And dividend stocks find a balance between paying back shareholders and growing the company. And basically, you can decide this of whether or not a company pays a dividend if they paid dividend than they are a dividend stock. If they don't pay a dividend, they're probably a growth stock because they're keeping all of that money and putting it back into the company. And so that's how I like to look at companies in general. If they paid dividends, dividends stock, if they don't pay a dividend, growth stock. Now there are some fine lines to that, but in general, growth stocks are usually technology stocks, drone stalks, biotech, e-commerce, space, cannabis, any of these growing industries, any of these newer industries, any of these kind of exciting technology industry's, most of these companies are going to be growth stocks. Now when it comes to dividends stocks, these are going to be companies with usually a more steady business model and steady revenue stream. Things like utility companies or energy companies or mining and resource companies, maybe even industrial or construction companies, and a lot of times even retail companies. If you look at a company like maybe Procter and Gamble, where they have a variety of different products in a variety of different niches and a variety of different stores. And they have a fairly steady business model. They can pay a fairly steady Dividend. And so these kind of steady business model companies are usually the ones that pay a dividend. Whereas these sort of e-commerce and space and cannabis companies are usually considered to be gross stocks. And so definitely something to keep in mind here. Now, there are certain companies that kinda cross this boundary. So for instance, I mentioned that a lot of technology companies or gross stocks, but Apple and Microsoft both paid dividends. They pay a dividend because they have grown so fast and they make so much money and they have so much cash on their balance sheet, meaning that they have so much cash that they have access to, that they might as well give some of it back to shareholders. So yes, there are technology stocks that pay dividends. Microsoft and Apple in general would be considered growth stocks. However, they do pay dividends. So that line does blur in different situations. Definitely something to keep in mind. But in general, growth stocks are usually those kind of technology, e-commerce space, biotech stocks, dividends, stocks usually having more steady business model. Now, how to tell if a company pays a dividend? It's very, very simple. You can just look up that company and almost anywhere you look it up, they will give you a couple of statistics about that company. And the one that we're looking for right here is anything to do with dividends. And so you can see right here, I looked up Shopify incorporated. This is the e-commerce website platform. And when you look at the dividend yield or the ex-dividend date is just terms that refer to their dividend. Everything is filled in with NA or not applicable in this means that Shopify does not pay a dividend if you go to a different company like caterpillar, which is an industrial construction company in the United States. You can see that this data is filled in here. You can see that they pay a $4.44 dividend and the ex-dividend date is January 19th. And so you can see that caterpillar does pay a dividend. Now if you look this up on your phone, this is what the screenshot looked like for me when I just went to the stock app on my Apple iPhone. And you can see right here that the dividend yield 2.15%. And so basically what you're looking for is any information about the dividend when you look up the company, if there is no information or just says N A, that means that the company does not issue a dividend. You do not get paid a dividend for owning those shares. And so this is the way that you can figure it out. You can find this information on almost any platform that you look up. I've just gone to Yahoo Finance and the stock apple, my cell phone because I find that those are the most popular. Now one question that gets brought up a lot when I talk about this topic is who decides on whether or not the company issues a dividend? Like what makes the difference between issuing a dividend and not issuing a dividend? And the truth of the matter is that decision is left up to something called the board of directors. And the board of directors is a group of people that are basically there to oversee the company and choose the CEO of their role is to make sure that that company is being governed and run properly. And if it is not, it is their job to step in and replace the CEO. And they also decide what happens with regards to the cashflow and the profit that comes from the company. And therefore, if they decide to issue a dividend, that money comes out of the profit and it gets issued back to shareholders. If the board of directors would rather keep that money in the company and use it for growth. They'll give that directive to the CEO. And the CEO will go into the company and execute it based on what the board of directors has asked for. And that's how a large corporation is usually structured. That's how most corporations work, and that's how dividends are decided upon. Now I know that there was a ton of information in this video. Feel free to rewatch it. Please make sure you are taking notes because I know there's a lot that we're going through right now. I'm trying to keep it as simple as possible, but in the next video, we're going to start looking at dividend yields so that we can start to understand how different companies compare with regards to the amount of money that they're paying out in a dividend so that you can get the most bang for your buck and the highest ROI and make the most money from your dividends. Here we go. 5. Dividend Yield: All right, You guys, welcome back to lesson 3. In this lesson, we're going to start to talk about the dividend yield. Now the dividend yield is very, very simple. The dividend yield shows us how much money we will get back from our investment in the form of dividends. It's a really useful tool for comparing different companies because if we look at two companies, company a and company B, and one company, company B has a higher dividend yield. That means we're going to get more money back from investing in this company. And that could influence our decision or be a reason to invest in company B over Company a. And so that's what we use the dividend yield for and it's very simple to calculate. All you do is you take the annual dividend yield. So the total amount of dividends that would accompany is going to pay on an annual basis and you divide it by the price per share. So let's look at an example here. If we look at Caterpillar stock, the price per share is $202.79 and this stock, Caterpillar stock pays an annual dividend of $4.44. So if we divide $4.44 divided by $202.79, that gives us 0 to one. Now if we turn that into a percentage, that gives us 2.1%, and that means that the dividend yield for Caterpillar stock is 2.1%. And if you go back to Yahoo Finance here, here's a quick screenshot and you can see the price is $202.79, $4.44 in a annual dividend, and that equates to a 2.15% dividend yield. And so for every $100 that we invest into Caterpillar stock, we are going to get $2.15 back in the form of dividends. Now if we look at another example here, this is John Deere, the popular tractor company ticker symbol is D0 and it currently trades at $348.78. That company has an annual dividend of $4.20 and that gives them a dividend yield of a $1.21. So for every $100 that we invest into Deere and Company, where you're gonna get a $1.21 back. And so if we were comparing john Deere to caterpillar, caterpillar has a higher dividend yield and as long as they are both good companies that operate in the same way, caterpillar is going to be a better investment for me because it's going to give me more money back in the form of dividends, which is exactly what we're looking for in this course. And so here's an example of how you can use that dividend yield to find a better investment. Now, another example here is AT and T, US Telecom company that provides cell phone coverage and they have an exorbitantly high dividend yield. So for instance, the price per share is $23.68. They pay $2.08 dividend, and that means that their dividend yield is 8.77%. So for every $100 invested into AT and T, you're actually gonna get back $8.77, which is absolutely amazing. And it's even much higher than caterpillar and John Deere. And so if you're looking just for dividends AT and T could be one of the options that you consider above John Deere or above caterpillar. Now, there's a variety of other factors that you need to consider before you make that decision. We're going to talk about all of those in the rest of this course. But just in summary here, the dividend yield helps us to understand how much money we should expect to generate from the investment in the form of dividends. So for every $100 at $1000 that you invest, the dividend yield will help tell you how much money you can expect to get back from that investment in the form of dividends. And we use the dividend yield to compare companies and understand which company is going to pay us back more money in the form of dividends. And so it's very, very helpful as investors. And now just to give you a real-life example of this, here is my personal goal when it comes to dividends. So for me, I live in Calgary, Alberta, Canada. And if I can accumulate a portfolio or in a massive money that is $3 million, I can then invest that money into dividend-paying companies. And if I can generate a 4% dividend yield across those investments, that will pay me a $120 thousand per year before taxes and $97 thousand per year after-tax is where I live. That means with a $3 million investment, I can generate $97 thousand of after-tax income for the rest of my life. And over time it would probably even increase. And so that is my goal. That is my target is to get to $3 million invested into dividends, live off of that dividend income for the rest of my life because I could very, very easily live off in $97 thousand per year. Absolutely no problem. So those are my goals. Now in the next lesson, what I want to talk about are the dates associated with dividends because there's a couple of different dates that are super, super important with regards to when you get paid from those dividends. So I want to make sure that you're well aware of the timelines and I'm going to walk you through everything you need to know in the next lesson. 