Do investment trusts have to pay dividends?

How much money to invest to live on dividends

Within dividend funds there are two very different categories: payout funds and accumulation funds. In the former, the dividends collected by the vehicle are delivered periodically to the owners of the fund, so that they get a periodic income. The disadvantage of this format is that the individual has to pay taxes on this income. The payment of that income can be monthly, quarterly or annually, depending on the fund.

“That is why we created the Tu Paga concept, which allows you to sell part of the fund portfolio to receive a monthly income,” explains Unai Ansejo, CEO of the advisory firm Indexa Capital.

The investor profile also counts: investment in pay-as-you-go funds has become very popular among retired people who want to supplement their pension. Accumulation funds have sold a lot because this type of shares have been in great demand and have achieved very attractive returns.

Investing in dividends

Another difference compared to the stock markets lies in the payout terms. Indeed, dividends are paid out over a longer period, on an annual or half-yearly basis. But the innovation established in this investment model is that it ensures returns with fixed income, through the payment of the coupon on certain bonds or debentures, even though these are the types of funds with the most modest profit margins.

They rarely exceed the 3% barrier, but provide greater guarantees in operations and are aimed at a very well-defined client profile: those who do not seek excessive risks and have a greater predisposition to build up a medium- and long-term savings portfolio. In any case, it acquires greater relevance due to the fact that we are experiencing a scenario of low profitability in all fixed income financial assets.

Read more  Which accounting principle states that a company should record revenues when they are earned?

Almost all fund managers include a product of these characteristics to boost their penetration among clients. Schroder European Dividend, JPM Europe Strategic, M&G Pan European Dividend or BGF European Equity Income are some of the examples that highlight this trend.

Best Dividend ETFs 2021

Investing in dividends is one of the oldest and most effective strategies in existence. In this article we offer you the keys so that you can approach it. Everything you need to know about investing in stocks with dividends is concentrated in these lines…

Such is the case of the growth strategy, in which dividends are sacrificed in favor of obtaining a greater amount of reserves, for the purpose of establishing expansion plans. However, investing in dividends is an investment in the purest sense of the word, since we do not focus on the difference in share price.

It is a strategy as simple as finding an attractive business that offers good profits to be distributed among its shareholders and becoming part of this business as a partner. By contributing capital through the purchase of shares.

But there are still many questions in the air. We will address these questions so that you can have in your knowledge everything you need to know about the dividend investment strategy.

Distribution funds

Dividends are payments made by a company to the owners of that company’s stock. They are a way for companies to distribute income to investors, and one of the ways investors get a return on their investment in shares.

But they are not to be confused with dividends. Not all stocks pay dividends. If you want to live off dividends, you must first specifically choose dividend stocks when you start investing.

Read more  What is so bad about Fresno California?

The ex-dividend date is extremely important for investors. Investors must own the stock before that date to receive the dividend. Investors who buy the stock after the ex-dividend date will not receive the profits that the stock has been earning. Investors who sell the shares after the ex-dividend date are still entitled to receive the dividend, as they owned the shares prior to the ex-dividend date.

Aside from that, if you are considering dividend investing and do not want to invest in individual dividend stocks, you should also know that you have the option of investing in dividend mutual funds and exchange traded funds. These funds hold many dividend stocks within an investment and distribute dividends to investors in those holdings.