Re: How Dividends Work?
Indiana,
You may want to start small and get into a DRP.
from yahoo finance:
Dividend Reinvestment Plan (DRP)
Automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder.
For instance I have one through WE Energies (my states major power provider). I put in $50 a month and every quarter when they issue a dividend that automatically buys me more shares (or fractions of a share depending on price of stock and dividend amount). I don't miss the money each month (it's taken directly out of my checking) and now after a few years I have $5,000 worth of this particular stock. Note I did start at $20/shr and it's at $39 now so that helped more than the dividends did.
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