Understand the difference between investing and trading.

Sidwell writes:

I read your article entitled “Using dividends to earn an income“. I’m currently one of the many people who in fact invest for “share prices”. Investing in share prices is easily accessible; one can do this through a stock broker or via online trading or even Internet banking. I would like to get involved in investing in dividends, however, have no idea how one gets to access investing in them.

Maya replies:

Dividends are a natural result of investing in shares; it is just a different investment strategy.

Share “trading” is typically where one is buying and selling shares in companies based on where you think the share price will move to. You would not necessarily hold the shares for very long.

Share “investing” is when you buy a share in a company with the view to holding it for the longer term in the belief that over time it will grow in value and will also pay a regular dividend.

You could continue using your online stock broker but you would start to build up a share portfolio with the idea of earning a dividend income off it in years to come. You may find you start moving away from smaller more volatile shares to the “stalwarts” like Tiger Brands, Vodacom, Spar etc which are large South African companies that have a track record in paying out good dividend income.