Tag Archives: dividend stocks

Smart Ways to Invest: A Quick Overview of Some of the Smartest Things You Can Do With Money

Guest Article By George Botwin

Do you suddenly find yourself with a bit of money and want to know about some smart ways to invest? How can you best put that money to good use? The most important thing to do – if you haven’t already done so – is to pay off your debts. Get that out of the way. If you still have debts when you invest, any interest you might earn from the investment will just equal out the interest you’ll have to pay on the debts. Holding onto debt might even be more costly than any profit you might make from investments.

Once you’re all clear with debts, then you can consider making smart investments. Investment bonds are usually considered a good idea for those who are afraid of taking on too much risk. The potential for returns is quite lower than those of stocks, but you will still get some interest over time, whether you invest in US government bonds or foreign bonds. Just do the right research first to find out which foreign bonds are likely to be the most profitable over the next decade.

Learn about the different types of mutual funds and decide if they are smart ways to invest for you. They are categorized by asset class: cash, bonds, and stocks, and then further categorized by objective, strategy, or style, such as stock mutual funds, money market mutual funds, and so forth. The downside to mutual funds is lack of ownership. The investor actually doesn’t own the individual stock, and therefore lacks perks such as voting rights.

Smart Ways to Invest With Diversification

While you don’t have to put all of your money in a single bank account, it’s still considered wise by many people to open up a Certificate of Deposit account with a reputable online bank that offers a high APY – even higher than a regular savings account. The drawback? You have to agree to let your money stay in the bank for a certain period of time and won’t be allowed to withdraw any of it prior to that time without getting penalized.

Dividend-paying stocks can be among the smart ways to invest for intermediate and advanced investors. Dividends are a portion of a company’s profit that are paid out to shareholders (usually quarterly). If you own a dividend stock, you can earn cash in the short term as well as the investment itself through market appreciate during the long-term.

As for the smart ways to invest in individual stocks and a few other opportunities, it’s best to join a group of insiders where you will get picks from the true professionals and experts. Having access to high-quality investment analysis, such as that offered by Capitalist Exploits, is a great way to gain an edge in investing.

To get closer to financial freedom, visit George’s website: https://www.financiallygenius.com/capitalist-exploits/

Article Source: https://EzineArticles.com/expert/George_Botwin/1425000

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Harnessing Stock Market Volatility

Guest Article By Steve Selengut

If you were to Google “stock market volatility”, you would find a wide range of observations, conversations, reports, analyses, recipes, critiques, predictions, alarms, and causal confusion. Books have been written; indices and measuring tools have been created; rationales and conclusions have been proffered. Yet, the volatility remains.

Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day’s gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.

The only question I continue to have about all this comical hubbub is why don’t y’all just relax and enjoy it? If you own only high quality income generating securities, diversify properly, and adopt a disciplined profit-taking routine, you can make stock market volatility your very best friend (VBF).

Decades ago, a nameless statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. “In the real world”, he said, “there are liars, damn liars, and any member of the groups just mentioned”. An economist or a politician, armed with a battery of statistics, is an ominous force indeed.

Well, now, all economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.

  • But the volatility (and the uncertainty it either causes or results from, depending upon the expert you listen to) persists.

Modern computers are so powerful, in fact, that economists and statisticians can now calculate the investment prospects of just about anything. So rich in statistics are these masters of probabilities, alphas, betas, correlation coefficients, and standard deviations, that the financial world itself has become, mundane, boring, and easy to deal with. Yeah, sure it has.

Since they can predict the future with such a high degree of probability, and hedge against any uncertainty with yet another high degree of probability, why then is the financial world in such a chronic state of upheaval? And why-o-why does the volatility, and the uncertainty, continue?

I expect that you are expecting an opinion (yet another opinion) on why the volatility is as pronounced as it seems to be compared with years past. Frankly, Scarlett, I can’t really make myself give a damn. The uncertainty that we are asked to believe is caused by volatility just simply is not. Uncertainty is the regulation playing field of the investment game… and of life, actually.

