If you want to generate more income, make a careful decision while investing in stocks. When the company makes a profit, you get a percentage of the share. When you buy the shares of stable companies, you can expect a steady growth in the cash flow.

The cash you get by investing in the stocks of a company is called dividend payment. Before investing in stocks, it is wise to do a research on the companies shareholders. A company with high dividend stocks, such as top oil companies, gives you dividend cash or a share of their profit for investing in them. High dividend stocks reduce the risk of any loss. You can start generating more income by buying their shares. Dividend paying stocks compensate for the losses caused in inflation. They ensure positive earning in a bear market.

You can reinvest all or some of your dividends to buy more shares when you invest in a high dividend paying company. You can continue to be a stakeholder or share the ownership of the company that pays high dividends. When the prices rise, your return of investment increases. Never invest in a start-up as they are never in a position to pay dividends. The risk of any loss is reduced as you get a two-way to use the income generated. You will get a steady flow of income and have the option of reinvesting. You can use it as a far-sighted wealth plan. Such dividends give you growth faster. As a company, you can use the money from dividends for acquisitions and for growing your business. If you have more than 5 companies, paying your dividends, you will be in a better position than drawing salaried income. If you want a steady growth in dividend income, it is better to develop a dividend portfolio.

You must know about dividend yields and have a dividend payout ratio calculated in order to have an idea about your steady income growth. If the dividend growth is steady, it leads to exponential growth over the years. This is a lot of money. Do the math behind investing in stocks. You will find a gradual increase in your wealth. How you reinvest is up to you.

Many companies have grown over the years by reinvesting in high dividend stocks. A company, only after attaining substantial growth, chooses to pay dividends to the shareholders. Markets are unpredictable. When prices fall, you have no option but sell your shares. Hence, it is wise to invest in companies that have generated high dividends overtime. Always buy stocks of good quality that assure steady growth income. When stock prices increase, you can re-invest and generate more wealth. Calculate the dividend yield by annual dividends per share by current market price per share.