Investing 102

[GregWeld]

Originally Posted by jeff71

Wow... theirs a lot of info to read through here.

I read through about 15 pages and didn't see much on Roth IRA's. I listen to Dave Ramsey daily and he swears by Roth's.

Greg whats your thoughts?

Pound as much money into a ROTH IRA as the law will allow! Best thing that ever happened to the American public!

Put in AFTER TAX money -- allow it to grow to retirement and beyond - and pull it all out tax FREE.... Mana from heaven man!

[GregWeld]

Originally Posted by Woody

Greg,

Can you explain this. It seems like if the stock price goes down "equal to the dividend payout," your return would be zero. What am i missing?

Woody --- when the company pays out "cash" for a dividend -- they are worth less... just like if you get paid on Friday you have "X" amount... then on Monday you pay your bills -- you're worth less (or worthless - guess it depends).

So the market "adjusts" the share price accordingly. In most cases - most of the time - the stock gets taken right back up again. So over time - you're going to have capital growth AND will have collected the dividend.

Take a look at any company that you're going to invest in - and check out the 3 - 5 - 10 year chart - you'll see - if it's a company worth investing in - that they've been paying a quarterly dividend... and at the same time - the price is higher over that long period of time.

[Woody]

Originally Posted by GregWeld

Woody --- when the company pays out "cash" for a dividend -- they are worth less... just like if you get paid on Friday you have "X" amount... then on Monday you pay your bills -- you're worth less (or worthless - guess it depends).

So the market "adjusts" the share price accordingly. In most cases - most of the time - the stock gets taken right back up again. So over time - you're going to have capital growth AND will have collected the dividend.

Take a look at any company that you're going to invest in - and check out the 3 - 5 - 10 year chart - you'll see - if it's a company worth investing in - that they've been paying a quarterly dividend... and at the same time - the price is higher over that long period of time.

Greg,

Thanks for taking the time to explain. I understand what you are saying. I guess I am looking at a very short term example in the case of NLY.

My thinking is that quoted yield is say 13% per year which equates to approximately 3.25% per quarter. So my thinking is that assuming the market is stable you should earn about 3.25% per quarter just on the dividend. So Nly was trading about 15.96 on January 2. At the end of the first quarter, after ex-dividend, it was trading at 15.60 which is a 2.25% decline.

So if you held it for the quarter, your net is only about 1% for the quarter which is not so good. Maybe looking at it on a quarterly basis is too short of a term?

[GregWeld]

Originally Posted by Woody

Greg,

Thanks for taking the time to explain. I understand what you are saying. I guess I am looking at a very short term example in the case of NLY.

My thinking is that quoted yield is say 13% per year which equates to approximately 3.25% per quarter. So my thinking is that assuming the market is stable you should earn about 3.25% per quarter just on the dividend. So Nly was trading about 15.96 on January 2. At the end of the first quarter, after ex-dividend, it was trading at 15.60 which is a 2.25% decline.

So if you held it for the quarter, your net is only about 1% for the quarter which is not so good. Maybe looking at it on a quarterly basis is too short of a term?

WAY TOO SHORT TERM

[96z28ss]

newbie question.
Do you need to be in the stock for the whole quarter period to collect the dividend, they don't pro-rate it correct.

[Flash68]

Originally Posted by 96z28ss

newbie question.
Do you need to be in the stock for the whole quarter period to collect the dividend, they don't pro-rate it correct.

Greg covered it prior but you just need to own it by the ex-dividend date. And it's all or nothing.

[GregWeld]

Originally Posted by Flash68

Greg covered it prior but you just need to own it by the ex-dividend date. And it's all or nothing.

Correct. You can buy the day before the "ex date" and sell it the day after an you're still going to get the whole dividend.

There are actually websites that publish all that data and traders the trade just based on trying to capture the dividend.

[booah]

Originally Posted by GregWeld

Keep all the shares.... and yes -- you're per share value will get readjusted to reflex the split. BUT --- I'd hold both companies.

From there -- if anyone had a crystal ball and could see the future -- we'd all be rich.

Thanks Greg, appreciate the input

Denton

[GregWeld]

This is why I like dividend investing so much... I DO NOT own this particular stock -- but will use this as a nice example of getting a RAISE without even asking for one! Here Goldman Sachs has just given its shareholders a nice .44 cent per year gift. That's real money - and if you have several companies doing this you can not only keep up with - but you can beat - inflation. For someone like me that is retired - this would be the equivalent of getting a pay raise!

Typically you will also see a share price increase when a company does this as well. A double bonus!



Goldman Sachs (GS) said it would raise its quarterly dividend to 46 cents per share from 35 cents.

[GregWeld]

I should add that the reason I don't own any Goldman Sachs (GS) is because of the paltry 1.18% dividend rate. Not to mention they also have a horrible chart. Remember that I always look for TOTAL RETURN -- and the TR on GS is negative.... for the past 5 years... I just felt the dividend raise was worth pointing out because these kinds of events are important and really help over the long haul.