Money matters. I wish that I knew tall when I was an investor, a business owner and a money educator, understand it better compound international budget investment to recover from debt. No one explained to me that your money to align us at work is about normalizing the conversation. I Hey everybody. It's Sarah here, investor, business owner and money educator. Today's episode of The Money Mechanics podcast, we're going to be talking about dividend stocks now. Dividend stocks, if you've read the book, this will come as no secret to you, but dividend stocks are one of my absolute favorite aspects of investment, because dividend stocks allow you to earn genuine passive income. Right now, I pull a face. Those of you watching on YouTube right, you'll know I'm pulling a face about passive income, because you see online all of the time how to earn passive income through running a business. That's not passive. How to earn passive income from doing a thing? Well, that's not passive. Then is it passive? The true definition of passive is you do nothing and you get paid, right? You get paid regardless of whether you wake up and do the thing with dividend stocks. You buy a stock that is a dividend paying stock, and I'm going to explain this to loads more detail, and you get paid for ownership. That's it. You've got run the company. You haven't got make any decisions around how it's run. You haven't got to think about peopling with any of the management team. You haven't got to do any of that stuff. All you got to do is set up an account, invest in the stock, and you will get paid your passive income. So what is a dividend stock? So a dividend stock, in its simplest form, is a company that chooses to distribute profits to shareholders. Okay, so there's a few different ones. I mean, there's loads of different ones. Actually, there's dividend stocks, there's dividend funds. We'll dig into this. Coca Cola is a dividend stock. ExxonMobil is a dividend stock. Ford is a dividend stock, Pfizer dividend stock, right? And what this means is that when you own a share of Coca Cola, you own that asset. You own that share. So let's say that my fist is the share you own that and because you are a shareholder in the company, you get paid a payment every single quarter for being a shareholder in the company. They're distributing a percentage of their profits out to their shareholders. Now, when you have a limited company, many of you watching this will have your own limited companies in the UK. Some of you won't, and that's absolutely fine as well. You'll have heard the term shareholder, probably, but you'll have related it to you owning the shares in your own company, right? So as a shareholder, at the end of the year, if your company's made a profit, you are allowed to pay yourself a dividend, okay? And that's exactly what's happening here. But with dividend stocks, obviously, these are giant global corporations. In most circumstances, you don't have to actually run the company. You don't have to be involved in decision making. You don't have to do anything at all. You become a shareholder. They run it, they do their thing, and then you get paid as a shareholder. Now, one of the most famous examples of this, which will help to just concrete into your minds, why this is a great thing, Warren Buffett, which many of you will have heard of Warren Buffett is, you know, he's called the godfather of investing. He's one of the most famous, if not the most famous investor on the planet, as we speak. And he is one of the biggest shareholders or his company. Berkshire Hathaway is one of the biggest shareholders of Coca Cola stock. So they own a big chunk of Coca Cola stock. Now, Warren Buffett, I think it was in 2020 I'm not sure if it's 2020 20 and 21 but a few years ago, Warren Buffett was paid 400 million passive income from shareholder dividends for just simply owning Coca Cola stocks. He doesn't run the company. He doesn't contribute to management decisions. He takes on no risk. He takes on no management of team. He doesn't do any of those things. His business was paid 400 million in passive income for owning the shares that he owns in Coca Cola. Now, if you think about the guy that's actually running Coca Cola, the CEO of Coca Cola, he didn't earn anything like 400 million, and he is certainly not working passively to run the company. So this is why investing in the company, not running the company, is sometimes way better. It's hands off. It's simple. You don't have to understand how to run a giant corporate company. You just need to invest in them. So Coca Cola is, is an example. There are loads and again, this is not investment advice. Absolutely not. I'm not saying you must invest in Coca Cola, or you even should invest in Coca Cola. What I'm saying is this is just an example of a dividend stock that's available. There's loads and loads and loads of them. Now I talk about this in the book. It's page 143 there's actually a 10. Table in the book that shows you all of the different, well, I say all some of the different stocks and shares that I invest in. It shows the dividend yield that they pay and what that would relate to in terms of your passive income annually. So you can go and check that out. If you haven't got a copy of the book, the link is in the comments, or the link is in the show notes, if you're listening in the beautiful part of dividend stocks is the lack of requirement of energy, right? This is why it's my absolute favorite. You just don't need to do anything. Now, when you look at dividend stocks, you choose them. The way you choose them is something that can be quite exciting. So for me, I have like I've selected my payout. I've selected my stock based on their payout patterns. Usually what happens when you buy a dividend stock, you will be paid quarterly. Now, some of them are annually. Some of them are six monthly. They're very rarely monthly, but most of them pay on a quarterly basis. Now, of course, they go up and down based on the performance of the company. So you know, if their performance has been excellent and they've made lots of profit, your percentage will be higher than if they've made less money, because your percentage of a lower amount will be less. So dividend amounts are not always predictable, because they change all the time, but what is predictable is the payout patterns that they run. So one of the things that I'm in the process of setting up, I'm not quite nailed it yet, but I'm working on this is we're selecting dividend stocks that have a payout every single month of the year. Now the ambition with this is that, basically we have enough invested. And again, we talk about this all through the book, all through this podcast we've talked about it. What we're trying to get to is our fuck you money number, right? And fuck you money just as a little reminder, in cases, the first episode you've ever listened to is enough money invested at a percentage that pays you your income without you having to physically go to work and do anything. You've got enough money invested that you get your annual required money purely from investment income. Well, if you can have a monthly pay day every single month from owning dividend stocks, you don't have to work. If you can get that number invested to enough that it's paying you monthly your cost of