Dividend Investing, Earn Passive Income from Stocks

Dividend investing is an investment strategy that focuses on stocks that regularly pay dividends. This strategy is usually applied by long-term investors who do not actively trade their stocks for capital gains.

Dividends themselves are generally given to shareholders in cash (cash dividends), but can also be in the form of additional shares (stock dividends).

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Choosing Stocks for Dividend Investing

Not all stocks are suitable for dividend investing. There are several criteria that investors must observe:

1. Dividend Yield → The rate of dividend yield (%) compared to the share price paid. Stocks with high dividend yields range in the teens.

2. Dividend Payout Ratio → The percentage of total dividends distributed to the company's net income in a given period. A healthy ratio ranges from 30-55%, more than that may not be sustainable.

3. Dividend History → The history of dividend distribution, whether it is routine 1-2 times a year.

4. Dividend Growth Rate → Dividend growth over periods.

IDX High Dividend 20

To make it easier for investors to select stocks for dividend investing, the Indonesia Stock Exchange provides an index of the 20 best stocks that regularly pay dividends with high yields. The following is the effective list until February 4, 2025:

ADRO	AMRT	ANTM	ASII	BBCA
BBNI	BBRI	BMRI	BRPT	ICBP
INDF	INKP	ITMG	KLBF	PTBA
SMGR	TLKM	TPIA	UNTR	UNVR

Pros and Cons of Dividend Investing

For investors who implement a dividend investing strategy, market volatility is not a big issue. Dividend stocks tend to be more stable, so monitoring price movements can be done minimally. Investors can also mitigate risk by reinvesting dividends.

However, to benefit significantly from dividends, investors need to invest a significant amount of capital. They also need to consider the worst case scenario, such as a decline in the company's profits, which may result in no dividend payments at any time. In addition, the growth of companies that regularly pay dividends is usually slower because they are well-established, unlike companies that are still developing.

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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).