Category Archives: Dividend Investing

Frequently Asked Questions (FAQ) About Dividend Investing – Dividend Growth Investor

Frequently Asked Questions (FAQ) About Dividend Investing – Dividend Growth Investor: Frequently Asked Questions (FAQ) About Dividend Investing
I have highlighted below several frequently asked questions about dividend investing. This is not an all inclusive list, but more of a running total of questions I am usually asked about dividend investing, dividend growth stocks and my strategy. The answers pertain to my investing, strategy and experience, and I have tried to respond to the best of my knowledge and intentions. As I get new recurring questions asked, I would add them to this list.

19 Things I Like About Dividends – Seeking Alpha

19 Things I Like About Dividends – Seeking Alpha: When I wrote my first Top 40 eBook in 2008, I included a chapter entitled, “Why Invest in Dividend Stocks?” I discussed the pros and cons of dividend growth investing. On the “pro” side, I had 9 reasons to invest in dividend growth stocks.

A couple of weeks ago, I published the 2013 edition. My number of reasons to like dividend growth stocks has grown to 19. Here they are.

12 Things To Dislike About Dividend Investing – Seeking Alpha

12 Things To Dislike About Dividend Investing – Seeking Alpha: Last week, I wrote “19 Things I Like about Dividends.” In the comments section, I sort of promised to write an article about the downsides to dividend investing. This is that article.

In addition to drawing on the 2013 edition of my annual eBook on dividend growth investing, I have dug back and found some of the objections to dividend investing that have turned up in articles and comments on SA and other places over the past couple of years.

How Dividend Investing Can Help You Stay Away From Ponzi Schemes ? Intelligent Speculator

How Dividend Investing Can Help You Stay Away From Ponzi Schemes

The last few years have seen many different trends in the financial markets. Unfortunately, one of them has been the explosion of frauds related to capital securities. Insider trading, market manipulation, and many other types of frauds are taking place at an increasing rate. One fraud that has been in the spotlights more than any other has been the Ponzi scheme. There have been small ones, big ones and then the Bernie Madoff one. These schemes have been happening a lot more than you would think but only the biggest ones got attention from the mainstream media.

How Ponzi Schemes Work

You can find much more detailed information but the basic concept is that investors buy shares in a fund. The manager then manages to publish falsified valuations making the returns look much better than they actually are. The effect is twofold:
-Current Investors Put More Money Into the Fund
-New Investors Come Knocking To Invest
This can go on for a long time because the basic ways such a scheme will get caught are if authorities catch on or when investors start withdrawing money which the fund often does not actually have. That is what happened to Madoff. If the financial crisis had not occurred, investors would have perhaps left their funds invested for many more years and the Ponzi scheme could have gotten much bigger. Other frauds such as Enron relied on different accounting frauds.

How Dividend Investing Can Help You Avoid Frauds

Diversification: While it is not unique to dividend investing, the truth is that dividend investors tend to have much more diversity in their holdings than the average investor’s portfolio.
Type Of Company: Generally, dividend investors tend to like long term, sustainable dividend companies such as the dividend aristocrats that have often been running for 50, 100 years or even more . While such companies can end up being fraudulent, the risk is much smaller than when investing in newer companies
Take Money Out:One of the great things about dividend investors is that they take money off of the table in form of dividends. The only Bernie Madoff that did not get destroyed were those who had taken out money over the years instead of always reinvesting into the same funds.

Dividend Investors Beware

I think it’s still important for dividend investors to look out for opportunities that look too good to be true. A company cannot keep increasing dividends by 10% per year for decades, it’s just not possible. Still, I think that as a dividend investor, my odds of being caught up in a major fraud are diminished.
Do you agree?

Dividend Investing: 6 Reasons To Buy Dividend Stocks

As we go through complex dividend topics on this blog and attempt to simplify them, we need to pause once in a while. Today we should stop for a second and take a look at some of the benefits of dividend investing. What exactly are the pros of dividend investing?
Dividends acts as passive income
Investing in dividend paying stocks is really a form of passive income. You purchase your stocks at the desired time and you receive a quarterly payment. The money is pretty much passive. The only requirement is that you hold enough capital in your savings to purchase the stocks. Then you’ll receive passive income on a quarterly basis. Instead of looking into scammy ways to attempt to earn a passive income, we recommend that you try investing in dividend paying stocks.
Dividends are paid by stable companies
By investing in dividend paying stocks, you’re ensuring yourself a majority of the time that your money is being invested into stable companies. A company that is able to share its profits with investors for a consistent period of time has established that it’s steady and will not collapse as easily during market swings. Stable companies also hold the ability to bounce back fairly quickly after a recession.
Extensive research
When you purchase shares from an established company that shares profits, the odds are that you have conducted extensive research to find this company in the first place. Think of Warren Buffet for example. He didn’t earn his fortune from investing in companies that he knew nothing about or hot companies that promised to earn you a ridiculous amount of money in a short period of time. He performed massive amounts of research to ensure that his money would be protected as an investor.
Less stressful
We are all different when it comes to investing. Some of us prefer to be day traders and to watch the stock market closely. The rest of us simply don’t enjoy this nor do we enjoy the stress that comes along with tracking the market swings. Through investing in dividend paying companies we ensure that are investing is passive and that we don’t have to track the many market swings that will occur.
Advantageous Tax Treatment
Dividend payouts are usually less taxed than interest income. Therefore, receiving dividends also means receiving more money in your pockets. For this reason, several retirees try to have a part of their portfolio paying off dividends instead of having only bonds paying interest income.
Dividend Reinvesting
Another way to make your portfolio grow over time is to subscribe to DRIPs. In short (you can have the full length explication of Dividend Reinvestment Plan by clicking on the previous link), DRIPs allow you to reinvest automatically your dividend payouts without occurring any action on your parts or trading fees.
As you can see, there are several advantages of dividend investing. At the same time, trying to find the best dividend stocks is not very different than trying to find any other high quality stocks.
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