6. Dividend Dates: All right guys, congratulations, you have made it to lesson 4. In this lesson, what I want to talk about are the dates that are associated with dividends. There's a very specific timeline that happens when a dividend is issued. And so in this video, I want to walk you through that timeline so that you can better understand it and make sure that you're not surprised when money either does or doesn't show up in your bank account. Okay. So when it comes to dividend dates there for dates that are important when it comes to dividends. And we're just gonna go through it in chronological order. So the first important date here is called the declaration date. And we're going to use caterpillar again as an example, just because I think they're a great dividend company and they're fairly simple to understand that they build construction equipment and bulldozers and pretty much stuff that you see at the construction site on the side of the road. So everybody's familiar with their products and they're very simple to understand. And so here is an announcement that the company put out on December 8th, 2021 Were they have basically announced that they're going to issue a dividend. And so if you've read this, it says caterpillar ink maintains dividend. And so the board of directors that I described to you earlier of Caterpillar ink voted today to maintain the quarterly dividend of $1.11 per share of common stock. And so if you own common stock, the board of directors has just announced that they're going to issue a dividend of $1.11 per share. Now, this announcement goes on to say that this dividend is payable February 18th of 2022 to shareholders of record at the close of business on January 20th, 2020, 2. And these are the other dates that start to get really important here. So this is the first one that's super important. And basically they've announced that it is payable on February 18th. So remember, they announce this on December 8th, but it is not going to be payable until February 18th. So two months from the day that they announced it is when you're actually going to receive that dividend. So just because IT company announces dividend, doesn't mean that money is going to be in your account tomorrow, something to keep in mind there. They also said that it's going to be payable to shareholders of record on January 20th, 2020, 20. And we're gonna talk about that right now because the record date is the second really, really important date that you need to be aware of. And basically the record date is the date where the company acknowledges who owns the shares and creates a list for payments. This date is set by the company. You can see it was actually put in that press announcement, and in that announcement in our example, it was January 20th of 2022. And so if you own shares On this day, not at the beginning of day, you have to own them for the full day. So you actually got to buy and before that. But if you own shares on January 20th, you will receive a dividend even if you sell them the next day. So if you sell on January 21st, but you own them for the full day of January 20th, you will receive that dividend. Now, the next date that is super important here is called the ex-dividend date. And basically what the ex-dividend date is therefore, is it can take one to two days for a trade to settle. So depending on what type of account you have, depending on what type of trade or you are and how much money you are trading with. When you go in and buy and sell a stock, it could take up to one to two days for that trait to settle and for that trade to actually go from one account to the other or that security to go from one account to the other. And so because of this time delay, we have something known as the ex-dividend date. And so this ex-dividend date is set by the exchange. It is not set by the company itself, it is set by the exchange that manages the shares. So the New York Stock Exchange or the nasdaq or the Toronto Stock Exchange, all have different ex-dividend periods which are dictated by that individual exchange. And that is because it can take up to two days for certain traits to settle. And so because of that, they have the ex-dividend date. And it's basically the date where you must own the shares before this date in order to qualify for the record date so that the shares can settle. So for instance, if the record date is the 28th of January and the exchange has a two-day ex-dividend date. That means that you need to own those shares on the 18th. You need to own them two days before the record date. And so this is very, very important. And it means that you can't just buy the share the day before the record date. You actually have to buy them a certain period of time before that record date. And that period of time is known as the ex-dividend period or the ex-dividend date. Now, the last date that's super important here is the one that we're all excited about and the one that really matters here, and this is the payment date and this is the day that the money is actually transferred into your account. And so depending on your account and how you have a setup most of the time, it will literally just be an increase to your cash balance. So money will come into your account and if you hold any cash, it will just increase that cash balance. Now, in our example, this was February 18th of 2020 2. And so on that date you would see that money come into your account and this happens completely automatically. You don't need to do absolutely anything for this, and it will just automatically take place in the morning or usually buy lunch. That money will be in your account and then you can do whatever you want with it. Now, in summary, here, I just want to go over the four days real quickly again. So the declaration date is basically the announcement of a dividend by the board of directors. This is controlled by the company and they can come out whenever they want and announce a dividend. Usually it happens on a quarterly basis. The ex-dividend date is the date that you must own the stock before this date beat. This is set by the exchange, and this is basically the period of time that it takes for your traits to settle so that that list can be built for the record date. The record date is usually one to two days after the ex-dividend date and you have to hold the stock on this day for the entire day in order to make it on that list, you can sell it the next day. Absolutely no problem. And you will still receive the payment on the payment date, and this is the day that you receive that dividend. Now, there's a little bit of reasoning for this number 1 is that this system prevents people from buying the dividend on the date of record and selling it right afterwards. So not only does it help account for that time delay, but it also means that you can't just buy the stock the day before it's about to record a dividend and then sell it the day after, you actually have to hold it for a period of time. And in most situations, in most scenarios, that record date of when that basically listing is made, the stock will actually drop just slightly because that cash will actually be accounted for at that point and that money will no longer be the company's, it will be the shareholders. And therefore, the stock usually takes a very small hit on that day. And so something to be very wary of, you're not going to be able to just buy and sell these shares before and after the record date. That's not a strategy that I would recommend. It's not a strategy that's worked very well for many people. And there are protocols and there are rules in place to prevent that. So I don't recommend it. And I really recommend long-term investing buying companies that you believe in and focusing on good dividend companies. I'm going to help you find in the rest of this course. Now, in the next video we're going to talk about how to actually buy these dividends stocks. We're going to go through one of the platforms that I use. I'm going to show you exactly how to buy into these companies, as well as exit these companies in case you change your mind. So stay tuned and let's go. 7. How to Buy and Sell: All right, everybody, welcome to lesson five. In this lesson I'm going to walk you through exactly how to actually buy and sell different stocks. And I'm going to do it right in front of you so that you can see everything you need to know. Let's go. Okay, so the first thing that you need in order to buy and sell stocks is you need to open up in an investment account if you live in Canada, I knew just getting started, I highly recommend well simple. If you live in Canada and you're already pretty familiar with trading, then I would go with Quest straight. It has a little bit more features and control over your investing. But well, simple is by far the more simpler and cost-efficient way to get started if you're new to trading and trading with a smaller amount. And if you live in the USA, I would recommend weevil. That's probably the best online platform for you. And if you live in Europe, I would go with equatorial. Now these are just my recommendations and the platforms that I think are good. I personally have most of my money on Quest trade. But in this example, we are going to use, well simple because it is the best platform for beginners. It's also the simplest to understand and you will be able to correlate what I am doing on well, simple with whatever platform you are using at home, because it is so simple. So that's where we're gonna get started. And in this video we're going to buy shares of AT&T and then we're going to sell shares of AT and T so that you can see exactly how it works. So all I'm gonna do here is go to my basically well Simple.com account here I have $1800 in this account and we only have one position in it. I've got Amazon CDRs right now and we have $57 of money leftover. And so what we're gonna do is we're going to spend that $50 on AT and T. And so all I'm gonna do is start to type in or out here in the search bar and then find the companies that I'm looking for. So AT and T cos $26.13 USD. And if we scroll down here, we can see some information about the company. So the market cap here is what the entire company is worth. And at the bottom here, you can see that AT and T has a yield of 7.94%, which is very, very nice, very, very attractive. And that is a great dividend yield. So what we're gonna do is we're going to scroll back up here. And on the right-hand side, you can see this little window here where it says Place Order. And so what we're gonna do is we're going to choose our account and I'm going to leave it in my personal account. You can see we have $44 USD available in this account. And then right underneath that you can see the order type here, and this is super-important. So you have two options. When you click on order type, you have the market by and then you have a limit buy. And basically what happens here, when you place a market buy, you will go into the market and you will buy those shares at whatever the next person is willing to sell those shares at. So if the last transaction was twenty-six dollars, but the next person is not willing to sell those shares except for at $27 and you place a market order, that may mean that you will go up to 27 dollars to buy those shares, will then drive the market price of those shares up. And so if you place a market order, your order may execute at something slightly different than where the price is currently at. That is the risk of a market order. But the benefit of a market order is that it will execute absolutely right away as early as possible. And so if you just want to get into it right away and you're not worried about a one to 2% slide and the price than a market order is perfect for you. However, if you are worried about