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Dividend stocks
Started Jul 30 at 4:05 ET (By StockShark)
Read this article:
http://www.dividends4life.com/2008/07/perfect-dividend-stock.html
What are your thoughts about dividend stocks? Is it a good play in this bear market. I think the dividends can cover (to a certain degree) for a loss in share prices and help balance the portfolio until the market goes green again.
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guliamo
Jul 30 at 6:40 ET
I love dividend stocks. I consider it pocket money that can add up .
Psychologically it allows you to take some money out without actually selling. In a market like this, I think it's an extra good deal.
My favorite dividend stocks are energy trusts - both Canadian FDG and PWE
Top 33%
phantom
Jul 30 at 11:12 ET
Hmmmm, depends on the share, if you have a share in a good company i.e. it will grow in the future and earnings are likely to rise then I think that its a good investment as not only is it likely that you will get capital growth from the share price increasing but also a good dividend because as the company does better the dividend usually increases. Also make sure to check out the dividend cover, the higher it is the better as it means the company can easily pay its dividend to its shareholders.
I personally use dividends as insurance i.e. a dividend of 10% a year in a company theoretically means ( as long as nothing bad happens to the company i.e. drop in earnings or drop in dividend) that in 10 years I will have recovered all my initial capital from the share, This is handy if the share price moves against you.
If the share price moves against you in the short term then it’s useful as it could help recover your losses as long as you got your dividend before the share price fell past whatever yield the share gives. I.e. if you sell the share at a 4% loss but get the dividend which say is 7% then it means you get a 3% profit so this is handy, I’ve done this myself once.
Dividend investing and reinvesting is very profitable if you do it for long enough you can turn a very small initial sum into a massive amount of money. I Quote Alvin Halls book winning with shares “If you had deposited £1000 in a building society in 1945, it would have been worth £52,887 at the end of 1999. That same £1000 invested in gilts would have grown to only £30,180. However, if you had invested the same amount in the stock market and reinvested all the dividends, it would have been worth £1,031,200."
So if you’re willing to wait dividend investing really pays off in the long term you just have to wait 54 years but you get 1031.2 times your initial deposit. Bit too long to wait for my liking I must admit! But each to their own!
Top 1%
blacktuna
Jul 30 at 1:20 ET
Dividends are a way to force management to share profits, it acts as a balance between the companies desire to use capital for growth and it's commitment to remember share holders deserve to share the gravy.
Naturally, young companies with debt, shouldn't pay out dividends, rather use that cash for operating expenses.
Top 91%
StockShark
Jul 31 at 3:50 ET
Thanks for all the input.
Phantom, what are your favorite stocks when it comes to dividends?
The article I mentioned points out some stocks, but actually I like 2 other dividend stocks: FAX which pays around 7% annually and ZTR which pays 10%-11% annually. Both of them hold pretty steady in terms of share price which is remarkable considering the current bear market.
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phantom
Jul 31 at 3:56 ET
I got on the BP wagon today, 5.6 % dividend yield not massive but it an alright divi, it goes ex on the 14th august, its trading at around $60 a share atm which is at a 4 year low, $60 has traditionally acted as support for the share 3 times before over 4 years, so I am hoping it will continue to do so this time. My plan is to get the dividend and sell the share from somewhere in between $66 and $75 when the share price rebounds from $60