Is Dividend Investing Good or Bad?

When looking for high-dividend stocks in India, it’s important to go beyond just checking the dividend yield. You should also think about the company’s overall financial health, how consistent their dividend payments are, and their potential for future growth.

Here are some key things to keep in mind when investing in dividends:

Taxes:

In India, dividends from domestic companies are taxable. If your total dividend income is over ₹5,000, you will face a 10% TDS (Tax Deducted at Source). If you haven’t provided your PAN, the TDS rate will rise to 20%.

Dividend Traps:

Be cautious with stocks that offer unusually high dividend yields. A high yield might be a sign of a “dividend trap,” where the stock price has decreased a lot. Even though past dividends might look appealing, the company’s overall performance could be declining, which may lead to lower dividends in the future.

Growth vs. Income:

Dividend investing mainly focuses on generating income. Some dividend stocks can appreciate, but generally, high-growth companies prefer to reinvest their earnings instead of paying out large dividends.

Ex-Dividend Date:

To get a dividend, you need to own the stock before its “ex-dividend date.” If you buy the stock on or after this date, you won’t receive the declared dividend.

Always do your research and think about your personal financial goals and how much risk you’re willing to take before investing in any stocks.