Understand Dividends Deeply: The Complete Guide to Investing in Dividend Stocks

Why Are Dividend Stocks Attractive to Investors

When the stock market is calm, investing in dividend stocks becomes an appealing option for those seeking steady income. The unique feature of this type of investment is receiving a consistent cash flow similar to bank deposit interest. At the same time, there is also an opportunity for the invested money to grow in value as the stock price appreciates in the future. Additionally, holding dividend stocks means being part of the company and benefiting from its long-term growth.

Dividend Stocks: Meaning and Basic Characteristics

Dividend stocks are shares of companies that have a policy of continuously distributing a portion of profits to shareholders each year. The dividend payout is determined according to a clear policy structure, and the amount of dividend depends on two main factors: the company’s profit for that year and approval from the shareholders’ meeting.

For example, if ABC Company announces a dividend of 1.75 baht per share with a XD date on July 1, shareholders holding 10,000 shares and maintaining their holdings until that date will receive 17,500 baht (before tax). It doesn’t matter whether they are long-term shareholders or new ones; only the investment cost will differ.

It is important to note that dividends do not come from the company’s initial capital but from net profits after operations. The company allocates part of the profit for further development and pays the remaining to shareholders. This profit may come from current-year performance or accumulated profits from previous years. If the company incurs losses or has never been profitable before, no dividends will be paid.

Different Forms of Dividend Payments

Payment Methods Based on Type

Paid in cash directly is the most common and popular method. Investors receive real money credited to their accounts, similar to earning interest from deposits. The least amount is subject to a 10% tax.

Paid in new shares involves issuing new common stock as a form of return. This method allows the company to retain cash for operations. Shareholders can choose to hold additional shares or sell them for cash. However, paying dividends in shares often causes the stock price to decrease (Dilution) because the number of shares in the market increases. Unlike capital increase, shareholders do not need to pay extra money.

Payment Methods Based on Timing

Annual dividends are derived from the profit of the fiscal year, announced after the fiscal closing in March. They are then approved at the shareholders’ meeting and paid approximately within 1 month.

Interim dividends are paid outside the regular annual dividend cycle. Companies with good performance may pay a second dividend around August-September, approved by the board of directors, and paid about 1 month later. The next shareholders’ meeting will be informed of this.

Key Indicators for Analyzing Dividend Stocks

###Dividend Policy(

Each company has its own policy. For example, INTUCH (Intouch Holdings) sets a policy to pay 100% of dividends received from subsidiaries. PTT (PTT Public Company Limited) commits to paying no less than 25% of net profit after reserves.

This policy means that if INTUCH has an EPS of 3.3 baht, it is likely to pay approximately 3.3 baht per share )100% of EPS(. Meanwhile, PTT with an EPS of 2.64 baht is likely to pay at least 0.66 baht per share. The policy provides a general framework, but the actual rate must be approved by the shareholders’ meeting.

)Dividend Payout Ratio(

This figure shows the proportion of actual dividends paid relative to net profit per share, calculated as:

Dividend Payout Ratio )%( = )Dividends per share / Net profit per share( × 100

For example, in 2022, INTUCH paid a dividend of 4.72 baht with an EPS of only 3.28 baht, resulting in a payout ratio of 144%, meaning the company used accumulated profits to pay extra. Conversely, PTT paid 2 baht in dividends with an EPS of 2.64 baht, at 75%, which is normal.

)Dividend Yield###

This ratio indicates the return on dividends relative to the actual investment. Calculated as:

Dividend Yield = (Dividends per share ÷ Share price) × 100

If in 2022, INTUCH paid 4.72 baht in dividends, and the closing price was 72.75 baht, the dividend yield would be 6.5%. If an investor bought at 50 baht, the yield would increase to 9.44%. Conversely, if bought at a higher price, the yield decreases. Managing costs is therefore key.

Practical Steps: How to Successfully Buy Dividend Stocks

( Step 1: Create a Stock Trading Account

Prepare essential documents such as a copy of your ID card, bank account book, and application form from a broker. The approval process takes 1-5 business days. Also, subscribe to the E-Dividend service to automatically transfer dividends to your bank account.

) Step 2: Transfer Investment Funds

Once the account is approved, transfer funds into your stock account as collateral or credit limit so you are ready to buy when opportunities arise.

( Step 3: Find and Follow Dividend Stocks

Research interesting dividend stocks in advance. Track prices via Watch List, use technical analysis or fundamental valuation to determine a suitable entry price.

) Step 4: Follow Company News and Dividend Announcements

Estimate dividends based on annual profits. Make preliminary forecasts before the shareholders’ meeting approves the exact amount. Hold shares until the XD date to be eligible for dividends.

Step 5: Receive Dividends

Dividends are paid approximately within 1 month after approval. The money will be transferred to the registered E-Dividend bank account, with 10% tax deducted. This amount can be claimed as a tax deduction at year-end.

Common Traps to Avoid: How to Choose Dividend Stocks

( 1. Choose companies with strong profit-generating ability

Dividends come from profits, so invest in companies with solid fundamentals and stable long-term income. This helps ensure continuous dividends and preserves stock value.

) 2. Look for reasonable Dividend Yield

At minimum, dividend returns should exceed the annual inflation rate (around 2%). If the dividend yield is lower, the real value of the investment diminishes over time.

3. Be cautious of abnormally high dividend yields

Consistently very high dividends are unrealistic. If you see suspiciously high rates, check whether it’s a one-time payout or if profits have been exhausted. Such payments are unsustainable; high dividends for only one or two periods will likely lead to a decline in stock value afterward.

4. Find companies with consistent dividend payments

Don’t rely on just one year. Study the dividend history over the past 3-5 years. Companies that pay at a steady rate demonstrate financial stability.

5. Control the cost of holding stocks

Even if dividends are the same, returns can differ based on purchase price. Investor A buys at 5 baht and receives 1 baht dividend, yielding 20%. Investor B buys at 6 baht with the same dividend, yielding 16.6%. It’s better to wait for a price correction before the earnings announcement to avoid buying at the highest prices already reflecting good news.

Frequently Asked Questions

How many days before XD should I buy to receive dividends?

You can buy any day before the XD date. However, purchasing on the XD date means you will no longer be entitled to dividends because XD means “ex-dividend.”

Where can I find dividend stocks?

Check the dividend payout ratio ###Dividend Payout Ratio### or dividend yield on the set.or.th website. Another option is the SETHD index, which includes the top 30 high-dividend stocks. Alternatively, analyze the company’s profitability: high profits and a high dividend policy tend to indicate higher dividend payments.

When is the best time to buy dividend stocks?

According to market efficiency theory, stock prices usually adjust to news already. Buying after dividends are announced may mean paying a higher price. For long-term investment and better prices, buy during the correction phase before earnings are announced, not after the announcement.