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.