the price moving once you've placed that order, that's when you're going to use a limit order. So a limit order will basically set the maximum dollar amount that you are willing to buy shares at. So for instance, if the current price is $26 and you want to buy a 100 shares, but there's only 50 shares available at 2650. And then the next 50 shares are at $28 and you place a limit order. It will only buy the shares that are priced underneath of your limits. So if your limit was twenty-seven dollars, you will pick up the 50 shares here, but you'll miss out on the 50 shares at $28. And so a limit order caps the maximum amount that you will pay on a per-share basis. So for us right now, AT and T is trading at $26.17, the maximum price that I'm willing to pay for it as $26.20 and I just want to buy one share. And so my maximum estimated cost is $26.20. Click on Buy, and this is going to show me how the limit orders work. I'm going to click on Continue. I'm going to confirm my order and then order sent limit by of one share, and there we go, $26.20. Now let's see if that order filled. We can go back to my portfolio here. And when we click on my portfolio, you can see we have two positions there. And when we scroll down, Oh, welcome back. It's asking me for my password, that's weird. And when we go to my portfolio here, you can see that we now have two positions. We have the Amazon shares that we held before, but we now also have one share of 880. And so this is really, really nice. That's how you buy the shares. And you can do it with either a market order L, a limit order, a limit order will cap the maximum price that you pay for those shares, whereas a market order will try and fill that order as quickly as possible. And if it means that it has to go up in price in order to fill that order. That's what it will do when you place a market order. So now we own shares of AT and T. All I'm gonna do is I'm going to slide this over here to the sell side, and it's going to show me that I'm trading in my personal account and I have one available share. And so my market cell is again going to get me out at whatever the next person is willing to buy it at. So if nobody is willing to buy 18 and t-shirts until let's call it $24. And I click on a market order to sell, that is going to drive the price down to twenty-four dollars and get me out there instead of the current price at 26. Now, the nice thing about AT and T is that it is a massive, massive company and there's a whole lot of people trading AT and T and there's a lot of action back and forth on 18 C, so I don't really have to worry about that and it's not really going to be a factor because I know that there's enough people on both of the buying side and the selling side that are going to be willing to either take that trade or give it up. So all I'm gonna do is I'm going to sell at the market. I'm going to sell one share rate here. And you can see that it's going to get me out at about 26 dollars and eighteen cents. We'll see where it actually executes, but let's test it out here. We're going to click on Continue. I'm going to confirm this order. We're going to click on Done, and now we can go back to our portfolio. We should have that share no longer in our portfolio shoot, so we should only have one position, which is exactly what you can see right here. And let's go see where that executed at. Okay, so when I go to the Activity tab up here in the top and I click on the 880 market sell order. It's displayed in Canadian dollars right here unfortunately. But as you can see, we've got out at $26.13, which is pretty close to where we were at. At the moment, I clicked on that buns. So as you can see, the market order isn't going to make a significant change in the price that you're trade actually executes at. But it can make a small impact on that price. If you want to alleviate that, you can use what's called a limit order, which is exactly what I walked you through when we bought the shares. And that will set the maximum amount that you're going to buy or the maximum amount that you're going to sell at. And that can protect you from a price ceiling that you weren't expecting. And so, and so in this video, I just bought AT and T with a limit order and I sold AT and T With a market order. Now, what's very exciting is that in the next video, we're going to start talking about how to do that multiple times in order to start building a portfolio. 8. Building a Portfolio: All right, everyone, welcome to lesson 6. Now that you know how to buy and sell stocks, it's time to start talking about how to build that portfolio. And so in this video, I want to walk you through my philosophy and my thoughts when it comes to portfolio management and the two main considerations that you need to be thinking about when saying, okay, how do I build a long-term sustainable, steady return portfolio or diversification and position size. Those are the two main factors that you need to think about and that we're going to cover in this video. So number 1, diversification. Diversification means investing in multiple different industries that are not related. And we do this so that if one industry crashes or portfolio will have stalks in other industries, they should do well. So for instance, if we hold a portfolio that has both airline companies and oil and gas companies in it can give us great diversification because when oil and gas prices fall, that means that our oil and gas companies probably won't do well. But that also means that the largest expense for airlines, which is gasoline or fuel for these airplanes, it means that their largest expenses now cheaper and they should probably make more money. And so when gas prices fall, airlines usually do well and having a diversified portfolio can help you balance out those highs and lows so that you achieve steady returns. And so the idea is to have diversification in your portfolio where you have companies in a variety of different industries, where if one does poorly, the other one should do well. That's the concept and that's the idea behind diversification. And it basically helps you to create steady or returns over the long run. Now, here is an example of a diversified portfolio. So let's say that you had a portfolio that consisted of a variety of stocks and five different industries. So retail, telecommunications, real estate, infrastructure, and utilities. You held stocks in a variety of different industries in these five industries. And I think that that would be a very diversified portfolio when utilities don't do well, real estate should do very well when retailed doesn't do well, infrastructure probably will do well. So a variety of different offsets that you will find that you have with a diversified portfolio and there's a lot of benefits to it. Now, the second factor that you need to consider here is position size. Position size is about how much money you have invested into each stock. Now, in general, what we wanna do is try and keep it fairly equal and balanced. So for instance, if you have ten different positions in dividend-paying companies, a good rule of thumb would be to go equal positioning amongst all of those 10% of your available funds into each of those positions. That way you can hold a diversified portfolio with good position sizing. We're not all of your money is in just one egg. Your Money is spread out evenly amongst a variety of different eggs and hopefully a variety of different nests being the industries that you choose. Now, here is an idea of an example portfolio. And pretty much my, my portfolio that I have for dividends right now. And so I don't like to follow more than ten stocks because anything more than 10 is just too much to cover. So for me, I have 10 positions and I put 10 percent of my money into each of those positions, try to have those positions in five different industries. And so there's just a really good rule of thumb if you're just getting started, this is where I would start, where I would start with even less than this. Because having too many positions and too many companies to follow, especially in the beginning, can be very overwhelming and it can take up too much of your time. Dividend investing is something that should be almost passive. It should be very easy to do. It shouldn't be something that you think about every single day. It should be something that you think about every now and then. When you check your accounts, check your balances, and you sit down at your computer after you get paid and you say, I've got a little bit of money to invest, where should I put it? Now, just for this course, I've put together an example portfolio here of a perfectly diversified and position size portfolio. Now, obviously, in real life, this doesn't happen because most of the stocks go up and down all the time and you're never going to achieve a perfect 10 percent balance between all of your securities here. But what's nice about this portfolio is that the position sizes at 10 percent here are all of the companies in the middle. So we've got Duke Energy, which is utility company for this, which is another utility company. We've got Caterpillar and Brookfield, which are both infrastructure companies. We've got Simon Property Group and Crown Castle group, which are both real estate companies, got AT and T and tell us what your telecommunications companies, we've got Target and Best Buy, which are in the retail space. And so we've got five different industries. We've got 10 different stocks, and each stock has an equal balance at 10% of the portfolio. Here are all of the tickers, right here on the right-hand side under the ticker column, and just a little bit further over here on the yield Kong, I've actually gone into each and every company and calculated the yield for that stalk. I've taken them all right here and then averaged it out at 3.8%. And so if you're just getting started in dividends, Here's a sample portfolio that you can look at that you can model off of. You can make your own changes to it. But this will get you started with a 3.8% average yield portfolio in some very good companies, some very large stocks that is probably going to do very well over the long-term. Now, that was just an example that I've put together. But what I wanted to do in the rest of this course is equip you with the tools and the knowledge and the skills to evaluate companies for yourself and determine which company is going to fit in your portfolio. So in the next few lessons, we're going to talk about how to choose which companies to add to your portfolio and how to better evaluate these companies to meet your goals. I look forward to seeing you there. 