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Why Invest in Dividend Stocks?

I realized that it is necessary to write about the reasons behind why I choose to invest in dividend stocks as my strategy in building wealth. Though, Dividend Investing is more popular in the United States, I am optimistic that this strategy will equally work-profitably in the Philippine Stock Market. Does anyone of you doing dividend investing strategy? I hope we can discuss our experiences here as we go along our journey towards financial freedom.

As an Overseas Filipino Worker (OFW), one of my goal is to build up my wealth as soon as possible. When I say wealth, it’s not simply about having a lot of assets, it’s about generating a significant amount of passive income that grows over time.

Putting Up a Business

I believe putting up a business is one way, if not, the best way to build our wealth. Indeed, I had put up three small businesses so far. Two of these are giving me an ample amount of passive income while the other one I decided to stop its operation due to the incompetence of the manager I hired.

With the closure of my third business and a timely introduction to me of the stock market, I realize that stock market could be a good business as well. Buying a share of stock in a company has no difference from what I have been doing in my businesses since I hire other people to manage the business that I put up for I am still working outside the Philippines (so I can be well capitalized).

 Stock Market as my new Business venture

I got motivated with the idea that once you bought a share of stock in a certain company, you are then a part OWNER of that company. Wow! I can own many businesses while I’m still an OFW. The challenge now is to define what strategy to implement before investing in the stock market?

EXPENSIVE-MONEY

Investment Strategy

Investing strategy depends on the type of the investor. In the Philippines, I often heard of the following strategies:

  • Buy and Hold. Buy and hold strategy involves buying company shares and hold them for a long time.
  • Peso Cost Averaging. The peso cost averaging strategy is designed to reduce the risk of suffering substantial losses resulted when the stock was bought just before the market falls.
  • Value Investing. The value investing strategy looks at the intrinsic value of a company and value investors seek stocks of companies that they believed are undervalued.
  • Market Timing. Market timing is usually used by the day traders (active traders) attempting to maximize their return.
  • Dividend Investing. Buying a Dividend Stock and holding while continually getting a dividend income.

So, Why Dividend Investing?

I am not against with any of the strategies mentioned above. In fact, I want to use them all. Yes, TO USE THEM ALL. I will incorporate the first four listed strategies above into the Dividend Investing. Why? Simply to ultra-maximize my return (wishful thinking).

Though, I’m still in the process of building up my Dividend Portfolio nevertheless I sense comfort with Dividend Investing, in a way that I don’t really need to put most of my time monitoring the ups and downs of the stock market price. In fact, I can’t monitor all the time during trading hours due to my 12-hours daily job (pardon, not really everyday – my work cycle is 4 Days work/4 Days Off). Monitoring the market action after the trading hours is not an issue in dividend investing.

My previous blogpost, a comparison of return between Dividend Stocks versus non-dividend stocks, shows how the dividend stocks leads in reaping the returns. Even, one stock reaps an overwhelming 1,600% return, wonderful, right? But then again just a reminder that this will not guarantee for the future performance. A detailed study is a MUST before you invest your hard earned money.

Another thing that I like in Dividend Investing is that, aside from price appreciation, the dividend income that you’re collecting can be re-invested hence, that will give you a passive income that grows exponentially each year and at the same time builds your net worth over the long term.

Security during Market Lows

As we all aware, stock market price is moving like a roller coaster. Everybody is happy when the price move upwards but many would panic whenever the price declines. The movement in price doesn’t affect much the dividend investor knowing we still get dividends and even have the opportunity to buy more shares when the price is low, Peso cost averaging and Market Timing strategies applies here. However, we MUST dutifully check the value of the stocks we’re holding to ensure that the stock value still holds to be favorable – here you will apply the Value Investing Strategy.

CONCLUSION

Apparently, the dividend investing strategy takes time and discipline. I would say, patience and perseverance is the key to success in dividend investing. Further, we need to develop a robust investing plan. We need to identify companies that will provide good earnings over time.

Some time ago, I read from one of the blogger (unfortunately, I forgot to take note of his blogsite 🙁 ) sharing his views in finding a good dividend growth stock for your portfolio. The following is what his general principles that are worth looking for when investing in dividends:

  • A good dividend growth company has a product or service that you can foresee existing and being relevant for many decades to come. Time is very important to allow passive income to increase, so it’s wise to find a company that is built to last forever.
  • The company should have unique aspects that separate it from competitors.
  • A strong balance sheet is the hallmark of a good dividend investment, because it increases the chances of your company being able to survive and grow.
  • Keep in mind the general estimation that the total rate of return will be equal to the dividend yield plus the sustained dividend growth rate. Some investors like high-yielding stocks with lower dividend growth while others like lower-yielding stocks with higher dividend growth, and some prefer a mix of both, but keep this basic guideline in mind.
  • The company’s stock should be reasonably priced. A good company can make a bad stock if it is over-priced relative to its fundamental value. If you buy stock in an overvalued company, your returns are likely to be less than the sum of dividend yield and dividend growth. If, instead, you buy quality undervalued companies, your returns may be greater than the sum of dividend yield and dividend growth.
  • You should be able to understand the company. My view of investing is about individuals taking control of their finances, so if they don’t really understand their stocks, they aren’t really taking control of their finances.

How is the idea of investing in dividends to you? Does it sounds more profitable, easy, and hassle-free strategy?

