How to understand dividend stocks and how to choose dividend stocks without losing money

Dividend stocks are one of the investment strategies that help investors generate steady income streams. They are similar to fixed deposits but still have the potential for stock value appreciation in the future. Importantly, you will truly own a part of the company. Today, we will focus on the critical topic: How to correctly view dividend payments through streaming data and how to select dividend stocks that won’t trap you in a price trap.

Deepen Your Understanding of Dividend Stocks: What Are They Really?

Dividend stocks are not a special type of stock; they are common stocks of companies with a policy of regularly paying profits to shareholders. These dividends come from actual profits, not additional capital.

For example, if ABC Company announces a dividend of 1.75 baht per share and you hold 10,000 shares, you will receive 17,500 baht (before tax) as long as you hold the shares until the XD date (Exclude Dividend). It doesn’t matter when you bought the shares; what matters is holding them to retain the rights.

Types of Dividend Payments: How Many Are There?

Dividend payments are not limited to one form; companies can choose the method that best suits their financial situation.

Payment Types by Form of Money

Cash dividends are the most common. You receive cash directly, minus 10% tax, and it goes into your account smoothly.

Stock dividends involve the company issuing additional shares as dividends, and you can choose to keep the shares or sell them for cash. This method helps the company save cash but increases the number of shares in the market, which may lead to a drop in share price.

Payment Types by Time Period

Annual dividends are based on the company’s annual profit, announced after the fiscal year-end, and paid within one month after shareholders’ approval.

Interim dividends are paid by profitable companies during the year, often around August-September (approved by the board of directors).

Key Figures to Know When Considering Dividend Stocks

To understand dividend payments properly, you should be familiar with these basic figures:

Company Dividend Policy (Dividend Policy)

Each company has its own approach. For example, INTUCH (Intouch Holdings) sets a policy of paying 100% of profits from subsidiaries, while PTT (PTT Public Company Limited) pays no less than 25% of net profit after reserves.

This policy does not specify an exact amount but provides a broad framework. Actual payments require shareholder approval.

( Dividend Payout Ratio )Dividend Payout Ratio(

Formula: )Dividend per share ÷ Net profit per share### × 100

This figure indicates what percentage of profits the company distributes to shareholders.

For example, in 2022, INTUCH paid a dividend of 4.72 baht with EPS of 3.28 baht = payout ratio of 144% (including retained earnings distribution).

Considering PTT, which paid 2 baht in dividends with EPS of 2.64 baht = payout ratio of 75% (reasonable payout).

( Relative Dividend Yield )Dividend Yield(

Formula: )Dividend per share ÷ Purchase price### × 100

This difference is very important. If you buy INTUCH at 72.75 baht and receive a dividend of 4.72 baht, your return = 6.5%.

But if you are skilled enough to buy at 50 baht, your return becomes 9.44%.

Lower purchase price = higher return. This is why timing your buy is crucial.

How to View and Select Dividend Stocks Without Getting Trapped in a High Return and Stuck in the Stock

( Point 1: Check the company’s fundamentals, not just the payout ratio

Dividend stocks come from profits. If a company has no profit or low profit, dividends will disappear or decrease. Therefore, choose companies capable of continuous profit-making, not just high dividend yields.

) Point 2: Avoid stocks with dividend yields that are suspiciously high

Some stocks have very high dividend yields but often pay only once or twice because accumulated profits are exhausted. Once income stops, the stock price tends to decline. So, when you see an unusually high dividend, check whether it’s normal or from accumulated profits, or if it’s from selling a single asset.

( Point 3: Review the dividend payment history, not just this year

Good companies pay dividends consistently. Although the amount may vary with profits, consistency indicates financial stability. Look back at least 3-5 years.

) Point 4: Choose the right timing to buy

Even if dividends are the same, different purchase costs lead to different returns.

If A buys at 5 baht and gets 1 baht dividend = 20% return If B buys at 6 baht and gets 1 baht dividend = 16.6% return

Timing your purchase during a price dip ###before good earnings announcements### can help you get lower costs and higher returns.

Steps to Buy Dividend Stocks: From Start to Receiving Dividends

Step 1: Open a stock trading account with a broker

Prepare a copy of your ID card, passport, bank statement, and broker’s form. Approval takes 1-5 business days.

Tip: Register for E-Dividend service simultaneously to have dividends automatically transferred to your bank account when paid.

Step 2: Transfer funds into your account as collateral

Once your account is approved, you can start transferring funds for trading immediately.

( Step 3: Do your homework and select stocks of interest

Follow prices via Watch List or technical charts. Use fundamental analysis to find a suitable entry price. When the price reaches your target, buy and hold.

) Step 4: Monitor from the purchase date until XD and dividend payout

Check annual profits, estimate dividends roughly, and wait for official announcement from the shareholders’ meeting. Hold the shares until the XD date to retain rights.

Step 5: Wait for dividends to be credited

After the dividend resolution, funds will be transferred to your account within one month, minus 10% tax. You can use this to claim tax refunds at year-end.

Frequently Asked Questions

How many days before the XD date should I buy the stock?

There’s no fixed number of days. The key is to buy before the XD date. Buying on or after the XD date will always exclude the dividend.

Where to check dividend stocks?

Look at the payout ratio ###Dividend Payout Ratio### or dividend yield ###Dividend Yield###, which are usually shown as basic data. Companies with high profits + high dividend policies = high dividend opportunities.

When is the best time to buy?

Stock prices often fluctuate based on news. Waiting until after the earnings announcement might be too late. Therefore, timing your buy at the base price before positive news, reducing the over-expectation of the price, results in a higher dividend yield.

Summary

Understanding dividend stocks and how to view dividend payments correctly is not difficult if you understand that dividends come from profits, not magic. The key is to analyze company fundamentals, review payment history, and buy at the right timing. High dividends by coincidence are often misleading, as they tend to trap you in the stock longer. The real return is the sum: dividends + capital appreciation, not just dividends alone. Once you grasp this point, investing in dividend stocks can be a tool to steadily grow your wealth.