9. Financial Statements: All right, everyone, welcome to lesson 8. Now that you understand the payout ratio, it's time to start diving a little bit more in depth into the company financials. And so in this video, we're gonna talk about where to find the financials as well as what to look out for in the three things that you really want to watch for when it comes to company financials and evaluating different companies for your portfolio is number one, increasing revenue. We want to see that revenue going up over time because that is a sign of a healthy company and that shows that they're going to have more cashflow in the future to increase that dude. And which is exactly what we're looking for. Number two is we want that company to be profitable. Like I said before, that healthy companies and the good companies are paying their dividends out of profits. And so the more profit that a company is making, the more dividends that we are going to receive as shareholders. And so we wanna make sure that our companies are profitable. And then the last thing we wanna do is look at the balance sheet. The balance sheet is going to give us an idea of what the company owns or how much cash and equivalent assets of the company has compared to how much debt the company has and how much money they actually 0. And so it's a good idea or it's a good tool to give us an idea of how much the company has and how much the company owes, and how healthy the company is at the current moment. And so those are the three things that we're going to try and look for when it comes to the financial statements. Now, how do you find the company financials? You may have never done this before. And so in this video, we're gonna go through a live example and I'm going to walk you through exactly how to find the company financials. So in general, when it comes to finding these financials, there's kinda two main sources that you can go to. The first source and usually the best source and the easiest source is going to be the company websites. So whatever company you're looking at, type their name into Google and then type Investor Relations. And a webpage will pop up that usually has all of the information you need. If you can't find it there, you can go to websites called either Edgar or CDR. Cdr is for Canada, Edgar is for US companies, and your company will have to file their financials on these websites. And so if you can't find the financials on the company website, you should be able to find them on either CDR or Edgar, and we'll go through an example of that as well. So what we're gonna do here is we're gonna go through an example with caterpillar. We're going to try and find their financials. It feels like they're just kind of a good example for this entire course. So I'm gonna open up a new tab here and we're going to type in caterpillar investor relations. And the first link here, as you can see, caterpillar Investor Relations very easy to find. And this is going to basically take you to the website that is specifically designed for investors and to give investors information about the company and about the stock. And as you can see here, you can find pretty much anything you need to know about the company, about the stock, even a slide deck that gives you a brief overview of the company and everything you want to know. An almost every company that you need to look up is going to have something very similar to this. And so you can literally do all of your research here. But what we're going to try and do, especially in this lesson, is focused on the financials. And so caterpillar has an option here at the top for financials, we're just going to click on the main tab here. And then as you can see, the last reported quarter was third-quarter 2021. It's highlighted in yellow right here. And this kinda gives you a press release and kind of a summary of the financials. But what we want is the actual financial statements. And for most companies, what we're going to be looking for is the quarterly report. And for us, that form is called the 10 Q. Now, every year come he's going to have to put out an annual report and that is called the 10 K. So you're either looking for the 10 K, which is the annual report, or if it's a quarter in-between the annuals, you're going to be looking for the 10 Q for us. We're on the third quarter of Caterpillar, so we are looking for the 10 Q and they even have one here that is described as the cat Financial Form, 10 Q which should be the perfect form for us. And so at the top here is going to be basically a description of what is inside of this form. And then as you scroll down, we're going to come across the financials. You can see part one, financial information right here. And this is going to be the consolidated statement of result of operations are basically the income statement or the profit and loss is another word for this. And so this is a great place for us to start because this is where we can kinda check off those first two things that we need to talk about. We're increasing revenue and profitability. And so we can look at that on this form here. And so as you can see here, sales and revenues is the first category that we're going to look at. And in the year of 2021, they brought in a 11 billion dollars. As you can see here, these numbers are in millions. And so they brought in $11 billion in the sale of machinery, energy, and transportation. And they brought in $690 million with a financial product for total sales and revenue of $12.397 billion. Now, like I said, we are looking for revenue growth because revenue growth means that the company might be able to give us a bigger dividend in the future. And when we compare 2021 to 2020, we can see that the revenue in 2020 was only $9.8 billion. And so if we just do the quick math on that, I'm going to pull up my phone right here and we go 12,397 minus 9,881 equals 2516. And if you divide that by the 2020 revenue, which was 9,881, that gives us a 25 percent increase in revenue for this company and revenue year-over-year. And so the revenue from the year of 2020 to the year of 2021 increased by 25 percent, which is extremely nice to see that is very, very healthy, excellent growth. And for a company that pays a reasonable dividend, that is very, very nice to see. And so when it comes down to our first factor of increasing revenue, caterpillar has checked out blocks and they have basically done a great job in the blown it out of the water. Now the second thing that we needed to look for was profit, and that is what we were looking for down here. And so right at the bottom here, you can see is highlighted. It's literally just described as profit. This is also described as net income or net profit. And as you can see, caterpillar generated $1.4 billion of profit in the quarter for the three months ended September 30th, which is extremely nice to see and it is up more than twice as much compared to the year before. So their revenue is increasing and their profit is increasing and they're extremely profitable, which is very, very nice to see. And so when we look at the first two factors of the financials that I wanted to focus on, caterpillar has checked both of them with flying colors and they've blown them out of the water. Now as you scroll down here, we should come across the balance sheet and you'll notice the balance sheet when it's kinda broken into three different categories. And those categories are your assets, your liabilities, and your shareholders equity riches right here. And so this is our balance sheet, this page right here, and the top two categories right here is kinda what we're focused on. So everything that I've highlighted right here is what we want to look at because on the top side here is your assets. This is things that your company owns. So this is the cash in the bank, the equipment that you have, the buildings that you have, all the tools, all of the machinery, anything, any equipment, any trucks, anything like that. Those would all be considered assets and that's what the company owns. And so when we look at the assets for Caterpillar, we can see that they own $80 billion worth of assets. So again, this is in millions of dollars, eighty thousand times a million, that gives them $80 billion. And so that's what they have in total assets right now. We can also see that that is up by about $2.5 billion compared to last year. So they have more assets this year than last year, which is good to see. But what we really wanna do is we want to compare this to the total liability. So total liabilities is how much money this company owes. And when we look at the total liabilities for Caterpillar, it's right at the bottom here, and it's basically a summary of all the money that they owe people. And it is $64 billion. And so the $80 billion worth of assets and they have $64 billion worth of liabilities. And that is a good thing. We want the assets to be higher than the liabilities. If it is higher than the liabilities by at least a 10 percent margin, That will check the box that will show us that we have a healthy balance sheet and that will show us at the balance sheet as well managed however, if the liabilities are ever equal or greater than the assets, that is a red flag, that is a cause for concern and that is accompany that you should think twice about investing in because that means that they owe other people a lot of money and that debt could put pressure on your dividend. Because remember that debt probably as a contract behind it and an interest rate behind it. But your dividend can be decided on by the board of directors. And so if they decide that that debt is more important than your dividend, then they can cut the dividend. And so you want to find a company where the assets are greater than the liabilities, that the liabilities do not put pressure on the company's ability to pay your dividend. Okay, So that was the summary of the financials. Now just the three things you need to watch for. You want to see increasing revenue when you want to see increasing profitability. And you also want to see a balance sheet where the assets are greater than the liabilities by at least a factor of 10 percent. If you have all of those three things, then it will have checked all three boxes. And I give you the go-ahead to make that green light investment. I think it's probably a good company. Now in the next lesson, what we're going to talk about is dividend lists. And dividend lists can be a very, very useful for finding new companies. So here is everything you need to know. Let's go. 10. Dividend Lists: All right, You guys, welcome to lesson 9. In this video, we're gonna talk about dividend lists now, dividend lists are very simple. They're basically just a list of companies that have maintained their dividends for a period of time. And what that means is that these companies are usually some of the largest, some of the safest and some of the most reliable dividend companies that you can find in the first list that we're going to look at is the list of dividend kings. Now, to make it on this list, your company has to have maintained or increased the dividends for at least 50 years. So for the last 50 years, if your company at any point ever got rid of or decreased your dividend, you would not be on this list. This list is made up of only companies that have maintained or increased that dividend with the last 50 years and then having done so, that makes them some of the most reliable, some of the most trusted, and some of the most safe dividend companies that you can invest in. And so on the screen here is a list of all of the dividend Kings. You'll find companies like 3M, like Coca Cola, like Procter and Gamble, like American starts water-like, a variety of other companies. Most of them are very