Dividend Stocks – The Other Side
filed in My Investments on Mar.04, 2011
When some people look at stocks, they watch the dividend payout. This payout can be a substantial source of income for those that are looking to have a new revenue stream when in their later years. Personally, I like this plan of action and do own stocks in my long portfolio that do just this. Currently the pay out is not substantial, but I’m young and not overly concerned about having this as my income source.
Now, there is always two sides to all stories. When companies are paying out dividends, they means that they are sharing a certain percentage of the profits to the shareholders. This percentage being paid also means that LESS money is on hand for expansion, development of new ideas, and the possibility of slowing down could be on the horizon.
Take for example Walmart, it announced a significant increase in its dividend payout while we all know that they are not doing so great. What was the motivation? Was the increase in dividend payout done to sooth the investors before they start selling? Personally, I would not want a payout increase on my dividends if I know the company could use that money to improve their bottom line. You need to spend money to make money I always say. What will be the point of having dividend payouts when your 500 shares of “some company” go down 20% over 5 years but they maintain a 2% dividend? Every time your paid a dividend, your taxed, so that payout can be even less!
As the markets open, just keep the other perspective of dividends in your mind. Its not always the best thing.
Happy Investing!
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April 2nd, 2011 on 1:02 pm
Dividend policy is always strange. I’ve seen way too many companies giving out dividends that they can’t afford all in order to keep their reputation. The market will react negative if they dont give that same dividend out… but yet its gonna hurt their future, its all so strange for sure.
-Jean
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Komodo Dragon Reply:
May 3rd, 2011 at 5:03 am
Yes Jean, I’ve always felt it’s kind of a ‘Damned if you do, damned if you don’t’ situation for them for the most part.
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used tires Reply:
March 1st, 2012 at 8:36 am
Yes, that is for sure a very good way to put it!
-Jean
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May 5th, 2011 on 11:02 am
Also think of the longer game though, some stocks will offer reinvestment opportunities, so they keep the cash and you get more shares with greater potential for long term growth.
Take a look to see who often does DRIPs and DVOPs.
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May 25th, 2011 on 10:57 am
I don’t know about others, but I’m a bit afraid to invest a lot. I lost money a while ago because I didn’t sell at the right time. The thing is that I didn’t realize it was the right time to sell. One week later, there was nothing but loss.
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used tires Reply:
June 1st, 2011 at 3:40 am
Sorry to hear about your recent losses Violeta. The biggest suggestion I would say is, it is all about your mindset going into the investment. You have to know ahead of time what kind of stance you are taking on it. If you are trying to time the market then there is a huge risk involved in that. But if you know the stock will do good in the long run, and are buying it for the long haul in my opinion it minimizes the risks.
-Jean
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June 1st, 2011 on 8:23 am
Even if you do your research and make calculated decisions, there is always a little bit of risk involved. There is always going to be an x factor at play which you don’t know about, and may come into play.
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used tires Reply:
July 2nd, 2011 at 9:11 pm
Komodo, what you are saying right there is exactly why money is made and lost in the market. The uncertainty and risk is where the money is and profits are made from. The market will reward you for bearing that risk.
-Jean
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Komodo Dragon Reply:
July 4th, 2011 at 6:57 pm
Indeed. That’s the best way to look at it.. nothing ventured, nothing gained, as they say.
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June 16th, 2011 on 3:03 am
So, it means that beside a good sign, the dividend can become a bad sign which tell us that the company is in stagnant growth again.
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October 7th, 2011 on 1:17 pm
Great article! The fact is there is always risk in the market. Dividend is not the only factor to look at. A wise investor should also look at the trend of what the stock price has been doing over the past months and years and also the companies current financial situation.
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November 21st, 2011 on 6:05 am
I agree, I would prefer the company to grow, if they continue to grow the bigger divends will follow.
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February 17th, 2012 on 8:12 am
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April 23rd, 2012 on 10:08 am
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May 7th, 2012 on 9:50 am
When all the money flows from other funds to funds and ETFs specialized in dividend stocks, it is a mild bubble.
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July 19th, 2012 on 10:51 am
Such investments can prove to be dangerous as the stock price may never recover. On the other side, a very low dividend yield is also not very.
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August 20th, 2012 on 10:28 am
The main point is that I was looking at a lot of high-dividend stocks, and if I was …. overshoot, and go to the other side where the pattern repeats.
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September 3rd, 2012 on 10:25 am
one other dimension to dividends in a challenging tax environment to consider is that solid growth companies, increase their dividends over.
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September 18th, 2012 on 10:16 am
when the market is going down, dividend stocks tend to go down on average less than the entire market.
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May 2nd, 2013 on 4:51 am
Nowadays no one having interest to invest in dividend stocks.
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