Investing 102

[AU Doc]

Thanks for taking the time to reply to everyone’s questions. I know the same questions get asked over and over.

That said, I’m through the first hundred or so pages and haven’t run across my particular question. At least not that I recognized, anyway.

Let me try again. It looks like the average dividend yield across the market is between 2% and 3%. Take Home Depot for example. It’s current dividend yield is 2.13%, which isn’t enough to warrant a buy on the dividend alone. It is however benefiting from the current housing growth and the stock price has been on a steady climb.

Another example is Ford. It pays a dividend of almost 5%, but the stock price has been on a decline since 2014. So again, it doesn’t fit the criteria.

Verizon has a nearly 6% dividend, but the stock has been mostly flat for the past five years. So it’s beating inflation, but still well behind the market.

I suppose what I’m saying is so far the intersection of stocks with a 5% dividend and a flat to increasing share price has been a bit like finding a unicorn for me Based on my difficulties so far, I’m wondering if I’m misunderstanding some of the terminology, or if these stocks are just difficult to find.

Thanks again! Just trying to put all the pieces together here

[GregWeld]

Originally Posted by AU Doc

Thanks for taking the time to reply to everyone’s questions. I know the same questions get asked over and over.

That said, I’m through the first hundred or so pages and haven’t run across my particular question. At least not that I recognized, anyway.

Let me try again. It looks like the average dividend yield across the market is between 2% and 3%. Take Home Depot for example. It’s current dividend yield is 2.13%, which isn’t enough to warrant a buy on the dividend alone. It is however benefiting from the current housing growth and the stock price has been on a steady climb.

Another example is Ford. It pays a dividend of almost 5%, but the stock price has been on a decline since 2014. So again, it doesn’t fit the criteria.

Verizon has a nearly 6% dividend, but the stock has been mostly flat for the past five years. So it’s beating inflation, but still well behind the market.

I suppose what I’m saying is so far the intersection of stocks with a 5% dividend and a flat to increasing share price has been a bit like finding a unicorn for me Based on my difficulties so far, I’m wondering if I’m misunderstanding some of the terminology, or if these stocks are just difficult to find.

Thanks again! Just trying to put all the pieces together here

Keep reading.....


The entire thread is only about things to think about - ways to look at things - it's not about what to do or what you should or shouldn't invest in. It isn't math class -- it's more about critical thinking. That's the problem with investing / investments.... if you understand the basics - then you can begin to look at them with your own criteria and understanding. That's all this thread is about.

You asked about narrowing down the choices you found using your search criteria -- I responded with some ways to think about how to begin to help narrow the choices down. There's no magic bullet for selection. There ARE guidelines to help - such as don't put too much in one basket - diversify - know and understand the business you're investing in etc. Investing isn't just about numbers - it's much more about understanding WHY you invested in what you did -- perhaps applying what and how you feel about that particular investment going forward... at some point - you can only trust your own judgement because it's YOUR money.

My suggestion was to just simply look around you - where you live - what you do for a living - start to look up companies you personally do business with.... sometimes just thinking and starting with that - will lead you to look at competitors and start doing comparisons - and one thing leads to another.... and triggers your brain to look at some other company that popped into your brain.... start making lists of the things you've looked up - the more you poke around the more you'll learn, the more questions you'll ask yourself....

This is investing 102 - beginners investing... you can pull up all manor of "criteria" -- and tape the list on the wall - close your eyes and throw a dart - and put money in whatever the dart landed on..... OR you can start with businesses you actually know their names - might do business with.... places that you might actually want to be a partner with. Do you want a rental house in a neighborhood you've never driven thru and know nothing about? Or would you sleep better at night with a rental in a place you kind of are familiar with and you've known the neighborhood since you were 10?

[GregWeld]

Here's something --- I've just been checking certain stocks this morning and thought of this -- or "found" this and thought it useful..... it's something that would never come up in any "criteria" search.... and as my favorite saying is -- Better LUCKY than smart....


Cisco (CSCO) in July 2011 began paying a dividend -- it paid .06 a share per quarter.... PALTRY by any standard (.35%)... but here we are 6 years later -- and it now pays .29 cents per quarter.

Had you been lucky enough to have bought it - and held it - your cost would be $15.74 a share.... you'd be UP 126% and you'd be earning 7.36% dividend on your original investment.

OH BUDDY --- yeah that's what TIME and a little bit of luck gets you.

[Woody]

Originally Posted by AU Doc

Thanks for taking the time to reply to everyone’s questions. I know the same questions get asked over and over.

That said, I’m through the first hundred or so pages and haven’t run across my particular question. At least not that I recognized, anyway.

Let me try again. It looks like the average dividend yield across the market is between 2% and 3%. Take Home Depot for example. It’s current dividend yield is 2.13%, which isn’t enough to warrant a buy on the dividend alone. It is however benefiting from the current housing growth and the stock price has been on a steady climb.

Another example is Ford. It pays a dividend of almost 5%, but the stock price has been on a decline since 2014. So again, it doesn’t fit the criteria.

Verizon has a nearly 6% dividend, but the stock has been mostly flat for the past five years. So it’s beating inflation, but still well behind the market.

I suppose what I’m saying is so far the intersection of stocks with a 5% dividend and a flat to increasing share price has been a bit like finding a unicorn for me Based on my difficulties so far, I’m wondering if I’m misunderstanding some of the terminology, or if these stocks are just difficult to find.

Thanks again! Just trying to put all the pieces together here

What you are describing is normal. In most cases, the stocks that pay the higher dividends have slower stock price appreciation. It is going to be difficult to find a stock with a 5.0% dividend that is a "growth" stock. There is usually a trade off between the dividend rate and growth or appreciation rate of a stock.

What is best (high dividend vs. high growth) is very dependent on your particular situation. If you are not retired and don't need the dividends to live on, I believe total return is the most important thing to concentrate on.
If on the other hand you are retired and need the dividend income, finding the stocks with higher dividend rates may be more important.

Another thing to consider is the dividend growth rate of a stock. For example, AT&T (T) pays a current yield of 5.65%. Over the last ten years, it has had an average dividend increase of 3.8% per year and more recently has been closer to 2.5%. Johnson and Johnson (JNJ) pays a current yield of 2.42%, but its dividend has increased an average of 8.0% over the last ten years. JNJ currently pays a much lower dividend than T, but it has grown its dividend at a much faster pace. Additionally JNJ stock appreciation has been much greater than T's stock price appreciation.

Total return for T over the last 10 years was 7.93% per year, while total return for JNJ was 13.2% per year. As you can see T's current yield is much higher than JNJ, but its total return has been much lower.

If you are a young investor trying to grow your money at the fastest rate possible, I believe a stock like JNJ would be a better choice. If you are retired and needed to live off of your dividends, a stock like T would probably make more sense.

The stocks I selected are just real life examples and are not recommendations, but you should be able to research stocks that interest you and make similar comparisons.

[AU Doc]

@Woody, that’s exactly what I’m getting at. The market averages about a 12% return. So I tend to use that as a quick check for various investment opportunities. In this case, I would want my stocks to provide a 12% return whether that be through straight growth or a combination of growth and dividend yield.

[toy71camaro]

I ran across this article a day or two ago, and it's talking about exactly what you're asking. And its something that we've discussed here on the thread too. So I felt it warranted me sharing it.

Anyhow, this may also help answer your question(s) about %, total return, etc.

https://www.kiplinger.com/article/in...-strategy.html

It won't make ME rething my strategy because its the strategy that our good friend Greg here has taught me already.

PS Hey guys - long time to see. hope you all are doing well!