living. So if you know that you need 3000 pound a month, let's say, Well, you can set yourself a goal to get enough money invested into a dividend stocks to be paying you a dividend on a payout pattern that is monthly, so that you can live on your dividends. Now this is again, it's not investment advice, but when you think about the ambition that most of us have when it comes to investing, it's so that we've got an easier financial life. We're trying to, like, just chill our boots a little bit. We all work super hard. What we want to do is soften that requirement to always be hustling, always be working. And we also want to give ourselves that freedom of choice to do things we want to do, versus having to do things because we can't afford not to. Right? Well, if you can set yourself up and get yourself to a point where you've got enough dividend stock investments that your shareholdership in all of those are paying you passively for owning those shares, you can, in fact, replace your job income through your investments. It takes time to get to that point. Of course it does. You know, the percentages aren't always super high, but you can work your way to having that goal. And like I said, I haven't quite nailed it yet. We're getting to that point, and we're trying to replace my mind and my husband's actually monthly living expenses through purely dividend stock investments. That's one of our goals, and you can totally do that yourself. Now. How do you do it again? There's lots of different ways, but for me, I use a tool called free trade. That's one of the one of my favorite investment tools. I'm going to put a link with this video as well. And for full transparency, it's absolutely an introduces link. So if you use it, you'll get a free stock, and I will also get a free stock for introducing you. So what it means is, if you set up an account, you put 50 pounds into it, that's a starting point. Gives you a starting point to start actually doing some investment. You can choose what you put it into. Free Trade will actually gift you a stock worth between 10 and 100 pounds. Free Money always a good thing. And for again, for full transparency, they will also gift me a share for introducing you to the platform. What that means is you can then go onto your phone at any time, and I can jump onto here now and open it up. And there's a section that allows you to look at what dividend stocks and dividend funds are currently available for you to buy shares in. And so it's super accessible. It's really quick. I can go and in literally that 10 seconds, I'm now at a list of dividend stocks and dividend funds that I can invest. And you can then look at the dividend yield. So the dividend yield is a percentage, and often the higher percentages is what people go for. They go, I'm just gonna be the highest possible percentage, because that's gonna pay me the highest possible money. In principle. That makes sense, but it's not quite accurate, because you have to take into account the context of that business, how it's run, you know, the management team, you know, is it a well performing company? You know, like a Coca Cola is pretty defensive. It's, you know, we all know Coca Cola. We've heard of the brand. We know that they're, you know, they're not really going anywhere they could, you know, there's always risk involved, but they're sticking around right? Whereas, if it's like a brand new company, you'd This is a bit less known, a bit more risky, maybe a little bit more volatile. So you can choose the higher dividend yield if you want, but you might want to actually diversify that even a little bit and just go for maybe one with high dividend yield, one with a midpoint, one with a low because generally the lowers lower risk. So like Coca Colas is 2.92% dividend yield. There's a company called Altria, which is a I do invest in them, and actually I was one of my first ever investments, and I invested in them purely because their dividend yield was super high. Um, eight point 12% 8.12% which, when compared with Coca Cola, it feels like that's a better option. However, the share price and the performance of the company is not outperforming Coca Cola. So a lower amount of a bigger number is often better than a higher amount of a smaller number. So you have to look at those yields, but also take into context in your decision, what's the actual cost of the share itself and what's the performance of the business, if that makes sense. So I totally invested in Altium, because I was learning right in the early days. I said, Oh, that looks great. I'm gonna get paid loads of money, but when compared with other lower dividend yield stocks. It doesn't always pay more than these ones. Again, it's just about doing your research and learning. Often, when you set up a free trade account, you'll get a free share that is a dividend paying share. So I've got loads of because I've introduced a few people to the platform. Now I've got probably about 15 shares that are dividend shares that pay me dividend for a free share that I got from free trade, which is amazing, because totally passive income. And again, if you use mine, and then you introduce other people, you will get a free share from those people as well. So we love a bit of free money, right? So dividend stocks. What I wanted, really on this episode. It's a short and sweet one, but I wanted you to really understand the context of what it means, where and how you can access them. And I would say free trade. There are other platforms, Hargreaves, Lansdown trading, 212, eToro. There's loads of them. There is funds and there is stocks. We'll do an episode on funds and stocks, and the differences funds is just a bit more diversified, because you're buying into a group of companies, rather than you buying one single stock in a Coca Cola, for example. You use the platform. You buy your dividend stock, and then you sit and you earn your money passively for as long as you own that share. If you sell it, you sell it, you have to get paid anymore. But if you keep it, and you keep it for the next 1520, years, 30 years, 40 years, you'll be paid quarterly, and that will increase over time. When you couple that with compound interest, which we talked about in the last episode, you can use what's called a drip, which is your dividend reinvestment plan, DRI, P, all your dividends that you're paid, you reinvest it back into the dividend stock that you own, or reinvest it back into a dividend stock in some capacity. It doesn't always have to be the same one, but you reinvest that money you're earning. Your compound interest is 10x because it allows you to take the free money that you're earning, invest it into your capital as well, and an interest on your interest and interest on your dividends, which is just exceptionally great for your bank balance, that's dividend stocks. Hopefully that's explained. If you've got any questions at all, comments, drop me a DM. Talk to me on whatever platform you want. If you're on YouTube and you are watching, please subscribe to the channel. Please hit the like button so that we can spread the word. And if you're listening on audio only, please leave us a five star review so that we can spread the word there. Thanks very much for listening. I'm Sarah Poynton Ryan, and this has been the Money Mechanics podcast. You.