If you’re considering purchasing Australian dividend stocks, now is a great time to do so. Economic fluctuations around the world mean that there are far more opportunities to score a great deal on Australian dividend stocks (and the share market in general) but that doesn’t mean you should rush into making a purchase. The fundamentals of good investing still need to be applied, so we’ve put together this list of things to consider when purchasing Australian dividend stocks so you can get started on the right foot.
Percentage Paid
The first thing you’re going to need to consider when purchasing Australian dividend stocks is what percentage they pay. As a general rule, you’re obviously going to want a larger percentage, as this means you will see a more significant return on your investment in a faster time frame, however, this isn’t the only factor that you’ll need to consider.
Stability Of Payments
You’ll also want to look at the stability of previous payments. Although past performance is not a reliable indicator of future performance, looking at how often the Australian dividend stocks you’re considering investing in have met their distribution targets can help you form a better idea of whether they’re a good investment.
Payment Cycle
Another thing to consider when looking to buy Australian dividend stocks is how often they pay out. Also referred to as a payment cycle, this will generally be quarterly, biannually or annually. Compounding interest is an important factor, so, in most cases, you’ll want to select Australian dividend stocks that pay out as often as possible. You’ll also want to set up a reinvestment plan in order to get the most out of what you’ve put in.
The Rest Of Your Portfolio
If you have a pre-existing portfolio, or intend on expanding your portfolio moving forward, it is also a good idea to consider how any Australian dividend stocks you’re considering purchasing will fit in with the rest of your investments. Diversification is key in protecting yourself when the market crashes so you’ll want to ensure that your portfolio is not weighted too heavily in any particular industry or asset class. If you are concerned about this, it is a good idea to include at least one or two ETFs within your portfolio, and possibly even within your selection of Australian dividend stocks, so you can get broad exposure without having to commit a large amount of funds to each sector.
Tax Implications
Finally, you’ll also need to think about the tax implications of purchasing any Australian dividend stocks that you’re considering. While all income will obviously incur a certain level of tax – that’s just the way our system works after all – different types will see you changed at different rates. For example, if you receive a fully franked payment, you’ll face a greatly reduced tax obligation on these earnings as taxes have already been paid on your behalf at a company level. By the same token, however, a share that doesn’t provide any franking credits will see you facing higher obligations. This is incredibly important to consider before making your purchase as any mistakes at tax time could end up costing quite a lot, so it’s a good idea to be on top of things before they can cause any issues.
Please note that all information included within this piece is general in nature and should not be taken as personal financial advice. If you require or desire personalised assistance, we suggest speaking with a qualified financial advisor about which Australian dividend stocks are best for you.