well-known. Most of them are very reliable. And this is usually a fantastic place to start when you're building a dividend portfolio. Now the second list of companies that I want to share with you is known as the dividend aristocrats. And on the screen here I have a list of dividend aristocrat companies from Canada. You can also find dividend aristocrats in the United States and a variety of other markets. But basically, to make it on the aristocrat list, you have to have maintained or increased your dividends for somewhere between 25 and 50 years. So you're not good enough to make it on the dividend king's list, but maybe you're pretty close, then you would be on the dividend aristocrat list. And this is kinda the next level down of companies that don't have quite the same level of history, but they have over 25 years of history of dividend increases or maintenance, which is extremely nice to see. And it means that the dividend that you are buying into today, you can expect that to at least maintain or increase in the future. And so if you're looking for more companies beyond the dividend king's list, I would start to look at the dividend aristocrats list because these are the companies that after the king's list are going to have the most history, the most security and the most reputation and the most kind of longevity behind them. And so this is kinda where I would start. Now, you can go even further. I think there's a third level to this, but the dividend kings are kinda the top and the cream of the crop. And then the dividend aristocrats. And then after that, the next list that I like to look at are the list of famous investors and what they're investing in. So just an example of this, you can think of Kevin O'Leary. You've probably seen him on Shark Tank or Dragon Stan or one of the TV shows or maybe even on social media. He is a famous investor and we can actually see almost everything that he has invested in because he runs a fund. And so if you just go to his website, its own shares.com and you look at is dividend fund, so it's slash OUS M. You can also just look up OUS M as a ticker. That's what you would be buying if you bought OUS m. And in this fund, he has a variety of different dividend companies that he believes are going to do well over the long-term. And so you can actually see all the dividend companies that Kevin O'Leary is holding. And if you have any other famous investors that are big dividend investors, it's more than likely that you can publicly see what they are holding as well. But this is really, really nice because if you don't like any of the dividend king or dividend aristocrat lists. And you don't like those kind of longer-term blue-chip companies. You can look at a list like this because these are all younger growth companies that still pay a dividend that Kevin O'Leary particularly thinks are going to do well. And so there's a variety of different dividend lists that you can go out and find depending on what you are looking for. These are just three examples. And what I would do if I were you, is I would use these lists as a place to start. Find a couple of companies that you can do some research on, building an opinion around and actually believe in. Once you have your belief, then you can add them to your portfolio. I would start with the dividend kings and the dividend aristocrats, because they tend to be the safest dividend stocks that you can fund. Once you have a couple of those, then maybe you start expanding into some of the younger companies or some of the more exciting companies. But that's probably where I would personally start. Now, in the next video, what we're going to start covering is comparing companies. We're actually going to look at one company and compare it to the other company and compare all of the ratios in the financial statements to figure out which one is a better investment for our portfolio. So remember to stay tuned and let's jump right in. 11. Comparing Companies: All right everyone, So now that you have a couple of tools for understanding these companies as well as finding these companies. What we need to start doing is comparing these companies to figure out which one is the best and which one deserves a position in our portfolio. Remember, we've only got 10 spots and we've got all of these other companies basically trying out and trying to compete for a right to get into our portfolio. And what we wanna do is we basically want to be the coach and only let in the best companies into the portfolio. And so in this video in Lesson 10 here, what we're gonna do is walk through an example where we're going to compare two companies to decide which one gets the right to get into our portfolio. Let's go. Okay, so the first thing to keep in mind here when we're comparing companies is you want to try to compare companies that are in the same industry or have a similar business model, or do the same thing. You don't want to compare a telecommunications company to an infrastructure company because they do very different things. The ratios are going to be different, the numbers are going to be different and you're not really comparing apples to apples. So what we wanna do is if we're looking at infrastructure or if we're looking at telecommunication, we want to try and find two or three companies that we think are great within that industry. And then we want to compare those companies to try and find the best company within that industry. We don't want to compare a bunch of different companies from a bunch of different industries because they aren't really comparable. They're going to have different pale ratios because the industries and the business model and the gross profit numbers are just different from industry to industry. So that's the first thing to keep in mind. Now in this example, what we're gonna do is we're going to say that we want to invest into a construction company. And we're gonna compare Caterpillar and John Deere. John Deere and Caterpillar both make construction equipment. John Deere also make some farm equipment, but they pretty much both have the exact same business model where they manufacturer heavy equipment for commercial and industrial uses. And so very good comparison, very easy companies to compare. And now what I'm going to, I'm going to show you just as simple spreadsheet that I have made that compares the different factors that we have already walked through in this course. Okay, so here's the spreadsheet that I've put together. And on the left-hand side here you can see all of the different factors that we're going to use to judge and analyze this company, starting with the dividend yield and the payout ratio, which are the first two ratios we looked at. Then we're going to go to the financial statements and look at the revenue growth quarter over quarter. We're going to look at the profit growth, and we're also going to look at the assets compared to the liabilities, the three different factors from those financial statements. And finally, we're going to finish it off with their dividend growth in number of years. How long, how these companies being paying and maintaining or increasing dividend over time. That's going to give us a good idea of how trustworthy that dividend is. So on the left-hand side here we have caterpillar and on the right-hand side here we have John Deere. And then I have a couple of notes about a different ratios and what we are seeing in the numbers here. So we're gonna go through line by line is gonna take a couple of minutes, but I just want to break this down for you so that you can understand what goes through my head when we are comparing these companies, okay, so first things first here is the dividend yield. This is how much money we get back for every $100 that we invest into the company. Caterpillar has given us back to point 14 percent. John Deere is only giving us back 1.2%. That means that caterpillar is giving us back almost twice as much our money for how much we invest into it, which is really nice to see. Caterpillar is definitely has a higher dividend yield. It's not anything that I would be worried about at this point. It's not above 10 percent, it's only at 2% here, but it is twice as much as John Deere, which means I'm going to get twice as much cash flow out of Caterpillar compared to John Deere, which is really, really nice. And that's definitely something that I am looking for as a dividend investor. And so I have highlighted this block green because caterpillar very clearly wins the dividend yield. Now when we move down here to the second ratio, we can see that in order to pay that dividend, caterpillars giving up 44.92% of their profit, meaning that they're giving up nearly half of their profit back to shareholders at the end of each quarter, John Deere is doing something a little bit different. They're only giving up under 20 percent of their profit back to shareholders every quarter. And that kind of explains why their dividend yield is so much lower. They're keeping the rest of the money inside of the company. And I assume that they're using that money to try and grow the company over time. Now when it comes down to revenue growth, caterpillar actually has the highest current revenue growth quarter over quarter right now at 25 percent and John Deere is only at 19.4. So they are fairly close and honestly, 20 and 25 percent is extremely high for dividend company like this that has been around longest caterpillar and John Deere. So both of these numbers are very impressive, but Caterpillar clearly wins that. However, the profit growth on John Deere is much higher than countable or 136 compared to 113. So even though caterpillars growing their top faster, John Deere's actually generating more profit for the revenue that they're bringing in. So that is very nice to see from John Deere. And this is probably the number that matters a little bit more than revenue is the actual profit that you're walking away with at the end of the day. And John Deere very clearly wins his category. And so, so far, it's kind of like, uh, to, to, to score between these two companies. And then when we look at the assets compared to the liabilities here. All I've done is divided the total assets, divided by the total liabilities to give us a ratio of 1.26 for Caterpillar, meaning that they have 1.26 times as much assets as they do liabilities. That's all I'm doing there is putting it into a ratio so that we can compare these two metrics. When you compare it to John Deere. John Deere actually has 1.23 and actually that is worse than caterpillar. So realistically this one should be highlighted green and this should be white. So realistically I've kinda mess that up right here. This should be green, 1.26 compared to John Deere, 1 to three because we want the company to have more assets and liabilities. And so this number being higher is actually better for Caterpillar. This should be highlighted green right here. I've made a mistake on the Excel sheet. Now when it comes to dividend growth here, John Deere actually has the longer dividend history of maintaining and increasing that dividend at 33 years compared to Caterpillar at only 28 years. And so when we look at these two companies, it's