Thank you for reading and looking forward for our success in all our endeavor!

dargs-ediens

The Rise and Fall of Dividend Champions

How many companies have tried and failed to become a Dividend Champion with 25+ years of annual dividend growth? How many of the former Champions are back in the running for another try at Dividend Championship?

Read on for some stats on the rise and fall of Dividend Champions since 2007.

The excellent US Dividend Champions list has been maintained by David Fish since 2007. The list contains a detailed “Summary” tab showing the evolution of companies in the list from year to year; however it’s not entirely accurate because the earlier lists from 2007 do not contain all of the companies showing as Champions today.

I compiled all of the lists from the Dividend Champion list archives together so I could see the complete evolution of all companies from December 2007 through to December 2015. To compile the list I started with the 2015 list and subtracted one year in each company’s history until 2007, then I added the companies that were eliminated in each year and back-tracked their history as necessary.

You can download the Excel File here.

I’ve shown the first three lines from the report as an example; it contains the symbol / company name and then the dividend growth length (in years) as a number for each year from 2007 to 2015. The 2015 column matches the December 2015 list; earlier years might not match up exactly with earlier lists because I’ve extended the data backwards.

So-Expensive

Empty cells indicates either no dividend was paid or that the dividend growth was less than 5 years. You can infer when companies started paying dividends e.g. Agilent started paying a dividend in 2010 and grew it each year until 2015 when it reached a 5-year history and is first shown on the list.

SymbolNameIndustry200720082009201020112012201320142015
AAgilent Technologies Inc.Medical Equipment        5
AANAaron’s Inc.Retail-Rental5678910111213
AATAmerican Assets Trust Inc.REIT-Retail        5

The Fall of Dividend Champions

There are many reasons why dividend champions are removed from the Dividend Champions list. Poor performance is just one; it could be because the company was taken private or merged with another company. It could also be that the company decided to expand or grow the company instead of paying out the dividend. And a pause in an annual increase will remove a company from the list. I’ve not researched the reasons why; I was mostly interested in the rate of decline of existing dividend champions.

Here’s a table showing how the companies in 2007 with 5+ years of dividend growth have fared in the subsequent 8 years until 2015.

# Years200720082009201020112012201320142015
50+888888877
45181817151515151414
40343330272727272626
35716657545351515050
3011110281787573727169
2514212799949189878583
20165150120114111108106104102
15194179149143138133130128125
10252237207201189185182179174
5379364334328311298286279266

The data is cumulative; that is there were 379 companies with 5+ years of dividend growth in 2007 and 252 companies with 10+ years. In 2008 there were 364 companies remaining from the original 379. This means that between 2008 and 2007, fifteen companies failed to increase dividends and were removed (379-364 = 15), and that in 2007 there were 127 companies with a 5-9 year history (379 – 252 = 127).

I’ve plotted this table out in the chart below.

This chart shows both the effect of the 2007-2008 financial crisis with a large drop in dividend increases in that period. In general, companies with a long history show a much lower failure rate than companies with a shorter history.

Past performance won’t apply going forward, but this kind of information might help determine the allocation of stocks between companies with long and short histories. A stock portfolio containing twenty companies with a 5-year history might expect to lose about 6 companies (28%) in an 8-year period with a corresponding reduction (or freeze) in dividend increases.

Using the numbers above that’s (266-174) / (379-252) = 92/127 = 72% remaining. The table below shows all ranges.

Start Length20072015Survival %
5-91279272%
10-14584984%
15-19292379%
20-24231983%
25-29311445%
30-34401948%
35-39372465%
40-44161275%
45-4910770%
50+8788%

The law of small numbers increasingly distorts the results since a single company dropping out has a much more significant effect when there’s only 8 to start with compared to 127.

Rising from the ashes

The following former Dividend Champions from 2007 are back in the 2015 list with a 5 or 6 year Dividend History. Their former status might mean they’re above average compared to other 5-year growth companies.

SymbolCompany Name20072015Sector
AVYAvery Dennison Corp.315Business Equipment
BBTBB&T Corp. 36 5Banking
BUDAnheuser-Busch InBev SA/NV 31 6Beverages-Alcoholic
FITBFifth Third Bancorp 33 5Banking
GEGeneral Electric Co. 31 5Conglomerate
HSYHershey Company 32 6Confectioners
JCIJohnson Controls Inc. 32 6Auto Parts
KEYKeyCorp 43 5Banking
LMLegg Mason Inc. 26 5Financial Services
LNCLincoln National Corp. 25 6Insurance
PFEPfizer Inc. 41 6Drugs
STTState Street Corp. 26 5Banking
UDRUDR Inc. 30 5REIT-Residential
USBU.S. Bancorp 355Banking

Survivorship Bias

The Dividend Champions List is a no-nonsense list; if a company cuts its dividend it’s out; there’s no special treatment for 50-year Champions despite their pedigree. For the most part, this is a good thing since only the strongest companies survive which is a desirable trait for companies in a dividend growth portfolio. But Survivorship bias can creep into comparisons so keep that in mind when comparing numbers.

As a case in point, in the 2015 Dividend Champions list there are 13 Financial companies, 14 Utilities and 5 Health care companies which have a 33+ year dividend growth length. So you might look at those numbers and think that Financial companies and Utilities are both great sectors for dividend champions and Health Care is quite weak.

