Searching for a few different high yield stocks one that serves as a good example for this information bulletin has to be Cornerstone Progressive Fund (CFP). Paying a yearly yield of about 24% during the time this is being written offers us a great view into dividends and how they can help bolster a bank account. With dividend paying stocks a few things to remember is that the money paid can quickly be reinvested or broker depending, deposited directly into a spending account.
CFP pays a monthly dividend. So because we are just starting off and say we have a $1000 to invest and have found the best broker for our needs. We are going to invest the $1000 into CFP and see what happens. First let's look at a cash deposit into our spending account.
When we made the purchase of CFP the yield was right at 24% now this yield is 24x higher than what most banks pay on a yearly CD. So there must be risk involved? Certainly. But let's look at what happens in the course of a year. With ease of math let's say we bought 100 shares at $10 per share. At the end of month the share price $9.75 so now our investment is sadly only worth $975 but remember we get our dividend money deposited in the bank $20 goes into the bank. We technically lost a few dollars in value. But we still have our 100 shares. Another month goes by and now the stock price has recovered but only slightly to say $9.85 account value is $985 but we got our second dividend check for another $20 now we are looking at a gain of $25 overall. We can fast forward and say a year has gone by we created $240 in spending money but the stock price has tapered off to $7.50 a share! Don't panic. We are still about even overall but maybe you feel like that 1% would have been less stressful? Let's see what we do with a price decrease.
The stock has stayed faithful to the dividend payments but the price has dropped. Instead of taking the $20 each month we can reinvest the money. The great thing is that when signed up for a dividend reinvestment program buying partial shares is possible. So now we put the $20 back into the stock so on the 13th month we now have 102.66 shares and now we are looking at about $770 in share value with the $240 paid out in the prior year, we are staying strong. Each month pays a little more since we are reinvesting so now we are collecting about $20.50 each monthly payment. Allowing the dividends to reinvest may not seem like the best option for everyone but over the course of a year and the continued accumulation of stock each month paying a little more than the last allows the account to grow in value. If the price falls you are attaining more shares for a lower price and should the price start climbing north you can gather fewer shares but even still each month you add to the account the more growth and value you will hold. Or with a positive price move you can collect some payments and go see that new movie you were waiting to be released. Good luck and happy trading.
