How to buy the best dividend stocks in Canada?

Highlights

• Stock market dynamics are complex and volatile, which means that even a single unfavorable news can crush the market sentiments
• Dividend-paying companies usually have steady stock performances due to low volatility rate underpinned by expanded business operations and sound public image.
• Investment in dividend stocks can grow in the long-term scenarios due to the power of compounded gains.

Dividend stocks generally belongs to reputed companies known for regular dividend payouts, which is a plus point to consider if you are a new investor and just stepping into the stock market world.

Investors who seek dividend stocks often do so as these generally possess the capability to withstand tough market situations due to their well-established business presence.

However, stock market dynamics are complex and volatile, which means that even a single unfavorable news can crush the market sentiments. Although dividend stocks are likely to live through tough economic situations, that does not mean that they remain completely unaffected.

Also read: 3 TSX dividend stocks to buy as the year-end approaches

Hence, investors should mind the following points while taking investment decisions for any dividend stocks.

1.    Research

The first step to investing in any stock is to dig into the company’s financial statements. A study of its financial health for at least the past five years could be considered to judge its stability and soundness.

This information can also help you understand the company’s year-over-year (YoY) improvements or declines, which can help you gauge its chances for surviving future market fluctuations.

In addition, in case of dividend stocks, one should also look at the company’s past and current dividend payments to compute the relative growth rate, which can help investors in making correct dividend expectations over time.

2.    Stock performance

Apart from financials, one ought to look at a dividend-paying company’s stock price movements, which can help in deciding the right dividend stock for you.

Dividend-paying companies usually hold a steady stock performance due to low volatility rate underpinned by expanded business operations and sound public image.

However, a thorough study of a stock’s past and current performance prices can help you estimate its future return capabilities. For instance, if a dividend stock is deeply undervalued at the moment while its financial and fundamentals are sturdy, its price can eventually rise to catch up.

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3.    Dividend payouts

If you are looking to make some passive income, dividend stocks can be an option to explore.

Dividends on stocks can be paid on a monthly, quarterly, half yearly or annual basis depending upon the company’s dividend policy.

Furthermore, dividend stocks can deliver notable returns when held for long term.

Also read: 2 off-the-radar TSX dividend stocks to buy 

Investment method

Traditionally, stocks were purchased through brokers in exchange of brokerage fees. But with technological innovation and upgradation, the stock world has also evolved.

Today, investors are just a few clicks away from buying and selling stocks through online trading platforms that enables them to transact stocks on a real time.

However, its is crucial to calculate the costs of the investing method to know which one is most effective and suitable for you.

Bottom line

Dividend aristocrat companies are often considered to be the most reliable and trusted investment options by investors. Investment in dividend stocks are also commonly expected to see significant long-term benefits due to the power of compounded gains.

Also read: Cyber Monday 2021: 3 TSX stocks to buy ahead of time

This compounded power, however, are not likely to work for investors who have short-term investment goals.

That being said, one should understand that dividend stocks, like any other, are exposed to multiple factors surrounding stock market, which can affect their daily or weekly performance. Hence, while analyzing dividend stocks, one should keep in mind the long-term picture.