However if you wind the clock back to 2007 and look at companies back then that had a 25-year Dividend Growth history (which is 33 years now), your conclusion might be quite different.

Industry2007 (25-Year History)2015 (33-Year History) Survival %
Health Care191473.4%
Utilities8562.5%
Financial441329.5%

Less than one-third of the 25-year Dividend Champions from the Financial sector in 2007 managed to continue to increase dividends over the next eight years, compared to nearly three-quarters of the Health-care companies. This time period includes the Financial crisis where Financial companies were heavily impacted, but the high numbers of Financial companies in the 2015 list are simply because there were more financial companies to start with. And another financial crisis is perhaps more likely than a crisis in the Utilities sector in the future.

Even this conclusion has its bias since it only counts companies with 25+ years and not the total number of dividend paying companies.

Summary

I don’t think too much weight should be put on the percentages in this summary; the set of numbers are too small. But it was an interesting exercise to see the kind of failure rates that might be expected over a long investing cycle, especially for investors who have a 40-year investing period ahead of them.

Re-visiting former champions that have recovered from their prior cut or freeze is an interesting topic too. Of course they cut their dividend in the first place but further research might indicate if they deserve a second chance or not.

And in case you’re wondering, the solitary Dividend Champion with 60-years of dividend growth which was removed from the Dividend Champions list in the 2007-2015 period was Diebold Inc (DBD) due to a dividend freeze in 2014. It’s still paying dividends with a 4.3% yield but the Champion’s List has no mercy.

Quote of the day

Choose a job you love, and you will never have to work a day in your life.

Day Trading Techniques

Day Trading Techniques: Get Out of the Games Fast

The phrase “day trading” refers to buying and selling stocks during the day, a quick and efficient strategy to procure profits while the stock market is in its peak of activity. Day traders focus on making profits by investing large amounts of capital into liquid stocks that present small price increases. Below, you will find some common stock trading techniques that are used by day traders.

Retail day traders find the Sun Microsystems (NASDAQ: SUNW) stock a favorite. The stocks sells at very low prices, is very liquid, and extremely volatile; all characteristics that make a stock perfect for a day trader. Long-term investors are not as concerned about the volatility unless their stocks seem to be hitting an all-time low.

The Techniques for Successful Entry

There are particular stocks that are ideal for day trading. The two characteristics that day traders normally seek in a stock are volatility and liquidity. The volatility is based on the amount of money that a day trader is doing business with; the higher the volatility, the greater loss or profit for the investor. The liquidity is the hope that a trader can slide into and back out of stocks with low slippage and tight spreads.

Once an amateur day trader familiarizes themselves with the stocks and decided which ones they are looking for, it is time to learn how to determine entry points. Taking a look at volumes and volume spikes, which demonstrate if other day traders have bought at that level before and are currently purchasing at that price level; they can take into consideration the high of the day (HOD) and low of the day (LOD) for analysis of the volume. Taking a look at the order sizes and the open orders can help with the choices as well.

Popular Techniques that the Day Trader Can Utilize

Popular techniques to keep in mind for day trading:

  • Scalping – This is an extremely popular method of trading. Scalping involves the immediate selling of stocks when it becomes lucrative to obtain the quick profit.
  • Daily pivots – Using volatility for profitability, this method pursues a stock in an attempt to purchase while it is as the low of the day (LOD) and sell when it reaches the high of the day (HOD).
  • Momentum – This technique involves purchasing stocks based on trends and news releases. The exit strategy of this method is based on selling if the stock shows signs of reversal while riding the trend.
  • Fading – This is a risky strategy that includes shorting stocks directly after they increase drastically. For the risk-taker, this technique can be very rewarding.

Trading techniques can start with the same tools used for entry into stocks; the difference in trading styles and techniques show up in the exit part of the trading strategy. For the most part, though, no matter which way trading is done, the investor will want to exit when the stock is showing trends of decreased interest. The stock market can be exciting, but it can also cause stress; therefore, it is crucial to choose a technique and practice it until is consistent and effective in order to be profitable when trading.

Functions of an Investment Bank

Investment Banks – A Beginner’s Guide

After the 2008 financial crisis, we all wanted to know more about investment banks. This term was not a part of our everyday vocabulary before the first signs of the credit crisis.

An Introduction

Investment banks have nothing to do with regular commercial banks. We don’t go to an investment bank if we want to get a credit card or to raise a mortgage.

On the other hand, you go to an investment bank if you would like to earn some extra money. For example, you would like to explore some new markets, but you do not have the necessary funds.

Consequently, you can sell some bonds with the help of an investment bank. As a result, you could gather the needed financial assets.

Also, investment banks can sometimes resolve complicated situations. Warren Buffett, the chairman of Berkshire Hathaway, refused to split the stocks. Thus, smaller investors could not buy them. However, this problem was solved by bankers and the shares were available to everyone.

In order to exclude any intermediaries, he came up with a dual-class capital structure. Moreover, he did it with the help of his investment bank. This allowed the executives to control the majority of votes, while having a small percentage of entire equity.

It is important to point that none of this would have happened if it were not for the investment bankers.

Different types of investment banks

We can say that investment banks deal either with the buy or the sell side of the business. However, there are institutions that deal with both.

  • sell side: aids the buying side with acquiring assets
  • buy side: clients of investment banks looking to buy stock or shares

Division of labour

Usually, the work in investment banks is divided between the front office, middle office and the back office.

