How I’m Investing My First 500USD - 5 Dividend Stocks I'm Buying Now

If you had told me almost 5 years ago that in the future I would be investing in the US stock market... I wouldn’t have believed you because I was so broke that I couldn’t even pay rent. But here we are, and I want to share that journey with whoever is watching this and feels like it might be impossible for them because it’s not.

There is also a video on this topic, so feel free to check it out:

While yes, I know that 500USD is not a lot of money, it’s still an amount that I would have thought impossible for me to invest even just a couple of years ago. So I’m going to be talking about:

• What exactly are dividend stocks
• Simple things to consider when buying these stocks
• Why I’m personally purchasing these types of stocks
• And which stocks I am buying

So let’s get right into it.

What exactly are dividend stocks

Ok, so first things first, what exactly are dividend stocks? In very simple terms, when you buy a stock of a company, you are the owner of a small part of that company, and usually when a company has been established for a decent amount of time and they have a very good business and make a lot or some extra money they can decide to go like “mmmm, let’s give some of this money to the owners of the stocks”. So, they share some of the cash profits with the owners of the stocks. That money that you receive for owning the stocks is what is called a dividend. So, any stock that pays you money for owning it, is a dividend stock. How much do they pay you? Well, that depends on the company really, it’s usually a percentage, but that percentage can change and it’s entirely up to the company to decide.

Simple things to consider when buying these stocks

• Because in essence dividends are the profits of the company being given to its shareholders, you should look for a company that has a good history of actually generating profit. That means, that at least they are not losing money in their business. Having that said, the way that businesses works are weird, sometimes a company will take on debts so they can re-invest that money into different projects that are under development and whatnot. So, taking a look at the history of the company overall can be a good indicator and help you decide if it’s a safe-ish bet to invest your money into that company.
• The dividend YIELD is the amount of money the company pays you every year for owning a share of their stock. This number is expressed in a percentage. But they are paying a percentage of exactly what? They take the price of their stock let’s say it’s 50 dollars, and they say “we’ll pay you 5% of 50 dollars annually for owning this stock”. This is why the yield can change as the price of the stock changes, so the companies can better adjust and maintain the dividend payments. If the same stock goes up A LOT they might not be able to pay the same 5% for each stock that you own, if the stock is worth 5000 dollars and 5% of that is 250 dollars.
• Did you know that you can own A FRACTION of a share? That’s right. This is something that I would have liked knowing a couple of years ago and maybe even before that. It’s entirely possible for you to own a small part of a company’s stock if you don’t have enough money to buy the entire thing. This is especially helpful when you want to buy stocks like Amazon that are ridiculously expensive right now. I personally find that this is really encouraging because you can start building your efforts towards generating your own wealth and generating passive income in the form of dividends. Granted it wouldn’t be much, but investing 50 or even 20 dollars every month into the market is better than investing nothing at all, and the earlier you start the more chances that you have for your money to grow along with the market and generate compound interest in your favor.
• Investing in dividend stocks is a great way to start generating passive income, HOWEVER, you have to choose very carefully the companies where you invest. Don’t let yourself be sweet-talked into buying a stock ONLY because it has a very high dividend yield. You have to look at the quality of the company that you are investing in as well. Part of the appeal of investing in dividend stocks is not just the dividend payouts, but that also your initial investment can grow as the price of the stock goes up. But the price of the stock can also go down. Price fluctuation is normal in the market, but most companies with a very strong business will eventually go back up, so try your best to avoid very volatile companies whose stock might go down and never go up again.

Why I’m personally buying these types of stocks

Ok, so moving on to why I’m personally buying these types of stocks. For the past year and something-something, I have been consuming a lot of content surrounding investing and financial education as a whole. And as you might have guessed if for some reason you watched my video talking about cryptocurrency, I started investing in crypto because it was the most accessible way for me to decide “ok, I’m going to start investing”. But around all of the content that I consumed one of the biggest things that people always recommend is diversifying your investments. This basically means, don’t put your money in one single place because you never know what the future might hold.

And I have personally found this to be true in more than one aspect of my life. My friends might tell you that I am a workaholic because I, most often than not, have more than one job. And this is not because I particularly like filling my time with work responsibilities, but because I have always felt a sense of security in having more than one source of income. It not only allows me to probably save more money than I would be able to if I had just one job, but it also gives me the reassurance that, if I ever saw myself out of one of those jobs for whatever reason, I wouldn’t be completely out on the streets. Being an immigrant and having virtually no backup plan or family to support me if I were ever unable to pay my rent or my other commitments, financial stability is one of the biggest sources of stress in my life. As it is for many of us, of course. But it’s more present to me than almost anything else in my life.

But everything I have done so far has actively traded the amount of time that I can dedicate to something with the amount of money that people are willing to pay for that time and attention. And as we all know, that can only take me so far and I will only be able to dedicate time of my day to working for so long in my life. Investing money into dividend-paying stocks is essentially using my money so that it generates more money for me, without me actively having to also invest time and energy into it. The idea behind investing in these types of stocks is that you can eventually invest enough so that every month or every quarter you receive money that would be equivalent to a monthly paycheck and you would be able to pay for your living expenses with that money, without even having to sell your investments. Granted, the amount of money that I would need to actually LIVE from the dividends I would get paid is a ridiculous amount of money that at this point in my life I can’t even dream of ever having, but I will not let that stop me from investing as much as humanly possible while still covering my needs and living a good life.

If there was ever something that migrating taught me, it was that no amount of saving is TOO LITTLE money. Even if all you can do every month is save 20 dollars in cash under your mattress, save those 20 dollars. You might not have an emergency every month, so those 20 dollars might just stay there. But when you DO have an emergency, those 20 dollars might actually be 200 extra dollars that make all the difference.

So yes, I’m investing in these stocks with the hope that they can actually generate some money for me, without me having to actively work for that money.

Which stocks am I buying?

Ok, so I will be the first to say that you should not AT ALL take anything that I am about to say as financial advice, because I am a very early beginner in anything that regards investing, and I have very limited knowledge and understanding of the market as a whole. Because of that, I am only investing money that I KNOW I won’t need in the near future, because I am comfortable with either losing this money or just holding on to the stocks I buy until it makes sense to sell them. But this is MY PERSONAL approach and you should not AT ALL take it for solid advice.

Having that out of the way, the first three stocks that I am buying are Coca-Cola, 3M, and Johnson and Johnson. And the reason behind this is very simple. Because my knowledge of the market as a whole is so far still very limited, I don’t feel comfortable investing in very risky companies that are still very well under development and have more volatile activities. And these three companies have A LOOOONG history of being successful businesses, so it makes me feel comfortable and secure enough that while these are not companies with stock prices that will suddenly go to the moon, they will steadily and surely payout their dividends and grow with time. These three companies are also known as something that is called “dividend aristocrats” which basically means that for at least the past 25 years they have not only paid their dividends without any issues whatsoever, but they have also increased their dividend base. And all three of these companies have a record of more than 50 YEARS of doing just that. (3M 63 years, Coca-Cola and Johnson and Johnson 59 years). So yeah, it makes me feel pretty confident investing in them.

The other two companies where I am investing right now are Verizon and JP Morgan. And the reason that I am investing in these two companies is also very simple, I don’t believe I am very knowledgeable about their activities but I know that they both have a long history of having a successful business model, and their dividend yield seems to be very sustainable for their shareholders. JP Morgan is also one of the largest if not the largest bank in the US, and they were not only able to get through the 2008 financial crisis but also acquired more assets during said crisis. Which makes me feel pretty confident investing in them as well.