Investing in dividend paying stocks.

tinners93

Hi everyone,

I just need some guidance on how I would invest in some shares that pay dividends? Do I have to go through a broker like Hargreaves Lansdown or IG share dealings or can I do them manually?

I'm really unsure with what I actually need to do.

Note -
(Current financial position)
24 years old, living at home.
Salary - 30k gross (why am I still at home? read below)
Bills - 400p/m
Savings - Help to buy ISA 200pm + 50pm into "rainy day fund" + 15k in savings to buy a house when girlfriends has a full time job (shes just graduated)
Investments - 100pm into P2P currently getting 3% average + 100pm into Lloyds online investment account.
Debt - 500 on a CC which is interest free for 18 months. Paying 50pm.


Thanks,
Matt

ColdIron

You shouldn't get involved in individual company shares unless you want all your eggs in a handful of baskets. You would be better off in collective investments such as dividend paying funds and investment trusts

Eco_Miser

Yes you would need to go through a broker or platform.
http://monevator.com/compare-uk-cheapest-online-brokers/

Investing in single companies, or even dozens of single companies, is considered risky. You could instead invest in a fund which spreads your money, and that of thousands of other investors, over hundreds or thousands of companies, reducing the risk of one company failing and taking your life savings with it.

tinners93

ColdIron wrote: »

You shouldn't get involved in individual company shares unless you want all your eggs in a handful of baskets. You would be better off in collective investments such as dividend paying funds and investment trusts

Eco_Miser wrote: »

Yes you would need to go through a broker or platform.


Investing in single companies, or even dozens of single companies, is considered risky. You could instead invest in a fund which spreads your money, and that of thousands of other investors, over hundreds or thousands of companies, reducing the risk of one company failing and taking your life savings with it.

Would you recommend me just to up the amount of money I'm investing into the Lloyds investment account then?

Eco_Miser

tinners93 wrote: »

Would you recommend me just to up the amount of money I'm investing into the Lloyds investment account then?

That would depend on what the Lloyds investment account is, and what it contains.
Do you mean a trading account with Lloyds Bank Share Dealing? Or an ISA account?
If so, you could buy individual shares in within that account, if you really wanted to.

Lloyds Bank Share Dealing is a trading name of Halifax Share Dealing Limited, with a higher annual fee, but lower transaction fees.

bostonerimus

Why are you particularly interested in dividends and why individual stocks rather than funds?

ColdIron

tinners93 wrote: »

Would you recommend me just to up the amount of money I'm investing into the Lloyds investment account then?

Depends on the sums involved but if less than £10,000 then probably yes. Their fees (0.45% OCF and 0.24% service) are reasonable. However in you shoes I would prioritise my mortgage plans and my pension over investing and most definitely over single company shares

I'd echo the post above, why dividends at 24?

tinners93

Eco_Miser wrote: »

That would depend on what the Lloyds investment account is, and what it contains.
Do you mean a trading account with Lloyds Bank Share Dealing? Or an ISA account?
If so, you could buy individual shares in within that account, if you really wanted to.

Lloyds Bank Share Dealing is a trading name of Halifax Share Dealing Limited, with a higher annual fee, but lower transaction fees.

It is just the e-Investement account, where they invest into funds for you.

bostonerimus wrote: »

Why are you particularly interested in dividends and why individual stocks rather than funds?

I work in the tax industry with some quite wealthy clients. I've been noticing that some shares have a quite good return on them. eg LGEN dividends had 5% return on investment 16/17. I get that there is risk but then there is risk with everything. Also with the new dividend rules I have the £5k 0% rate band to use.

ColdIron

tinners93 wrote: »

Also with the new dividend rules I have the £5k 0% rate band to use.

If you work in the tax industry you will know that the threshold is likely to be reduced to £2,000 next year though it's irrelevant when you can bung it all in an ISA. But you knew that didn't you

tinners93

ColdIron wrote: »

If you work in the tax industry you will know that the threshold is likely to be reduced to £2,000 next year though it's irrelevant when you can bung it all in an ISA. But you knew that didn't you

I understand that and that is going to have an adverse effect on directors of private LTDs that draw profits as dividends.

For an individual like myself that wants to invest 2k-3k in some shares, it's not going to have any effect. The dividends paid are going to be minimal compared to the allowance.

Eco_Miser

tinners93 wrote: »

Also with the new dividend rules I have the £5k 0% rate band to use.

That sounds like the tax-tail wagging the investment dog.
Put it all within an S&S ISA and get all your dividends and capital gains tax free forever - or at least until some chancellor is courageous enough to abolish ISAs.