The front office generally helps businesses with the acquisition of new assets. In addition, they can help companies with potential mergers. They also work on in-depth research for a selected group of clients. Furthermore, they deal with potential risks regarding future investments. Also, they quite often work with clients on corporate financing and merchant banking.

The front office

The middle office represents a very important part of every investment bank. They make sure that none of the transactions are violating the restrictions.

Moreover, they keep an eye on the liquidity. It is one of the most important things to be done since the 2008 crisis. In addition, the middle office can impose limitations on the activities of other employees. Therefore, we can think of the middle office as risk managers.

The middle office

It is quite safe to say that any of this would be impossible without the back office. Their work may appear as dull and unappealing, but it is essential for every investment bank. Moreover, they handle all the technological problems. In addition, they work on better algorithms and make sure that trades are confirmed.

The back office

What do investment banks deal with?

For a long time, investment banks located in the United States were not a part of commercial banks. The regulators thought that this would be too big of a risk. They worried about the liquidity of regular banks. Although investments banks can generate a lot of profit, they also deal with much riskier processes than commercial banks.

However, these types of rules were not present in countries such as Switzerland. Interestingly, they thought that merging of investment and regular commercial banks was a great idea.

Functions of an Investment Bank

Also, it is important to note that the Union Bank of Switzerland had losses of about 21 billion Swiss Francs. Furthermore, this occurred  due to the investment bank.

In order to cover their losses, they had to trade with shares and securities. As a result, they managed to replace more than 60% of shareholder equity.

Most experts say that the last financial crisis happened because of the investment banks. That was due to their trade with collateralized debt obligations (CDOs). It was the regular stockholders that had the most problems due to these trade speculations.

Investment banks can also offer preferred stocks to more important investors. These types of investors are usually banks or insurance companies. Moreover, they can issue bonds. This can help companies during an expansion.

Furthermore, investment banks can insure bonds or create new stock (credit default swap).  Also, they can speculate on the possible worth of gold in the foreseeable future.

dividend

A Guide to Finding the Best Dividend Growth Stock

Choosing the best dividend growth stock involves a lot more than looking at a company’s dividend payment history. There are several other things to consider before you can find the best one. In this article, we will show you how to successfully find high growth dividend stocks to invest in.

But first, let’s talk about what dividend growth stocks are.

Dividend growth stocks ― what are they?

Let’s begin by saying that dividend growth stocks are companies that increase their dividends paid on a frequent basis.

dividend stocks

The unwritten rule is that any company can be considered a dividend growth stock if it consistently raises its dividend payouts at least once a year.

Some companies raise the dividend payouts on a quarterly basis. Others do so on a yearly basis.

Main categories of dividend growth stocks

Another important thing you should know is that there are several dividend growth stock categories.

Ultimately, there is no established definition for each of the following categories. Before we explain each one, it’s important to remember that you shouldn’t focus solely on the company’s past performance. There are other factors you need to consider before coming to a decision.

  • Challengers are stocks that have raised dividends during the past 9 years.
  • Contenders are stocks that have raised dividends during the past 10–24 years in a consistent manner.
  • Dividend Champions are stocks that have been consistently raising dividends during the past 25 years.
  • Dividend aristocrats are the same as dividend champions. Additionally, aristocrats need to have their stocks listed on the S&P 500.
  • Dividend kings are companies that have been consistently raising their dividends during the past 50 years.

Dividend payout ratio

A dividend payout ratio is basically an indication of the amount of money that a company is giving back to its investors against the amount it’s keeping to pay off debt, reinvest, or add to retained earnings.
Dividend Stocks Income

How to calculate the dividend payout ratio

In order to calculate the dividend payout ratio, you need to divide the dividends by net income (dividends/net income)

You can find out a lot about a company with this formula. For example, you can determine the sustainability of a dividend. Any company that pays a high percentage of dividends won’t be able to keep it up for long.

A payout ratio of 100% isn’t sustainable. Basically, a 100% payout ratio means that the company is returning more money than it’s earning.

This payout ratio should be used when you’re in a dilemma about whether you want to invest in a profitable company that pays dividends or a company that has a high growth potential.

Finding a high dividend growth stock

Now that you know what a dividend growth stock is and how to calculate the dividend payout ratio, it’s time to find a stock worth investing in.

stock market

First of all, you need to take a look at some stocks that are paying out dividends and view their payout ratio. Look for companies with a 30% payout ratio and lower. Why? Because this percentage shows that these companies have a significant amount of leftover cash that they can use to fund their other objectives. Furthermore, anything up to a 50% payout ratio is acceptable.

Next, look at the credit rating of each company. See which companies have the best investment grade ratings. The credit rating is important because any company that wishes to borrow money in the future needs to have a good investment grade rating.

Keep in mind that a new company that wants to expand and develop new products is allowed to have a 0% payout ratio. However, an older, more established company with a sizable cash flow isn’t allowed this luxury.

The conclusion

Hopefully, this article has cleared up any questions you may have had about the dividend growth stocks.

If you want to find a high growth stock, start by viewing the dividend aristocrats and champions and go from there.

All in all, if you want to successfully invest in high growth dividend stock, you need to be patient and completely subjective. Remember that dividends are industry-specific, which means that the payouts are different.

