It can be a little tricky to understand dividends, stocks, and the stock market in general. Add the online methods into the mix and things just get even more confusing!
But don’t worry, we are here to help you out with this guide on how to buy dividend stocks on Robinhood. We will explain everything from the basics of dividends and the Robinhood stock market platform, as well as why you should invest in it.
With that being said, let’s dive right in!
What Are Dividends?
A dividend is a share of earnings that a company pays its shareholders. This may sound simple enough, but there are actually two types of dividends: regular and special.
Regular dividends are paid out every quarter or year, while special dividends are paid out at any time. Companies use these funds for many different purposes such as buying back their own shares, repaying debt, paying off other investments, etc.
How Do You Buy Dividend Stocks?
Buying dividend stocks is very similar to buying individual stocks. The only difference is that instead of going through an exchange like NYSE, NASDAQ, or AMEX, you go directly to the company itself. There are several ways to do so. One way is by using an online broker.
These brokers usually offer commission-free trading, which means no fees when buying and selling your stocks. Another method is to open up a brokerage account with TD Ameritrade (NASDAQ: AMTD), Etrade (NYSE: ETR), Scottrade (NASDAQ: SCOT), or Fidelity (NYSE: FID).
All four companies offer commission-free trades, and they also have free educational resources available to investors who want to learn about the stock market.
If you decide to purchase a stock yourself, make sure to research the company first. Find out if the company has been around for long or if it is new. Also, check out the competition within the industry.
Is there another company that offers better products or services than yours? Researching all of this information before purchasing stock will save you money in the long run.
Once you have found a company you would like to invest in, you need to determine whether, or not, it makes sense to buy the stock.
If you find that the price is too high, then you might want to wait until the price comes down. However, if the price seems reasonable, then you can proceed with the purchase.
Once you have purchased the stock, you will receive a certificate showing ownership of the stock. Keep track of your certificates and keep them safe. They are important documents to show to tax preparers and financial advisers.
Now that we have an idea as to what dividends are and how to invest in them, let’s take a look at Robinhood and how you can buy stocks with the company.
What Is Robinhood?
Robinhood is one of the most popular apps for buying and selling stocks. The app was created by former Facebook employees and allows users to trade stocks without having to pay commissions.
Users simply log onto the website or download the mobile app and start making purchases. Once you have made your initial investment, you can sell your stocks whenever you wish.
Robinhood does charge a small fee per transaction, however, the amount is negligible compared to the cost of traditional brokers.
For example, Robinhood charges $0.15 per trade, while Charles Schwab charges $4.95 per trade. In addition, Robinhood doesn’t charge any annual membership fees.
The best part about Robinhood is that it is completely commission-free. When you use Robinhood, you won’t be charged any fees when you buy and sell stocks.
How Does Robinhood Work?
The process of buying shares on Robinhood is simple. First, you must create an account by providing some basic personal information. This includes your name, email address, phone number, and other contact information.
Next, you will choose from one of three different types of accounts. You can either select the “Individual” option, the “Estate” option, or the “Trust” option. Each type of account provides its own set of benefits.
Individuals
Individuals can buy stocks directly from the site. They don’t have to deal with brokers and the process is much simpler.
Estates
Estate accounts allow individuals to manage their investments after they pass away. It’s a good choice for people who plan on leaving their assets to family members.
Trusts
Trust accounts are designed specifically for those who plan on passing their wealth to children or charities. With trusts, you can easily establish rules for how your funds should be managed after you die.
After selecting which type of account you want to open, you will be asked to provide additional details such as your Social Security Number and bank routing numbers. Once you have provided all the necessary information, you can begin investing!
You can deposit money into your account using debit cards (Visa, MasterCard, American Express) or credit cards (Visa, Discover). Deposits are processed instantly and there are no minimum deposits.
You can also transfer money between your Robinhood account and your bank account. If you already have a checking or savings account with another bank, you can link your Robinhood account to it.
Once you have deposited money into your account, you can then purchase stocks. Remember, you can only buy stocks through Robinhood if you are a resident of the United States.
When you are ready to sell your stocks, you can do so at any time. All transactions are handled automatically and there are no fees associated with them.
How To Buy Dividends on Robinhood?
If you decide to invest in dividends, you will need to sign up for the Robinhood Dividend App. After signing up, you will receive a confirmation code via text message. Enter this code into the app, and you will be able to access your dividend’s portfolio.
Dividend Portfolio
The first thing you will see once you log into the app is your dividend portfolio. Here, you can view your holdings, track your performance and get real-time updates.
Trading History
On the left side of the screen, you can find a list of all of your trades. You can click on each trade to learn more about it.
Reports
There are several reports available within the app. These include:
Portfolio Performance Report
A summary of your overall investment performance over a specified period of time.
Income Statement Report
An overview of your income statement over a specified period of years.
Balance Sheet Report
A snapshot of your balance sheet at a specific point in time.
Account Summary Report
Provides a detailed look at your account balances and activity.
There are also two tabs located at the bottom of the page that allow you to view your dividends history and your dividend’s portfolio.
The Robinhood Dividend app is free to use, but does require an initial setup fee. This is $10 per month ($1.25/month), which is waived when you make your first transaction.
Robinhood Dividend Fees
As mentioned above, Robinhood has a monthly maintenance fee of $10. However, they waive this fee for the first year you hold your account. After one year, this fee reverts to its normal rate of $1.25 per month.
As of right now, Robinhood charges 0% commission on stock purchases and sales. In addition, they offer a flat $0 trading fee on all other types of investments.
Final Thoughts
When it comes to investing in dividends on Robinhood, there are many different ways to go about doing so.
However, one of the best options is by purchasing shares directly from the company itself. This way, you know exactly what you are buying, and you don’t have to worry about potential stock price fluctuations.
Hopefully, our guide has helped you on your way to becoming a successful investor.
