Dividends From Stocks
Dividends From Stocks
The LML Group Hong Kong Opinion on Investing Using Dividend Paying Stocks
Investment in dividend stocks can provide a steady income stream as well the potential for appreciation of stock value. Well-known companies such as PG or GE have continually increased their dividends year after year for decades. There are companies that have never missed a dividend payment for a century! During a recession investors commonly buy consumer goods companies that pay dividends. The argument against dividend stocks is that they are not growth stocks. That is not necessarily true. Over a five or ten year span the best dividend paying stocks typically outperform the S&P 500 by several percent.
A dividend is a payment, typically announced and made every quarter, from the company to its shareholders. A dividend is part of the company’s profits, after taxes. The company has two things it can do with profits. One is pay dividends and the other is to reinvest to grow the business. A mature and stable company will make money on its business but will not grow at the same rate as that of a startup. It may have a major share of its market and can only increase its share through research and development instead of capturing market share. The company pays dividends to compensate for a lesser growth rate than a newer, faster growing company. Some stocks, such as power companies, have very slow growth rates but will pay very high dividends. Investing in companies paying dividends to shareholders is especially attractive for retirees as these stocks provide quarterly cash income.
In picking dividend stocks the investor can look on a stock screen for the highest dividend rates or can look for companies that have continually increased their dividends for the last 3, 5, or 10 years. The ability to pay dividends for years on end is a measure of the company’s financial health whereas a company that is only currently paying a high dividend may be in trouble and essentially trying to bribe investors into buying their stock. It is wise when looking at buying dividend stocks to do your own due diligence of the company’s financials, its current products, and product development, and its competitors in its market sector. Investors typically buy dividend stocks for the very long term as many of these are very healthy, well managed companies. However, there may also come a time to sell these stocks.
Sometimes it is wise to sell a stock even though its dividend yield has gone up substantially. This would be the case when a stock as lost share price but has maintained most or all of its dividend payments. In this case the investor needs to decide if the company will stage a comeback in share price or if it is time for a look around for something new market. Using a record of long term, increasing dividend payments as a measuring stick of long term financial health and growth, it is wise to include a number of dividend stocks in a balanced portfolio and will help get to you where you want to eventually to end up.
Time to Buy Dividend Stocks
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The 10 Best Dividend Paying Stocks in the Dow Jones Industrial Average $0.99 Want to receive checks from your investments every month or quarter (depending on how often the company pays out) rather than wait around for the stock price to increase? Then investing for the dividend income is a wise strategy in both good and bad market conditions.In fact history has shown that investors that choose stocks that pay good dividends actually fare better than those investors that d… |
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The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits) $9.95 Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winnerâs game. Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), but after the substantial costs of investing are deducted, it becomes a loserâs game. Common sense tells usâand history confirmsâthat the sim… |
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Be a Dividend Millionaire: A Proven, Low-Risk Approach That Will Generate Income for the Long Term $24.99 This is the eBook version of the printed book.Millions of investors are struggling to build a nest egg in the face of todayâs brutal market realities. For many of them, dividend investing represents the perfect low-risk approach. Over the past 80 years, dividends have accounted for over 44% of the S&Pâs total returns. Now, thereâs an up-to-date, practical, step-by-step guide to succ… |
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