The Future of Cryptocurrencies

When it comes to cryptocurrencies, they are undoubtedly some of the hottest commodities in the world at the present moment. Whether it’s mainstream news publications or your buddy’s Facebook timeline, it seems that almost everyone has heard of them. Because of this massive spike in their popularity, it’s also natural that people are beginning to invest in them as legitimate assets. Rather than treating them as hobbies or play-money, people are beginning to put a lot on the line as they ratchet up in terms of their legitimacy and their popularity. But given this rise in popularity, since 2009, Bitcoin, the most valuable cryptocurrency in the market, has shot up in value and expanded rapidly in terms of its market capitalization. Given this surge in value and investors, are cryptocurrencies like Bitcoin just a standalone fad, or are they a legitimately valuable asset that is going to be here for the long haul?Cryptocurrencies

Bitcoin: The “Gold” Standard

 

What Makes Bitcoin so unique is the fact that it relies on a constantly randomizing blockchain technology that uses peer-to-peer networks to issue and circulate the currency. This makes Bitcoin valuable to those seeking anonymous, decentralized ways of sending and receiving money, hence, it has skyrocketed in value since its inception back in 2009. Bitcoin came to the scene as the first-ever cryptocurrency, making it incredibly valuable to anyone that planned to used it for whatever purpose, whether it was storing money anonymously or buying goods or services that someone would otherwise prefer to be anonymous as well.

This made Bitcoin attractive due to the fact that governments and private interests couldn’t track it, but it could also be used as a storer of value in a digital realm, which makes it easy to move around large amounts of money, rather than having to smuggle physical cash like the old-fashioned days. With this increased level of scrutiny, it means that a lot of governments because looking at Bitcoin as a serious threat not only to their ability to track illegal and illicit transactions, but it opened an entirely new door as far as criminal enterprises being able to move large amounts of funds very quickly.

Acceptance, Alternatives, and a Bright Future

However, since the scrutiny phase of Bitcoin, many people have realized that legitimate cryptocurrencies will have tremendous utilitarian purposes going into the future. Other coins like Ripple and others have sprung up to help maximize the way banks, financial institutions, and even computer programs send data, meaning that cryptos (as they are affectionately called) will soon be the way we move and transfer money going into the ensuing decades. And whether or not Bitcoin will be around remain to be seen, but there is no doubt that there is a tremendous surge in interest for them as investment options, and a lot of entities, both government and private, are similarly interested as well. Someone interested in cryptos as investments should certainly give them a look, but as with any investment, be sure to do your due diligence before taking any sort of financial risk

dollar-banknote

Top 10 Reasons I Like Dividend Growth Stocks

I believe dividend growth investing is one of the best investment strategies available. There are many reasons I like dividend growth companies and today I wanted to highlight some of what I feel to be the biggest draws towards dividend growth stocks compared to other investment options. Here you’ll find my top 10 reasons that dividend growth stocks are my favorite type of investment.

Dividend growth companies tend to be great businesses.   Companies who have demonstrated the ability to increase dividends year after year for quite a few years (minimum of 5) are doing something right.  Look at many lists of dividend growth stocks and you’ll find many blue chip, solid industry leading companies who have been not only increasing dividend payments but earnings for many years in a row.
Income from dividend growth stocks can outpace inflation.  When looking for stocks to invest in I look for stocks that have a reputation for annually increasing their dividend payment at a rate higher than inflation.  This means that when I am living off of my dividend income, that income will at least keep pace with inflation.  As my expenses rise due to inflation, so will my income causing me no concern about being able to cover my bills.
Dividends can have a compounding effect on your wealth.  During the accumulation phase of investing I am using my dividend income to buy more shares of dividend growth companies.  As time passes I will be receiving dividend payments on shares that I purchased with previously earned dividends.  In effect I will be earning dividends on my dividends.  This is compounding and nothing can boost your wealth over time like the effect of compounding income.
Dividend income can pay my bills.  Eventually I will reach my goal of earning enough dividend income to cover my daily living expenses.  At this point I can choose to collect my dividend payments in cash rather than reinvesting them.  I can then use that cash to pay all of my bills and I will no longer have to go to a job in order to earn money.  When you don’t need to rely on a job to earn money to pay your bills, but instead can afford to cover those expenses with dividend income, this is what I call financial freedom.  Dividend growth can help me reach financial freedom.

