If the stock drops the exact amount of the dividend, why is it that great of a deal to have one? I'm new to investing, so this just sounds like 6and 1/2 dozen of the other to me.
2007-09-25 08:42:23 · 6 answers · asked by Avenger 2 in Business & Finance ➔ Investing
That is a complicated question, but generally dividend paying stocks are larger companies with a stable history and a proven history of positive quarterly earnings. Over the long term dividend paying stocks tend to outperform the general market when you factor in the dividend payments.
2007-09-25 08:46:31 · answer #1 · answered by akg4y 1 · 0⤊ 0⤋
Dividends usually are an indication of a companies financial health and yes, mentally they do paint a rosy picture in an investors mind. They also offer some additional benefits if purchased in the form of a dividend fund.
Funds diversify across a certain group of stock and dividend funds hold shares in a variety of dividend paying companies. This can have a levelling effect of you investment by making it easy for you to spread your money around and not run the risk of having it "all in one basket". When one of the holdings in the fund pays out a dividend, it is usually reinvested in the fund and you see it as an increase in the number of units that you hold. In a recession. while that fund may drop in value, the number of units you hold may still increase. During the recovery phase after a recession, because of the extra units held, the fund's value tends to outperform other types of funds.
I am a fan of dividends as they have been solid performers for me over the years. I believe that a good portfolio mix should include a reasonable proportion of a dividend paying fund or companies.
2007-09-25 16:51:22 · answer #2 · answered by Larry M 4 · 0⤊ 1⤋
Everything drops at some point , so looking at 1 day or 1 week drops is pointless .
True investors look at the trend over 6 months , a year , 2 years . . .
Dividend stocks are Not day trading stocks .
And , so far , all my dividend stocks have returned to higher values than before .
They are stock equities and the price fluctuates but it usually fluctuates Up over the course of a year .
My dividend stocks are up over 10% per year , plus I get the dividends .
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2007-09-25 15:52:13 · answer #3 · answered by kate 7 · 0⤊ 0⤋
Dividend matters more for investors but less for traders. A company paying dividend usually means it has a healthy financial structure and making money. Earnings are sometimes deceiving but dividends are hard to fake. If you are looking for long term investment it is better to look into companies paying higher dividend than its industrial average.
2007-09-25 16:26:27 · answer #4 · answered by w 2 · 0⤊ 1⤋
Its just investor psychology. Dividends are often paid by companies with mature markets for their products and they have nothing better to do with the money. They make no difference in company value.
2007-09-25 16:19:15 · answer #5 · answered by jeff410 7 · 0⤊ 0⤋
you can live of them.
2007-09-25 17:37:21 · answer #6 · answered by Anonymous · 0⤊ 0⤋