pretty much even this block right here should be green. And it's kinda like a four to three score here between John Deere and Caterpillar. I've put my notes in or eight here, but this is kinda what goes through my mind as I think about these companies and as I go through these metrics now when it comes down making a final decision here in my thoughts, number one, I think both of these companies are very good options. Both of them are very well-managed. The growth is phenomenal, the profit is phenomenal. They're growing year over year and they're very well managed with regards to a financial perspective and that balance sheet, both balance sheets are fairly healthy. Now, John Deere is probably the safer option, just because that pale ratios a little bit lower, it shows that they're probably keeping a little bit more money inside of the company and that's always going to be safer for the company. However, John Deere also pays out of very low yield, and it was only coming in at about 1.2%, which means I'm only getting a $1.20 back for every $100 I invest. Honestly, that's not very much. So for me, I like catalog better because cat pays a much better dividend yield, meaning that they give me more money back for the money that I'm investing in. And it is still a very safe company that does not raise any major concerns of reason that I say that it's because they have more assets than they do liabilities. There's still profitable. They're more profitable than they were last year. The revenue is increasing. There's still maintaining an increasing that dividend. And everything about the company looks like it's going in the right direction. So even though John Deere's probably a little bit safer and probably a little bit better in some of the metrics. I would personally be investing in cat because I get twice the cashflow back out of that company without any additional risk, at least in my opinion. So that is how I think about these two companies and how I think about comparing these two companies. Now in the next lesson, what I want to point out to you is some red flags to watch out for. So if you ever see these things come up in your research, It's definitely time to think twice about this talk. I'm going to tell you everything you need to know in the next video. 12. Red Flags: All right, everybody, Welcome to Lesson 11. In this video, I'll walk you through a couple of red flags to keep an IO for. And if you ever see these red flags pop up in your research, It's definitely something you might want to think twice about. Here's everything you need to know. Let's go. Okay. So first of all, I just want to start with the red flags that I pointed out to you already in this course, just so that you're aware of them and I can kind of reinforce them in your mind. So number one is anytime that the dividend yield is above 10 percent, most companies cannot afford to pay a 10 percent dividend. As you can see, what is to come. These we have looked at so far are somewhere between 2, 8% yield. So anything above 10 percent is a red flag. It's a red flag because that's just exorbitantly high. Most companies can't afford to pay that long-term means that the payout ratio is probably going to be very high. And I don't expect a company to be able to maintain a 10 percent dividend yield. Because if that existed, every single investor would be buying into that stock and the price will go up and the yield would no longer be 10 percent. So if you find a stock that has a 10 percent yield or higher, that is a red flag and it usually means that something is wrong. You need to do more research. Secondly, as a payout ratio above 90 percent, the payout ratio calculates how much profit are going to shareholders. If you're paying more cash to shareholders, then the profit you are making, that is very clearly unsustainable and that company is not going to be able to keep doing that. So you need to keep that in mind because that dividend, unless the company makes a whole lot of money in the future, that dividend is going to get cut. Third thing you need to watch out for is declining revenue. If the revenue is declining, that means that they have less money coming in to turn into profits, get back to shareholders. That is a very bad thing and I'm very negative sign. So if you're investing into accompany that, you are expecting that dividend to grow and their revenue is declining. That is something you need to think twice about because it's probably not going to happen. Number four is declining profit. Even if that revenue is going up, if their profit is going down. Something you need to be well aware of because that profit is what they pay out to shareholders in the form of dividends. And if that profit is going down, museums less money for that dividend. And it means that you're probably not gonna get paid at some point in the future. Last red flag that I've already pointed out here is the assets and liabilities of the company has more liabilities than they do assets that as a major red flag because it means they owe people money and those people that they owe money to, or in the form of contracting, you do not have a contract for your dividends. Dividends or the choice of the board of directors, which means they're probably going to get cut in the event that they need that money in order to fulfill the contracts and pay the debt. And so if a company has a lot of liability, puts more pressure on the dividends and you may not be able to receive that dividend in the future because of that liability. And so company as higher liabilities than assets, it's a major red flag. You need to watch out for it. Now, here are a couple of other things that you need to watch out for that I have not mentioned in this course so far. Number one is management changes. If you see that the company has gone through more than one CEO in the last 12 to 18 months. That is a major red flag. Same thing with the CFO. If any of those major positions changing over or have changed over more than once in the last 12 to 18 months. That is a major concern and a major red flag. And it means that there's probably some turmoil behind the scenes. The next red flag that you need to watch out for is a declining industry. If you're buying stock in a company that is in an industry that is on the downtrend or that is on the decline, or there probably won't be here in ten to 20 years. You really need to think twice about it because dividend investing is long-term investing. And if that company and that industry are on the decline, that is not accompany that you want to be investing in. And if the industry is declining, It's more and more pressure on the company and it makes it harder and harder for that company to be successful. So you need to be very, very careful. Over the next 20 to 40 years, oil and gas might fall into that category, where the next five to ten years tobacco probability falls into that category over the next little while, regular TV and cable TV probably falls into that category. So any of those industries you need to be very, very careful about. Next thing you need to watch for is if the company as a short history of dividends. So if they just started paying dividends in the last year or two, that is not a long history. That is not something that is reliable and that's not something that you can bank on to continue in the future. So if they don't have 10 or 15 years of dividend history behind them, that is not accompany that. You should be thinking is going to maintain that dividend for the next 15 or 20 years because they just don't have the history there and they just don't have the business experience to be able to commit to something like that right now. And lastly is company events. If something bad happens to the company, you need to be well aware of that. One of the examples of this is Boeing. Boeing pays a nice little dividend. However, when their planes went down a few years ago, the stock price took a big hit and it had a major impact on the company. So events like that can have a major impact on your investment, and they can also impact whether or not the company is able to pay a dividend. And so any event that happens like that to accompany that you hold shares in, you need to pay attention to, you need to understand, you need to try and think about how that is going to impact your cashflow and you dividend flow in the future. And now in the next lesson we're going to talk about Dividend Reinvestment Plans or drip plans. You may have heard of these before, and they basically allow you to make more money on your dividends and walk you through everything you need to know in the next video. 13. Dividend Re-Investment Plan: All right, You guys welcome to lesson 12. In this lesson we're going to start talking about Dividend Reinvestment Plans, also known as drip plans. And so drip plans, like I mentioned, dividend reinvestment plans and they are exactly like what they sound. You're reinvesting your dividends and you're automatically doing it back into the same company that gave you that dividend. And what's really nice about this is it then allows you to take advantage of compound interest. Compound interest is when you earn money on the money that you earned the year before. And so you invest $1000 and then you make a $100 in dividends. And in year two you invest that money again, you're not really making money on your principal investment, but you're also making money on the interest that you earn the year before and that compounds and it continues to grow at an accelerating rate. And just to give you an example of how quickly this can accelerate, I've just pulled up a simple dividend calculator here. And so you've typed in the different factors here. So we're looking at an individual stock or buying a 100 shares at a $100 a piece. So we're investing $10 thousand and as an annual dividend yield of 5% and annual expected increase of 3%, a share price appreciation of 3%. We're investing our money for 20 years. We pay 15 percent tax. We get a dividend every quarter, just like most companies, and we are not participating in the drip plan here. So as you can see under the drip selection right here I am clicking on No, we're investing our money for 20 years. And when I click calculate dividends, gives us a return of $18 thousand after 20 years. So honestly, that's not a bad return. You made $8,061 after 20 years, but you did not participate in the drip program. And so unfortunately, you lost out on a little bit of money because had you participated in the program and reinvested those dividends back in, you would have been left with $41,157 with all of the exact same metrics, except with the drip program on. And so basically you're taking those dividends when they come in, you're reinvesting them back into the same company and you are accelerating your growth of your portfolio by making on money, on the money that you made from the last dividends, which is absolutely amazing. And it's just one giant snowball effect when it comes to how to set this up, a really depends on the platform and the brokerage say you are using most of the time when you create an account, you will be able to enroll into the Dividend Reinvestment program. Or if it does not come up when you create your account, just go to the frequently asked questions or go to the Help button and ask about a drip program or reinvesting your dividends. And you should be able to set it up very, very easily. But it is a platform unique and a platform specific process. So you will need to figure it out depending on what software you are using to buy and sell your shares. Now, couple of things you need to consider about a drip program number 1, drip investing can lead to a concentration in one position. So if you have one stock that just pays a ton of dividends and does extremely well over the next 20 years and you participate in the drip program, what may end up happening is that that one specific position in your portfolio, instead of being an equal 10% in a few years becomes 20, 30, 40 percent of your portfolio, and it becomes overweight compared to the rest of your portfolio and the rest of your positions. Now they're really simple way to just deal with that is to sell some of those shares by some of the shares in the other positions and rebalance your portfolio. But it is something you need to be aware of and something you need to consider. Most of the time though it is beneficial to participate in the program because it can save you on fees and commissions. And you can choose at any point to sell any of your shares and rebalance or take money out whenever you'd like. Now in the next lesson, we're going to start talking about how to set a goal for your dividend portfolio. We're gonna go through all the different variables and you're going to know everything you need to set an achievable goal for your portfolio will see you there. 