Growth Stocks


Dividend income keeps me from making stupid mistakes.  There is a lot of volatility in the stock market.  Prices will go up sometimes and prices will go down.  As an owner of stocks you must be willing to sometimes experience large price declines.  When stock prices are dropping it is easy to think that you need to sell your stocks before you have nothing left.  However, if your main focus is on dividend income then this can give you a pause.  Dividend income can help you get through the hard times when you might be tempted to sell.  As long as the underlying business of the stock you own is still good and strong there is no reason to sell just because it may fall slightly out of favor with the market.
Don’t have to sell off assets (shares of stock) in order to generate cash.  If you own investments that don’t pay out an income then in order to pull out cash to pay your expenses you will need to sell some of those investments.  Dividend income allows me to continue to own my stocks while still paying me an income to meet my expense requirements.  I will never have to sell my stocks if I don’t want to.
Dividend growth is a positive sign from a companies management.  Typically if management is raising a dividend rate it is because they feel good about the future prospects of the company.  They believe they will have the profits to support a higher dividend payout.  The last thing management wants to do is have to decrease the dividend because this will negatively affect the stock price.  I believe most managements are conservative with their dividend increases so they will not be forced to have a cut in the future.  However, this is not always the case.  Make sure you do your due diligence as to the safety of the dividend before investing.
Dividends continue to grow even during recession or stock price declines.  There are companies out there that have increased their dividend for 20, 30 and even 50 years or more.  They continued to grow their dividends right through the bear markets of the 80′s, right through the bursting of the dot com bubble and right on through the recent financial crisis caused by the housing bubble.  Owning shares of companies who are able to continue to do well through recessions, despite what stock prices may be, makes me very pleased.  You can feel good that your companies are doing their jobs and the stock price will recover once the economy gets back on track.
Dividends are taxed at low rate for most taxpayers.  In the United States, qualified dividends are taxed at a lower tax rate than the regular income tax rates.  This means I get to keep more of each dollar of my dividend income compared to earned wages and interest.  I can then use these dividends to buy more investments to make more money in the future.
Dividend income is passive income.  Possibly my favorite reason to own dividend growth stocks is because dividend income is passive.  My goal is to eventually accumulate enough shares of dividend growth companies that I will be able to cover all of my living expenses with the dividend income I am paid.  I no longer will have to work to be able to meet my obligations.  I will be able to do whatever I want whether that is travel, golf, watching sporting events or sitting at home playing video games and watching movies.  Monday morning will come and rather than having to go into the office, I will be able to wake up and decide to do whatever I want.  That will be because no matter what I decide to do, my dividend stocks will be doing their job and paying me a passive income.

There you have it.  These are my top 10 reasons for owning dividend growth stocks.  What is your favorite reason for liking dividend growth investing?  Please share your thoughts in the comments below!

Stock Market lap

Simple Things You Could Do To Make Money In The Stock Market

TIP! Damaged stocks are good, but damaged companies are not. A temporary downturn in a company’s stock value is the perfect time to get in at a great price, but be sure that the drop is, in fact, temporary.

The stock market can be exciting for all investors. The methods for investing will vary, depending on what your goals are and what your risk tolerance is. Regardless of the investment method you choose, a fundamental understanding of the stock market is essential. Here are some investing tips that will help you do just that.

TIP! Before you invest or entrust any money at all with an investment broker, make sure you take advantage of the free resources that are available to you to clarify their reputation. If you take the time to do some research, you will be less likely to become a victim of investment fraud.

Sound portfolios can generate returns in the area of 8 percent, while terrific ones may bring 15 or 20 percent. There are other options that can even go beyond that amount. However, picking a highly profitable portfolio is difficult and it will take a lot of knowledge and dedication.

TIP! Don’t be fearful to step out of the market. You are doing yourself a favor by giving up trading when you are experiencing difficulties in life that do not allow you to devote the necessary time to investment.

Before purchasing any type of stock, it is vital that you lay out your goals. For instance, you could be aiming to earn income with a very low amount of risk, or you could be aiming to increase the size of your portfolio. Many different goals call for different strategies, so identifying your goal is the first step towards a successful purchase.

TIP! Diversification of a stock market portfolio means more than just choosing stocks from many different sectors. Furthermore, you do not need to work every consideration into every trade in order to craft a sound investment strategy.

Opening a Roth IRA is a wise investment decision for anyone living within United States. Most citizens qualify if they are working or middle-class income earners. This type of investment has so many benefits and tax breaks that even if there is a medium level return, it can generate a large yield.

TIP! Make investments in areas you understand. Great investors, such as Peter Lynch and Warren Buffet, made their fortunes by investing in industries that they understood.

Know the limits of your knowledge and skills and stay within them. It is unwise to venture into purchasing stocks in industries that you do not know much about, or into companies you are not familiar with. Although you may be able to predict the future of any company, you won’t always understand companies that make oil rigs. Rely on the guidance of a professional financial adviser when it comes to stocks in industries you do not know.

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Growth Stocks

TIP! Do not allow your money to stay invested in a stock that is not making you any money. A stock which doesn’t move won’t ever make you a profit.

An excellent suggestion is discovering stocks that have slightly above average growth rates, but not extremely high. They tend to have more reasonable prices for their value compared to high-growth stocks. High-growth stocks are typically in hot demand, which pushes prices up even higher and they ultimately have trouble meeting the inflated demands of money-hungry investors.

TIP! Don’t fret over the daily ups and downs of your stock. There is always volatility in the market, and becoming concerned about short-term movement will not do you any good.

Learn as much as you can about accounting and financial management. You don’t need to get a degree to have a good understanding of the basic principles. These principals will help you to understand the stock market scoring system, and therefore, make wise decisions about your purchases and sales. Warren Buffet says that education is crucial to success and every man deserves a voice.

TIP! Keep a watchful eye on a stock’s trade volume. The trading volume reflects the amount of trading that the specific stock is currently involved in.

You will not find overnight success in stocks. It might take some time before a certain company’s stock begins to show some success, and quite a few people think they won’t make any money, so they give up too soon. Patience is a virtue you need when investing.

TIP! Stay open to the fluctuations of a stock’s price. The more a stock costs compared to its earnings, the more it will have to appreciate to give you a decent return.

A significant proportion of investors lean towards stable sectors during recessions and trade conservatively. During these times you should pay attention to new companies that are producing products for the future. Keep your portfolio diverse by backing companies that are are designing or promoting new technologies.

TIP! Keeping it simple applies to most things in life, and the stock market is no exception. Reduce your risk by keeping all investment activities, including examining data points, predicting and trading, extremely simple.

