Getting Started with Dividend Investing
Educational information about dividend investing basics for those new to the NZ share market. This guide covers concepts only - not personalized advice.
Important Disclaimer
This is educational content only, not financial advice. We are not a Financial Advice Provider (FAP) or Financial Service Provider (FSP). All investments carry risk, including the risk of losing money. Share prices can fall as well as rise. Dividends are not guaranteed and can be reduced or eliminated at any time. Always conduct your own research and consider consulting a licensed financial adviser before making investment decisions.
Key Dividend Concepts
Dividend Yield
The annual dividend payment divided by the share price, expressed as a percentage. A 5% yield means you receive $5 in dividends annually for every $100 invested (before tax).
Imputation Credits
NZ company dividends often include imputation credits, representing tax the company has already paid. These can reduce your personal tax liability on the dividend income.
Ex-Dividend Date
The date by which you must own shares to receive the upcoming dividend. If you buy on or after this date, you won't receive that particular dividend payment.
Payout Ratio
The percentage of company earnings paid out as dividends. A lower ratio may indicate more room to maintain dividends during difficult periods, but this isn't guaranteed.
Things Beginners May Consider
These are general factors, not recommendations. Your situation is unique - consider seeking professional advice.
Example: Larger NZX Dividend Stocks
Stocks with 3-6% yields and larger market capitalizations. This is not a recommendation list - it demonstrates how to filter stocks by certain criteria. Larger companies are not necessarily safer or better investments. Always do your own research.
A Note on High Yields
Very high dividend yields (often 8%+) can be tempting for beginners, but they often indicate elevated risk. High yields may result from:
- A falling share price (which increases the yield percentage)
- A dividend that may not be sustainable
- Company financial difficulties
This isn't to say high-yield stocks are always bad, but they warrant extra research.