The more you invest in higher risk securities, the more you speculate on future directional change, the more you ignore growing income, and focus only on market value, the more uncertain your investment environment becomes. So risk, speculation, poor diversification, low income generation, and up only market value expectations combine to exacerbate uncertainty, but nothing can eliminate it… only that is certain.

Volatility, on the other hand is simply a force of nature, one that needs to be embraced and dealt with constructively if one is to succeed as an investor.

But this machine driven, hyper-volatility that we have been experiencing recently, has been magnified by the darkest forces of the “dismal science” and the changes that it has encouraged in the way financial professionals view the makeup of the modern investment portfolio.

On the bright side, enhanced market volatility actually enhances the power of the equity and income security trading disciplines and strategies within the Market Cycle Investment Management ( MCIM ) methodology… an approach to market reality that embraces market turbulence, and harnesses market volatility for results that leave most professionals either speechless or in denial.

  • MCIM focuses on the highest quality equity securities and well diversified income security portfolios, creating a lower than normal risk environment where price fluctuations can be dealt with productively, without panic. Higher prices generate profit taking transactions; lower prices invite additional investment. The underlying quality, diversification, and income generation create a more tolerable “uncertainty quotient” than other methodologies.

But, with no statistical data necessary (or available) to support the following opinion, consider this simplistic rationale for the hyper-volatility of today’s stock market.

Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations.

Those of us who trade common stocks in general, Investment Grade Value Stocks in particular, owe a debt of gratitude to the real volatility creators: the hundreds of thousands of derivative products that bring an entirely speculative kind of indirect supply and demand to the securities markets.

Generally speaking, the fundamental, emotional, political, economic, global, environmental, and psychological forces that impact stock market prices have not changed significantly, if at all.

Short term market movements are just as unpredictable as they have ever been. They continue to cause the uncertainty you need to deal with, by using proven risk minimization techniques like asset allocation, diversification, and profit taking.

The key change agents, the new kids on the block, are the derivative betting mechanisms (Index ETFs, for example) and their impact on the finite number of shares available for trading. Every day on the stock exchange, thousands of equities are traded, a billion shares change hands. The average share is “held” for mere minutes. No one seems to we seek out analysts who spin tales of “fundamental” brilliance, profitability, or income production.

On top of derivative trading in real things such as sectors, countries, companies, commodities, and industries, we have a myriad of index betting devices, short-long parlor games, option strategies, etc. What’s a simple common share of Exxon to do? I’ve heard financial talk show hosts warn listeners to never, not ever, buy an individual equity!

  • Is today’s movement in any individual equity the result of demand for the company shares themselves, or demand for the multiple funds, indices, and other derivatives that track or include the company in their “model”? How many derivative owners have a clue what’s inside their ETF?

We are in an environment where investors feel smarter dealing in sectors than in companies; where 401k “retirement” plans (they really are not retirement plans, you know) are banned by regulators from offering even reasonably high yielding investment opportunities, and where government fiscal policies have forced millions of actual retirement savings accounts to seek refuge in the shark infested waters around Wall Street.

Market volatility is here to stay, at least until multi-level and multi-directional derivatives are relocated to the Las Vegas casinos where they belong, until regulators realize that 7% after higher expenses is better than 2% after minimal expenses, and until interest rates are allowed to return to somewhat normal levels… and this is what feels to some like an elevated level of uncertainty.

For the discernible future, we’ll need to find a way, a methodology, that makes both of them our VBFs.

My articles always describe aspects of an investment process I have been using since the 1970’s, as described in my book, “The Brainwashing of the American Investor”. All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.

Article Source: https://EzineArticles.com/expert/Steve_Selengut/12786

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Relavence of the Dividend Yield

What’s so important about the dividend yield? Why do I focus on it equally with the stock price? As a dividend investor I like to have my money work for me with little effort or worry. All investments come with risks. I like to mitigate mine. I do this with dividends. With dividends I don’t rely solely on share price to receive a return on my investment. Also, dividends are what I get paid to have my money tied up for the long term.