Before investing real money in the stock market, practice by playing a game. It doesn’t take much to practice. All you need to do is choose a stock, and jot down it’s current price and what your reasoning was for buying it. Then you want to follow the stocks performance over time. This lets you know how your strategy would work without any risk at all.

TIP! If you are using stock analysis to consider new investments, one of the first areas you need to consider in your analysis is the PE ratio, along with the total projected return on the stock. The price/earnings ratio should be no more than twice the value of the projected return.

Start with blue-chip and well-known companies. In a lot of cases, investing in large companies is relatively safe and helps you build a solid portfolio. You can start selecting stocks from smaller companies after you are familiar with the market and ready to branch out. Small companies have a larger growth potential, but also have a large risk for loss.

TIP! Buying stocks with which you are familiar is a good way to start investing. If you know of a stock which has previously experienced success or you know an industry really well, you should purchase some shares of this stock.

Many times you can look at the obscure investments for a great investing strategy. This involves searching for stocks that others avoid. You need to sniff out the potential of stocks in under valued companies. Companies that everyone wants sell for a premium. So, there is little upside to these. If you find small companies with positive earnings, you can identify a rose in the concrete.

TIP! You may be able to invest in the stock market through a retirement plan, such as a 401k. Though you can’t access your funds until you’ve retired, you will save on taxes by using a retirement account.

As you begin to invest into various stocks remember that cardinal rule when it comes to investing: Do not invest more than you can afford to lose. This almost goes without saying for high-risk investments. Even when dealing in long term, safe investments you need to be aware there is a possibility of a significant loss. Keep money needed to pay bills in a brick-and-mortar bank rather than the stock market.

TIP! Before you buy any stock, do your research. People are often too quick to decide that a new company is a good investment after reading about it’s existence.

Monitor the stock market before you actually enter it. Before investing, try studying the market for a while. In general, watching the market for three years is the recommended time before making your initial investment. Doing so helps you to understand how to make money on the market.

TIP! Contrary to the strategy of many, greed for higher and higher returns can turn a stock market profit into a loss. Being too greedy can result in your missing an opportunity to sell and ultimately losing money.

Do not invest a lot of money in stock of the company who employs you. While purchasing company stock might be prideful, there is a lot of risk involved. If your employer makes bad management decisions, both your investment and your paycheck will be in danger. However, if you can get discounted shares and work for a good company, this might be an opportunity worth considering.

TIP! Do not follow any unsolicited advice on investments. Your broker or financial adviser offer solicited advice, and that’s worth taking.

To maximize your chances for investing success, write out a detailed investing plan with specific stock strategies. Your plan should outline strategies which dictate when the right time to buy stocks is and when the right time to sell them. It must also include a clearly defined budget for your securities. This way you will know that you are spending only the money you have allotted for investing and choosing wisely with your intellect and not your heart.

TIP! Don’t let your emotions control your trading decisions and don’t obsess over trading decisions. If you have the urge to continue to watch a dropping stock, resist it.

The stock market certainly can be exciting, regardless of whether you plan to turn investing into a full time career or a part time hobby. To make it as rewarding as possible, you should follow the advice that was given to you in this article. It will help no matter what your investment preference is – stocks, mutual funds, or stock options.

Being aware of all of the details of more trading advice for the stock market today can be difficult. The article you’ve read should have provided you a nice amount of knowledge. Once you’ve absorbed this information, keep reading other articles to expand your information.

Financial Advisor

The Risks Your Financial Advisor May Not See

You may recall The Flying Wallendas. They were a danger-craved circus act. Best known for performing high wire acts without a safety net, the group was founded by Karl Wallenda in 1922.

A 73 year old Karl Wallenda tried walking along a wire rope strung between two high rise Puerto Rican buildings in 1978. Nearing the second half of his walk, a swell of wind sent Karl falling to certain death 120 feet below. Karl Wallenda tempted fate one too many times.

This parable is similar to the problematic situations shared among today’s market investors. The last 30 years have had a few scares, but more often than not, rolling the dice has produced riches for these market gamblers. It’s clear that investors and financial advisors have become complacent. Too many are walking a financial tightrope without a safety net because it’s the only way they know. They are grossly unprepared for anything but good weather.

The economic climate determines the market’s cyclical movement. Stagnation, inflation, strong growth, and deflation shape the direction of every type of investment. The economic weather forecast can be modified over time, but the last big wave of change happened long ago, making future movements much tougher to predict.

Financial Advice

What Are The Possible Forecasts?

Deflation

Many discussions about inflation center on concerns over the Federal Reserve ordering more money into circulation. Yet, that cause and effect situation is not guaranteed. Rather, deflation in the 1930s United States was a direct result of increased money production.

Increased quantitative easing from the Fed creates a counter reaction, where the rate of spending, or velocity, decreases considerably. Uncertainty about the future has restrained the desire to spend.

What investment groups work best when deflation occurs?

Interest rates are likely to fall. This means long-term, high quality bonds, such as Treasury bonds, should perform well. Overall, goverment bonds with longevity have a good chance to yield high returns through a deflationary period. 

Inflation

Rest assured the Federal Reserve hopes a boost in money supply leads to inflation.In fact, they have an official inflation target of 2%. Creating inflation may be simple and logical on the surface, but there’s some danger that inflation will shoot up higher than intended.