14. Goal Setting: All right, everyone, welcome to Lesson 13. In this lesson we're going to talk about goal setting and I'm going to walk you through three different goals that you should consider setting as a dividend investor. Let's dive right in, okay, So your first goal when you're getting started in dividends should be to try and make $100 per year in dividends. So if you're just getting started, this should be your number one goal. And my recommendation would be to go out and buy five companies and try to Karen, can you lead how much money you would need to invest into those five companies in order to generate $100 per year in dividends. And just to give you an example of what this should look like here is exactly how I have done it. So I've invested into five different companies that everybody should be well aware of. Here's the current price of those shares, Here's the current dividend yield and the number of shares that I am going to purchase, and the position size that those number of shares will equal. And then the annual dividend at those shares to generate for me. And at the end of year one, I should have a $101 worth of dividends if I invest 3200 and $6 today into these five companies in these proportions. And so here's just an example of this exercise of what you should do in order to get started with your first five companies and your first dividend target. Now, once you've got that knocked out of the park, your second goal here should be to try and make $100 per month. So instead of a $100 per year, let's try and do it a $100 per month. And my recommendation here would be to try and build a portfolio of about 10 dividend stocks. And just as an example from one of our earlier videos, here was the example portfolio that I put together with 10 different stocks in five different industries, all with their dividend yield here. And if you had invested $31,578 into this portfolio, it would pay you almost exactly $100 per month. And so this should be kinda the next step that you want to get to. Is that a $100 per month milestone? Because at that point, all you need to do is just start scaling up and adding to these different positions. Now your third goal here should be to try and live off your dividends. This is my ultimate goal right now, and this is what I'm striving for. And me personally, I wanna make $10 thousand per month or a $120 thousand per year before tax. And I think I can invest my money at a 4% average dividend yield, and at that rate, a 120 thousand divided by 0.04. That means that I would need to invest $3 million in. So if I can build up a portfolio of $3 million and invest it at 4% yield, I can live off a $120 thousand per year for the rest of my life in dividend income. And that is what I am aiming for, that is my personal mission. Now, in order to get to that point, I've taken out a dividend calculator here. I will also link this in the resources and the project for this course, but it's really, really simple. So I started with $15 thousand an adding in a $1000 per month. I have my dividend reinvestment program on, and I'm investing for 40 years and that will generate $2.95 million for me to put into dividend stocks. Now, thankfully, I have a little bit more money than this. I know I'm investing a little bit more than a $1000 per month. So hopefully this comes sooner for me, but this is my path and my roadmap of how I'm getting to $3 million and then what I'm doing with that $3 million to generate a $120 thousand per year so I can live off dividends for the rest of my life. So that is goal number three. I've walked you through the other first 12 goals that you should have as you get into dividend investing. And now in the next lesson, I want to start talking about taxes because this is something that not a lot of people talk about, but it is important. So we're going to dive into it. 15. Taxes: All right, everyone, welcome to Lesson 14. In this lesson, we're going to start talking about taxes. And the first thing that I want to say is that your taxes will depend on what country you live in and what type of account you have. The other factor that's going to determine your taxes is where the company that you're investing in is based out of. So if I live in Canada and I invest in a Canadian dividend company and a US dividend company. Those two dividends are going to have different taxes. They're also going to have different taxes between me and you living in different countries and investing through different accounts. So there's a couple of variables. They're going to change your situation. And if you're looking for individual advice, you need to go out and seek a professional in your country that is familiar with the laws of where you live. Now in general though, here's just kind of a rule of thumb is that if you receive dividends in a regular investing accounts, if you just open a normal investigate account and then you invest into dividend-paying companies and you start to receive that money, you're probably going to have to consider that money that you're receiving as income. However, there are some accounts that you can open that our tax sheltered meaning that you have advantages and you don't have to pay as much tax when you receive dividends in those accounts. In Canada, those accounts are called the tax-free savings account, as well as the registered retirement savings plan in the United States, they're called the Roth IRA and the 401 k. And in the country that you live in, they may be called something different. But basically, these accounts allow you to save money and save taxes on the dividends that you receive. Now, if you're interested in calculating this and actually getting some real numbers here, all you need to do is go to Google and type in tax calculator for the country that you live in. And for me, I just wanted to, well, Simple.com, I'll put the links in the project as well. But all you have to do is type in the numbers that you want to deal with and it'll give you the after-tax income that you are looking for so you can understand how much tax you are going to pay. So in this example, if I live in Alberta, here in Canada, and I receive a $100 thousand in eligible dividends, I'm gonna pay just under $6 thousand in taxes and walkaway with 94 thousand. And so there's a variety of different factors that come into play here. The number one factors to country you live in. The number 2 factor is the type of account that you have. And then number 3 factor is the country where the company you're investing in is located. So those are the three main factors that you need to consider. And if you want to calculate your own tax after dividend income, go on to Google type in tax calculator, dividend calculator for the country that you live in, you should be able to find something very easily. Now, in the next lesson, we're going to start talking about a couple of alternative options to just individual stocks. We're going to dive into dividend ETFs, and then we're going to start talking about rates as well. 16. Dividend ETF's: All right everyone, welcome back to Lesson 15. In this lesson, we're going to start talking about dividend ETFs. Now if you're not familiar with the term ETF, that is no problem. It refers to exchange traded fund. That's what ETF stands for. And basically when we say ETF, what we were talking about is a group of stocks that trade as a single security. So it's kinda like buying one stock, but inside of that stock is like 10 or 20 or 30 other stocks, but it has a couple of benefits. So the benefit of buying an ETF is that you get instant diversification and position sizing with just one trade. Because when you buy an ETF, It's actually like buying 20 or 30 or 40 stocks, whatever is held within that ETF. It's kinda like the ETF is a basket with a bunch of stocks into it and you're buying one share in that basket or one share in that ETF. That's kinda how you can think about it. But the benefit of buying an ETF is a you get instant diversification and position sizing and only one transaction fee. And you can buy and sell at anytime just like a regular stock trade, just like normal stocks, but they represent ownership in a variety of companies. Now, there are a couple of drawbacks to an ETF. Number one is that you have no control over what stocks are in that ETF. You can choose to buy an ETF or not to buy an ETF. But if you choose to buy one, you have no control and no say over what is inside that ETF. And you can't really pick and choose or remove one at a time that just doesn't exist. There's also very small management fees associated with an ETF. Usually they're under 1%, which means however much money you put into it after one year, whoever owns that ETF is going to withdraw 1% of your funds as a fee for managing your money. And so That's how an ETF works. Now an example of an ETF that I think is a good option and that I fully support and then I think is a good place to start your research is something called the Vanguard Dividend appreciation, ETF. And if you look this up on any of your web apps or your computer or anywhere that you can see stalks, if you type in the ticker symbol V, G, that represents Vanguard Dividend appreciation, ETF. And if you just buy one share in V, it's actually like buying shares in over 268 different dividend-paying companies. Now the reason that I bring up Vanguard Dividend appreciation ETF, is because this is one of the largest dividend ETFs in the world, not by the number of stocks, but by the actual amount of money inside of this ETF, there's one of the most well-known ETFs out there and it's