Payments on dividends

As with all gains from capital investments, shareholders must also pay tax on dividends. Although people often speak of "dividend taxes", in fact this is the final withholding tax. Income from dividends must be declared in the income tax return.

Invest strategically and receive high dividends

If you buy shares, you can use various strategies to keep dividend payments as high as possible. One widely used strategy is the so-called "Dogs-of-the-Dow" strategy.

The idea behind the Dogs of the Dow strategy

This particular investment strategy was developed by Michael B. O'Higgins. He published his ideas in a book called "Beating the Dow", which was published in 2000. O'Higgins noticed that dividends from stocks show a more constant growth than sales or profits of companies.

This led to the consideration that a high dividend yield could indicate a possible undervaluation of the stock in Exness asia pte ltd. Therefore, O'Higgins mainly bought shares that were undervalued in order to benefit from as high a dividend as possible when paying out profits.

First, the top 30 stocks in the Dow Jones are listed at the beginning of the year. From this list, 10 stocks are filtered out that have the highest dividend yield. The capital to be invested is then distributed among these 10 stocks. Finally, the shares are held for one year. Only at the beginning of the new year is a new valuation carried out.

The success of the strategy

O'Higgins could prove that his strategy was successful. It is particularly recommended for investors who want to achieve high dividends and are looking for constant growth without large movements.

Why companies pay dividends

Companies pay dividends to shareholders for several reasons. On the one hand, shareholders are rewarded for investing money in the company.

For another, the company's own return is not affected, as the surplus alone does not make the corporation more profitable.

An alternative would be to focus on growth and invest the surplus in new employees, machinery or business areas. However, this growth strategy carries the risk that no profits can be made or distributions made in the following year.
Disadvantages of dividend payments

Possible disadvantages can arise for companies from the dividend payment if the distribution becomes higher than the surplus or profit.

For example, it may happen that a high dividend is agreed at a shareholders' meeting, but it does not correspond to the profit. The company then has no more capital to invest.