Quote:
Originally Posted by Chad-1stGen
I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...
Reminds me when everyone was day trading and then everyone was in real estate.
Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.
|
Well -- the major difference is that these PAY YOU. They're not gambling that the price is suddenly going to double... or that you can trade them daily and get in and out... or borrow cheap money and sell something in a month.
The reason people are coming on board the dividend train is because the dividend percentage is a known calculated rate. When you compare this rate to other "interest bearing" investments - the rates are very compelling. Compared to Bonds - CD's - Money Market funds etc the return is huge... and the only reason they would be BAD is if the stocks go way up and the dividend as a % then would come down. That can happen - but it doesn't take away that long term steady march of dividends reinvested. Historically this is a great way to invest. It's not another get rich quick scheme that just popped up.
So let's put this into real life terms. I own 25,000 shares of Annaly Capital Management (NLY) @ an average cost of $16.88 - it's dividend this quarter is .57 per share. This stock went "ex dividend" on the 27th -- and I will get a cash payment of $14,250.... and I'll get that or similar in another 3 months - and so on -- so that dividend (provided the dividend stays at .57) will pay me $57,000 this year.
I don't care if dividends are the "hot money" or anything else - because that $57,000 per year is REAL MONEY and I get it. Even if the stock goes DOWN -- I still get that dividend - if the stock goes up - I still get that dividend and I'd also have capital growth... but what I L O V E is that check!
The reason I PREACH look at the historic chart -- is because the capital (stock price gains) have been going like this for YEARS.... if not - I don't buy 'em. I can only get a glimpse of the future by looking at the past. There is no guarantee that they will continue - or at what rate - or that they won't go down - but if they have a 25 year history of paying that dividend - I have to go with that. I don't really know what else I could do differently. I can't make any money on CD's... I could buy houses cheap and HOPE they are going up some time (my bet is that they will)... but that takes talent - and work - and involvement etc. I can do my stock and bond investing with my laptop... and so far... it's beating all the real estate I own... and I've been doing it for 30 years. Doesn't make me an expert. And remember -- this is Investing 102 -- not "let's pick the next Microsoft" (been there done that - LOL). We're talking COKE - JNJ -MCD - KFT - etc.....