Tag Archives: retirement

Value or Dividends

The one question that I had to ask myself was I going to invest my money into stocks that were going to increase in value (price/share) over time or stocks that would be paying a specific amount per share.

Investing for value is by far the more riskier process. You can’t always tell if a stock’s price will go up or down. Take for example the 2 shares of Obalon (OBLN) that I bought back in 2019 before I really had a grasp of what I was doing. I had just signed up with Robinhood and I had $5 burning a hole in my pocket. At that time I bought 2 shares at $1.89/share and I bought 5 shares of Guardian Health Sciences (GHSI) for $0.206/share. I bought those shares because, at that time, I was focused on the Health sector and thought that investing in anything Health industry related was a smart investment. As I learned more I ended up changing my investment strategy (which I didn’t know it was a strategy then). A couple of month’s later I sold the Guardian stocks for $0.55/share. The Obalon share price had dropped down to below $0.80/share and hasn’t moved up over $1. I have a standing sell order to rid them at $2.20/share (about a 20% increase over what I paid for them). At this time, I’m not looking to lose money.

At the time I signed up with Robinhood I received a free (no cost to me) share of Lyft (LYFT). When I got it the share price was in the $40 range. I didn’t know anything about the business model for the company nor what their plans were. So, I just held on to the share and started doing some research about what was going on with Lyft. One of the things I learned was due to the lockdown because of the Corvid-19 neither Lyft or its competitor, Uber, were going to be going great guns in price. I also learned due to the restricted revenue due to the virus, revenue wasn’t planning on growing. Additionally, in all of the years that Lyft has been in business it has never paid any dividends and was not planning to do so in the near future. I ended up selling it for $29/share. I didn’t pay anything for it but I didn’t maximize the gain I could have gotten. I determined that value investing was not for me.

So, where did this leave me? It left me looking into dividend investing, where I invest in stocks that pay high dividends on a consistent basis. This is where Seeking Alpha and Finviz came in handy. I used Finviz’s Screener feature to identify companies/funds that were paying out high yield dividends. The criteria I used was:

  1. High Dividend Yield greater than 5%.
  2. The share price must be less than $20/share (I’m not overly rich).
  3. They have been paying dividends for many years and their dividend growth is on the positive side.

The logic for these is to be able to get the largest return I could and to be able to buy the maximum amount of shares (because dividends pay per share) with the limited funds. That’s not to say I am not invested in higher priced funds, but that’s for another post at a future time.

Based on the above criteria I identified 2 stocks; Arbor Realty Trust, Inc (ABR) and Ares Commercial Real Estate Corporation (ACRE). I then researched these stocks further on Seeking Alpha. They both fit with what I was looking for, were well within my comfort zone regarding risk, etc. I will use the dividend from these socks to reinvest into the same companies. At some point I will be looking to take the dividends instead of reinvesting but that will be a few years in the future.