2007-02-13 22:12:33 · 4 answers · asked by tjcald11 1 in Business & Finance ➔ Investing
Many risks.
1) That they will not continue to pay the same dividend they have in the past (companies can, will and have cut their dividend payments)
2) That the capital depreciation in the stock will more than offset the dividend (drop by more than 20%).
3) They they will not have the CASH to pay the dividend and therefore pay out of borrowings putting the company in further financial distress and increasing the odds that #1 &/or #2 will occur
4) If it is not a US company and the dividends are paid in another currency then you run the risk of currency devaluation as well.
2007-02-13 22:21:54 · answer #1 · answered by random_market_investor 2 · 0⤊ 0⤋
By just quoting the divident payout ratio one cannot figure out the risk. The only signal you can infer from it is that they are paying low dividends and that means they are ploughing back a large portion of their income back into the business and this signals the company is in a growth trajectory. Suck stocks are called 'growth stocks'. There are Mutual funds that invest only in growth stocks.
2007-02-14 10:59:10 · answer #2 · answered by Mathew C 5 · 0⤊ 0⤋
What reputable stock is paying 20%???
Few if any--average is 4-%
2007-02-15 02:00:52 · answer #3 · answered by laliquebarry 2 · 0⤊ 0⤋
At that rate it will be in bankcrupty in less than 5 years.
2007-02-14 23:51:55 · answer #4 · answered by Anonymous · 0⤊ 1⤋