one of the largest CTFs in the world. So it's a very safe place to put your money. And it also pays out a dividend every single quarter. And if you dive into it, I'll put the link in the project resource here. But it's really, really cool because here are the top ten holdings inside of this dividend ETFs. So you can see exactly what you are buying into and exactly what you are holding. And then here's the breakdown by industry. So as you can see, they're fairly diversified between a variety of different industries and none of them make up more than 20% of their holdings. So as you can see, lots of positions, variety of different industries, well-positioned, very well diversified and with good position sizing, all with just one trait. And if you look at the results of this ETF over the last little while, it is done extremely well. So over the last one year generated a twenty-three point 64 percent return, 22% over the last three years, 17% over the last five years, and 14% over the last 10 years. And since its inception in 2006, it has produced a return of 10.4% on average per year. So this is a fairly safe investment with really good cash-flow and fairly steady returns, It's a pretty good place to park your money. However, if you're interested in doing some research and some other dividend ETFs, here are the ones that I would look at. Most of these are fairly large, fairly safe, and they're all a good place to park your money to generate some good growth for your portfolio and some good dividend cashflows definitely do your own due diligence, do your own research, but this is a great place to start. Now in the next lesson, what I want to talk about is something called a rate. It's sort of similar to an ETF, but it's in a different industry. And I'm going to give you everything you need to know in that video so we'll see you there. 17. REITS: All right, everybody, Welcome to Lesson 16. In this lesson, we're going to start talking about rates. Now, reads stands for real estate investment trust. And basically a reed is a special type of corporation that only invest in real estate in order to provide cashflow for shareholders. Basically, what they're doing is they're buying buildings and then renting them out to provide and generate cashflow to shareholders in the form of dividends. Sometimes those dividends are also called disbursements, depending on the country that you live in and when they come from a read. But basically what this is, is a company that has a couple of special rules and all they do is invest in real estate. They rent out that real estate to bring in money and they try and return that money to people that own shares in the rate. Now, the reason that reads are so unique is because they have kind of two separate rules that make them different than a regular corporation. And so number one is that a read is legally required to pay out somewhere between 80 and 90 percent of their income back to investors. That number depends on the country that to read operates in, but they're legally obligated to pay out a very large majority their income back to shareholders. So there is no board of directors that is deciding whether or not to issue a dividend like there is an irregular company in a read, there legally obligated to issue that money back to shareholders. Now, the second thing that makes reads very, very unique is that reads can pay investors before paying corporate tax. And this gives them a benefit because this allows them to pay a slightly higher yields back to investors. And I'm going to explain why right now. So here is our example of a normal corporation in a normal business and how they have to operate in. So let's say that Company XYZ, makes $10 million in profit in the year. Well, because they're a normal corporation, they have to pay normal corporate tax on the profit that they generate. And that corporate tax is usually somewhere around 21% after they pay that corporate tax. That means that they have $7.9 million worth of money that is leftover to give back to shareholders. And let's say that they decide to pay out 90% of that income back to shareholders. We talked about this as the payout ratio. 90% is a little bit high, but that's okay. Let's just assume that we're going to keep it the same for this example. And let's assume that they pay out 90% of their profits to shareholders. Well, because it already had to pay tax, they only have $7.9 million left, and 90 percent of that is $7.1 million, which means shareholders are entitled to $7.1 million worth of dividends. Now, that sounds pretty good until you actually compare it to a rate. And the rate has a big advantage because they can pay their shareholders before they pay tax. And so this is what it looks like for a rate. Company XYZ makes $10 million in profit. And because they can pay our shareholders before they paid tax, that is what happens next. And so they pay out 90%, the same number that we used in the last example. And they pay that out in dividends to their shareholders, which means the shareholders are now receiving $9 million instead of 7.1 in the last example. And then the company has to pay the 21 percent corporate tax on the million dollars that is leftover. And so when IT company classifies and becomes a read, it means that they are legally obligated to pay out a much higher amount of their income to the shareholders. But it also means that they can paled their shareholders but fate before paying corporate tax, which is a huge advantage. And this is the main reason that reads can sometimes pay a much higher yield. And so if you see a rate that is paying a yield above 10 percent, that is not necessarily a red flag like it would be in a normal corporation. That could be a sign of a very healthy and well-performing rate. And so here's an example of that. And here's an example of actually the largest reach in the USA. So this is not a gross stock or a small company or something that just popped up or having 11 percent yield is like a one-off thing for them. This is the largest reach, one of the largest property managers in all of the USA. So the company name is called annuli capital. That ticker symbol is nl y. So you can go out and buy this today. The price as I'm filming this is $7.98. And this company owns $87 billion in assets and they're currently paying their shareholders and 11 percent yield. And it's because they can pay out the shareholders before they have to pay corporate tax. So they can usually pay o to higher yield. Uh, like I said, this is one of the largest reads in the USA. And if you wanna do your own due diligence and research can go to annually.com. But if you're looking for other reads to check out, maybe in different spaces are different industries or commercial property or industrial office property, whatever you are looking for, there is a rate that is specific to that type of real estate and that type of investing style. So you can find a variety of them. Here are some of the largest reads in North America, so I highly recommend checking them out and kind of finding one that is close to home that you can understand and in an industry that you like. So if you think offices are going to fill up over the next few years, maybe you go out and buy an office rate if you think warehousing space is the next big thing in your area, maybe go out and buy a warehousing vt. Now that's about it for real estate in this course, but we will see you guys in the next video. 18. Conclusion: All right everyone, it looks like we have finally reached the conclusion of our course. And I just want to leave you with a couple of last thoughts starting with our course summary here. The first thing you need to do when getting started in the markets is to set a goal. And the second thing you need to do is build a plan to reach that goal. That is the part that a lot of people forget. They set lofty goals and lofty expectations, but they don't build a hard concrete plan to get there. That is what you need to do. You can do it in an Excel sheet, you can do it on a sheet of paper, whatever it is, build your gene portfolio, and then work every single day to reach that goal and make sure that you are investing consistently and you're investing often, because that is the best way to build your wealth up overtime. Now if you've got any value out of this course, please. If you could do just one thing for me, the only thing that I would ask is to leave a positive review about your experience in the course and please leave some feedback or some information for me about how I could do it better, how we can make this course more valuable, and how I can improve it over time. I would sincerely appreciate it. And if you're interested in reaching out to me or staying up to date and following my journey that you can reach out to me on social media as I highly recommend tuning in and subscribing to my YouTube channel, I am posting almost daily videos with instruction and news and insights about how to invest your money into the markets. I'm also pretty active on all of the other social media channels. And if you want to see what I am investing in on a daily basis and when I'm actually putting my money into, I also run a discord chat that is where you can see exactly what I'm doing, what charts and looking at what my analysis looks like. And the link for that is underneath all of my YouTube videos. But if you're interested in staying on the Skillshare platform, then definitely check out the other courses that I have here on the platform because they will walk you through almost everything you need to know when it comes to the world of finance, including how to build a better credit score, how to get started in cryptocurrency, how to learn a little bit more about swing trading in the stock market. And then if you want to get into the more advanced topics, you can get into personal finance and options trading for beginners. So I have a wealth of knowledge, a wealth of resources here on the Skillshare platform, and it is completely free for you, and I would love to share it with you. And lastly, I want to leave you with a quote. This is a quote that has stuck with me through the years. It is always in the back of my mind and it's always something that I think about when I'm getting invested into the markets. And this quote says that in the short-term, the stock market is a voting machine. And in the long-term, the stock market is a weighing machine. And this quote by Benjamin Graham, he was the mentor of Warren Buffett. And basically what this quote is saying here is that stocks are going to go up and down over the short-term and that's usually caused by influence, it's caused by opinion, it's caused by what is the height at that time or what is the most popular at the time. But over the long-term, everything comes back down to the fundamentals, everything comes back down to the cashflow, and everything comes back down to how good your businesses. And so don't get caught up in the short-term voting, get caught up in the long-term wing. That's what dividends is all about and that's my last piece of advice for you. Thank you so much for everything. Thank you so much for taking this course. Please remember to leave a review and we'll see you soon.