Inflation alters how people spend their money, which somewhat dampens the enthusiasm of heightened spending The target is not productive investment, but protection of wealth and lifestyle. The future’s volatility slaps a label of “risky” onto startup businesses and new products that would otherwise attract investors.

What investment groups work best when inflation occurs?

When prices rise, money is likely to flow to investments viewed as a store of value or physical assets that have practical use. Gold, real estate, and commodities are some examples.

Goldilocks

The Goldilocks premise counts on the economy’s ability to stroll across that high wire safely. There are a few variations of this possibility. 

First, there could be a revolutionary breakthrough on the horizon (along the lines of the automobile or computer) that creates strong economic growth. Goldilocks could be in the cards, but it’s not worth an all-in bet.

Miraculous industry expansion isn’t the only path to a Goldilocks situation: world banks (including the Federal Reserve) would have to print money in the right amount at the right time. This would give governments enough time to enact economic reforms to remedy its instability.

What investment groups work best when Goldilocks occurs?

Stocks. Stocks are a regularly solid investment in a Goldilocks situation, and for good reason. You’re in a solid position for Goldilocks if your current investments follow this strategy. If you aren’t convinced Goldilocks will be the ultimate outcome, you are walking that high wire into the wind without a safety net.

Stagnation

Stagnation occurs when the economy remains static in its current state. We may see inflation, growth, and deflation at times, but overall, the economy would not experience sustainable improvement over a long period of time.

What investments deserve attention during a Stagnation period?

Income producing investments should work well. When price appreciation is slow, income-driven investments help keep a stream of cash flowing in until growth becomes sustainable. A pro-active approach to trading also helps turn a profit in unsteady markets. 

So Which One Will It Be?

Intellect and education can take you far, but it can’t help anyone guarantee the future. Even Ben Bernanke, who gets his information before anyone else and controls the printing press, can only resort to educated guesses.

Guessing isn’t inherently bad, as long as you comprehend the situation you’re predicting. Sadly, numerous investors lack that information, and leave that up to a financial advisor that thinks they have the answers.

There is a silver lining: guessing is not required for success. You just need to think about diversification differently than the past. Diversification among stocks and the situations above becomes vital.

There are dark clouds approaching. Whether it comes our way remains to be seen. In any event, make sure you understand how your investment strategy is likely to perform under any scenario. Without adequate preparation, the coming storm could sink your investment ship.

Stock Market

An easy way to invest in the Stock Market

Before you start let me clarify that I do not intend to give individual advice but general information. The easiest way to invest in the stock market is, in my opinion, through a mutual fund, that is, a diversified portfolio of shares, a company registered in open versions that sell shares to the public at a price of supply and when the investor redeems request, the value of net supply. In simpler words, mutual funds meet many people‘s money and invest it in stocks, bonds and other investment vehicles. The value of the shares of a mutual fund is related to the value of all the shares it owns in a given time. The price can go up and down and therefore can win but also lose money, especially when investing in the short term.

There are many types of mutual funds. Some could be classified as index mutual funds because they mimic the portfolio of the major indexes such as the SP 500 or the stock market as a whole. The advantage of these mutual funds is that they often charge lower administrative costs of managing and spread risk among many stocks. There are also mutual funds that are actively managed, meaning that its administrators decide which stocks to buy, how to buy, when to sell, buy and in what sectors. Also fall in this category of mutual funds specializing in areas such as technology, financial institutions, oil, international stocks, and so on. In general, the higher the specialization of the fund and the lower the number of shares held, the greater the risk. It is important to mention that there are mutual funds that are called “load” and make it a charge, which can reach 5% or more when buying the shares. Imagine has begun to invest and you’re losing some of their money. F or this, I would avoid mutual funds and seek “no load”.

Stock Market Phone

In my opinion, one way less risky and less costly to invest in the stock market is through mutual funds indexed to diversify risk from hundreds of actions that mimic the overall market. You can buy funds directly from the issuing companies or through investment brokers. Visit several companies, consider whether you feel comfortable, if you offer valuable information or are simply trying to “sell”.

Some people may invest $ 50 a month; another may invest $ 200 or more. By investing every month in highly diversified funds with low administrative costs, avoid the risk of investing all the money when the stock price is inflated, distribute the risk among many stocks and to pay administrative costs low, you get more money for investment. Many people, who invested in shares of technology companies when they rose at inflated prices, lost a lot of money when the price paused dramatically. However, anyone who has been buying shares every month in mutual funds diversified among stocks, bonds and cash, and has held other investments, real estate and personal business for example, will probably not suffered so much from the vagaries of the economy.

Before investing is important to visit a licensed financial adviser can help you determine your goals, analyze your financial situation and make a plan to invest in a diversified portfolio. There are people who at one time should not invest in stocks. For example, if someone has credit card debt paying high interest rates which should pay those debts before investing. If the interest you pay is for example 18%, and the expected performance of a mutual fund is 8%, would pay the debt best business to invest in the fund. Similarly, who has been retired and need all the income to pay your expenses may not be investing in the stock. In general, who need to use the money before 10 years may not be investing in the stock because recent experience has shown there may be dramatic fluctuations. Hence those who are nearing retirement or who need the money in the next 10 years should take a conservative approach when it comes to investing in stocks. Conservative can mean investing a small percentage of the capital.

For all the above, consult a financial adviser would be a financial institution.


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