## Getting Started with Dividend Stocks: From Zero to Regular Income

Investing in dividend stocks is gaining popularity among investors because it helps generate a steady income stream during uncertain market conditions. However, before you start buying, you should understand the basics and avoid common traps that could cause you to miss investment opportunities.

## What Are Dividend Stocks: Learning the Income Distribution System

**Dividend stocks** refer to shares of companies that have a policy of paying profits to shareholders consistently and regularly. This money comes from the company's net profit. Each year, the company allocates a portion of its profit for reinvestment, and the remaining is returned to shareholders.

For example, ABC Company announces a dividend of 1.75 baht per share on the ex-dividend date of July 1. If an investor holds 10,000 shares, they will receive 17,500 baht (before tax). New investors purchasing shares on June 30 will have the same rights, but their cost basis will differ.

The important point is that dividends do not affect the company's capital value but are derived from net profit for the year, special profits, or accumulated profits from previous years. Therefore, if the company has no profit, it cannot pay dividends.

## Types of Dividend Payments: More Than You Think

**Cash dividends** are the most common method, allowing investors to receive cash directly, with a 10% tax automatically deducted. The **stock dividend** method gives shareholders new shares instead of cash, helping the company retain cash for operations. However, this may reduce the stock's market value because the number of shares increases.

In terms of timing, **annual dividends** are paid after the fiscal year-end, while **interim dividends** may be paid mid-year, depending on the company's board approval.

## Indicators to Evaluate Dividend Stocks

**Dividend policy** is the framework set by the company, such as INTUCH (Intouch Holdings)(, which pays 100% of its subsidiary profits, or PTT (PTT Public Company Limited)), which pays at least 25% of net profit.

**Dividend payout ratio** is calculated as (dividends per share ÷ net profit per share) × 100. For example, in 2022, INTUCH paid 4.72 baht per share, with a net profit of only 3.28 baht, resulting in 144%. This indicates the company used accumulated profits to pay dividends. PTT paid 2 baht from a net profit of 2.64 baht, which is 75%.

**Dividend yield** is calculated as (dividends per share ÷ stock price) × 100. If you buy INTUCH at 72.75 baht and receive a dividend of 4.72 baht, the yield is 6.5%. If you buy at 50 baht, the yield increases to 9.44%.

## Avoid the Traps: 5 Points to Watch

**1. Choose financially strong companies**. Dividends come from profits, so select companies with consistent profitability, not those that pay only once and then stop.

**2. Returns should exceed inflation**. If the average inflation rate is 2% per year, dividends of 2% do not contribute to wealth accumulation. The return should be at least 2% or higher.

**3. Beware of unrealistically high dividends**. Paying 15-20% annually is not typical. Excessively high dividends often signal warning signs, such as a one-time payout or using up accumulated profits.

**4. Check for consistency**. Review the past 3-5 years to see if the company has a trend of regular dividends. This reflects financial stability.

**5. Time your purchases wisely**. For example, buying at 50 baht yields 20%, while buying at 60 baht yields only 16.7%. Lower cost basis generally results in higher returns.

## Steps to Register and Buy

**Step 1: Open an account with a broker**. Prepare a copy of your ID card and bank account statement. Register for E-Dividend service to have dividends automatically transferred to your account when paid. Approval takes 1-5 business days.

**Step 2: Transfer investment funds**. Once your account is approved, transfer funds to use as trading capital. You can start buying immediately.

**Step 3: Screen and monitor**. Do your homework to select stocks with good fundamentals. Track prices via Watch List, use technical or fundamental analysis. When the price is right, buy and hold.

**Step 4: Follow operational news**. Calculate estimated profits to assess next year's dividend payments. Wait for shareholder meetings and XD announcement dates.

**Step 5: Receive dividends**. About one month after the XD date, dividends will be transferred to your registered bank account, with 10% tax deducted according to law.

## Frequently Asked Questions

**How many days before the XD date should I buy?** You can buy any days before the XD date, but avoid buying on the XD day itself because XD means "excluding dividends." Buying on that day means you are not entitled to the dividend.

**Where to check dividend stocks?** Look at the dividend payout ratio( or dividend yield) shown on the SET website under the SETHD index, which includes the top 30 high-dividend stocks, or check the company's profitability.

**When is the best time to buy for maximum returns?** Based on market efficiency assumptions, after dividends are announced, stock prices tend to adjust upward to reflect the dividend value. To avoid buying at too high a price, it’s better to buy when the price has pulled back, reducing the risk of overpaying and holding a potentially poor investment in the long run.

## Summary

**Dividend stocks** are valuable income-generating tools for those seeking regular returns while waiting for growth opportunities. By following principles such as avoiding abnormally high dividends, choosing financially strong companies, and timing your purchases well, you can confidently build a portfolio that delivers satisfying returns.