What does the dividend yield mean to me? How does it relate to my own investment strategy? I look at the dividend yield as a way to determine how good the stock price is in relation to the dividends being paid. The higher the yield the better the stock price is in relation to the dividend. Let me explain using 2 stocks.

                                        Div Yd   Share $   Div $
Home Depot ($HD)   2.15% $272.81 $6.00
Lowes ($LOW)             1.48% $159.82 $2.40

As you can see Home Depot has a high dividend yield not just because of the high dividend it is paying but because the high dividend relative to its share price. If the share price were to increase by 10% the dividend yield would drop to 2%. Additionally, if the share price dropped by 10% the dividend yield would increase to 2.44%.

Again, you can see that Home DEpot and Lowes have dividend yields of 2.15% & 1.48%, respectively. Now, if you took their share prices and switched, you’d end up with a dividend yield of 3.75% for Home Depot (6/159.82) and 0.87% for Lowes. The dividend yield can be affected by a change in either share price or dividend payout.

I view the dividend payout as a gauge to determine how good the share price is in relation to what they payout in dividends. As I stated before, this is just one of the factors I use to decide what stocks to invest in.

Of course, there still are other factors that I look at, such as, P/E Ratio, EPS, & PEG. I also start with companies that have a large MOAT. I don’t prefer to invest in companies which may have an uncertain future, regardless of how much they pay in dividends. But overall, it starts with the Dividend Yield.

Importance Of Stock Price To A Dividend Investor

How important is the stock price to a dividend investor. Speaking only for myself, stock price is a little less important than the dividend payout and the number of shares owned. As long as the stock price remains within the 52 week price range, all is well for me. If it set a new low, I will definitely take another look at the company to determine if I want to remain invested with it. To me the share price is an opportunity for me to buy additional shares so that I can get more dividends.

You find a lot of stock investor stressed out because of the activity with the stock market, specifically when the market has a downturn or pullback in the prices. That’s because that is all they are banking on, the overall value of the total stock. I don’t sweat it when my stocks take a decrease in price. I look at it as an opportunity to purchase more stocks at a price less than what I originally paid. Don’t get me wrong, I still think that stock price is important but not the #1 factor. It’s in the Top 5. You could end up with a stock like Just Energy Group ($JE) that had a 1 day drop in price of 95% back in Sept-Oct.

That’s too much of a risk for me. I can’t eliminate all risk but I tend to prefer mitigating it as much as a I can.

Accumulating cash

I’ve been very quiet on my blog so far because there’s nothing happening for me in the investing world. I’m holding my current positions and I have recently received dividend payments on some of my stocks. Those payments I’ve taken and re-invested into the same stocks. At this point I am waiting for the rumored stock market crash so that I can pick up some bargains and to increase my positions on the stocks that I currently own.

In the meantime, as my funds for investments come in I’m just accumulating them into my investment cash account. My focus is to acquire additional dividend stocks, primarily, and to increase my current positions when the opportunity presents itself. This is my sub-strategy for the next 8-12 months. Then I plan on changing gears to focus more on increasing my current positions, primarily, and then to acquire additional dividend stocks when the opportunity presents itself.

But so far all I have been accumulating has been investment funds. I’m looking to find stocks or ETFs that pay dividends on a monthly basis. All of my other criteria still are in place whenever I research where I should invest.

Not All Dividend Stocks Are Created Equal

As a dividend investor, dividends are the key factor in deciding if I want to invest in a company or not. As I’ve mentioned in my previous posts there are other additional factors that go into my decision making process to invest or not to invest. But in this post I want to focus on the aspect of dividends. Many investors are growth investors. They buy the stocks of a company for the purpose of selling for a profit within a specific period of time. Others, like myself, invest for the long term to capitalize from a company’s increase in revenues and thus profits, which then translate into dividends. But again, not all dividend stocks are created equal. Some companies pay very low dividend payouts while others pay a substantially higher amount.

One of the key things I look at is the dividend payout relative to the company’s stock price. This is referred to as the Dividend Yield. This is the amount of dividend you will receive for every dollar you have invested. Some are very low, such as Dollar General ($DG), where the yield is 0.67%. Their last dividend payout was $1.44/share. To get that $1.44 you’d have to spend about $218 to buy 1 share.

Then you have McDonalds who just increased their dividends. Even with the last payout being $5/share, this is still only a little over 2% in dividend yield. You’d have to spend about $224 to buy 1 share of stock. That one share would then pay you the $5 in dividends.

There are many similarities between growth stocks and dividend stocks when it comes to deciding if the company is worth investing in or not. But with dividend stocks you’re looking for a continuous income coming in. The growth stock investor is also looking for income but they have to sell all or a portion of their holdings to generate the income. This means that they have to constantly be on the lookout for their next “Deal”. They have to replace the stocks that they sold.

This is the reason that I prefer dividend investing. Once I have researched a company and I have decided that it is worth investing in, all I have to do is hold my investment and collect the dividend payments. As long as there are no drastic or catastrophic changes to the company, there is no reason to sell the stock. Once you decide to buy the stock the only things left to do is 1) collect the dividends and 2) decide when to buy more stocks in the company. This last part is for another post in the future dealing with buy on the DIP (drop in price). After buying the stock and the dividend yield drops, you may want to just hold onto the stock shares you have. If the yield increases that may be a good time to increase the positions you hold. Again, other factors come into play here.

But back to the original premise of the initial dividend yield and how it is a factor in deciding to buy. As I stated before the dividend yield is the key factor for me. I want to get the maximum dividends for the least cost (i.e. stock price). The only time that share price is important is when I am looking to buy more shares. I’m not looking to sell my shares any time soon. As long as the stock price stays fairly stable, I am happy. As long as the dividend keep growing, I’m happy. As long as the company doesn’t reduce the dividend payout 2 periods in a row, I’ll hold on to them shares. My whole focus is to own the maximum number of shares for the least amount of money.

What is my investment strategy?

In discussing investments with others I am asked what is my investment strategy? I am going to try to outline my strategy here but you must remember that the strategy is a bit broad and in special cases I will make exceptions to certain criteria.

I only invest in:
1. Long standing, existing businesses. I tend to avoid emerging/startup companies and IPO’s.
2. Companies that pay dividends. This is the rule that is pretty much set in stone. No dividend then no investment from me.
3. Companies that have a dividend yield of between 2.5 to 5%.
4. Companies that have at least a 5 year history of dividend payouts.
5. Companies that show a positive dividend growth.
6. Companies that are rated at Average or below in risk and Average and above in returns.
7. Companies whose stock price allows me to maximize the quantity of share that I own.

The above points are all relative. Such as the dividend yield. If a company is paying out a dividend of $6/share and it’s stock price is $200, this gives me a yield of 3%. This passes my criteria.for dividend yields but does not pass my ability to maximize the number of shares that I own because I am limited by my investment budget. If I have only $200 to invest each month, buying the one stock for $200 only gets me that 1 share. But if I can buy another stock that sells for $50/share and pays 3% dividend yield I can get 4 shares. The dividends I can get will be the same for both at $6 but when I re-invest the $6 I can only get 0.03 shares of the $200/share stock but 0.12 shares of the $50/share stock. I try to maximize shares owned and maximize dividends earned.

I am focusing on the growth of my stock investments based on share growth in addition to any increase in stock price value. Share growth is more critical to me than share price growth. I will increase my position with a specific stock if the share price drops or increases no more than 10%. If the share price increases more than 10% I will just hold and wait for the next DRIP.

I’ll be detailing my different strategy points in later postings.