Stock Market Basics for Dividend Investing
The recession that began in late 2007 changed the dividend landscape completely, and not necessarily for the better. In the last quarter of 2009 alone there were 288 companies who cut their dividend payouts. In fact, Standard and Poor’s reported another 804 companies who were forced to follow suit in 2009. This cost investors another fifty-eight billion dollars.
There are four lessons you should learn before you get involved in dividend investing.
1. There are no guarantees
Many people decided to ignore this lesson in the years before the recession hit. While collecting interest on other investments, such as CDs and bonds, is something you can count on, the same is not true of dividends. The board of directors get to decide whether or not shareholders will be entitled to cash dividends. Most companies recognize that it is in their best interest to maintain or ideally increase payouts. Continuing to pay dividends is a good sign of a company’s financial health. A financially strong company can also attract more investors, enabling them to grow.
2. Do not go after high yields
In the last few years there were many investors that got too greedy and started taking higher and higher risks to find yields that were acceptable. This was possible because interest rates and market yields were very low. However, this turned out to be a bad decision in the long run. To minimize risk, investors should avoid any yield higher than 2.5 times market average. For example, the current market average is two percent, therefore you should stay away from anything five percent or more.
3. Cash flow is king
Do not just look at a company’s earnings this year, but also look carefully at the cash going out and coming in for the last five years, at least. If you focus just on earnings, you will not have a good picture of a dividend’s sustainability. Also try to account for capital expenditures as well. The remaining amount is called the free cash flow and is what the company has available to either pay dividends or buy back shares. Also check how much the company pays out in dividends every year. The free cash flow needs to be greater than the dividends paid so the company can maintain dividend payouts.
4. Don’t put your eggs in one basket – diversify
No matter what the current financial situation may be, diversifying your portfolio will help you weather even the toughest situations. Diversification is the basic rule in your building your portfolio and this is a lesson that should learnt in your stock market basics class. The financial industry was hurt worse than others over the last few years, and even those who diversified were hurt. However, they were also less affected than people who put all their money into high yield financial stocks. Diversifying is still important even if the yields are lower.
These four tips will ensure that you have a much easier time building your portfolio. You will be able to find companies that have a sustainable dividend payout with a higher than average yield.
Tags: bonds, cash dividends, cash flow, diversifying your portfolio, dividend, dividends, interest rate, investment, investments, investor, investors, market yields, recession, shareholders, standard and poor, Stock Investing Basics, Stock Investing Tip, Stock Investment Software, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, stocksRelated posts
Need Some Stock Trading Information?
Doesn’t everyone need a little stock trading information? I know even after being involved in the stock market for so many years, I’m still looking on a regular basis for new information on how to increase my portfolio. No matter what it may be, stock tips, a new IPO, or just some other ways to diversify my portfolio during these unstable times. I’m going to share a few pointers for you to help you with your portfolio.
Where to go to get good information? Well that could be anywhere. I’ve learned to take information from all sources to assist me and my trades. The one thing to keep in mind is to make sure you follow up on the information to assure that it’s correct and valid. There are more mistakes made in the stock market than there are not. Traders and Investors make mistakes everyday and that’s just the way it is. To help limit your mistakes, you need to do your own research and due diligence before you invest.
Getting stock tips are not the only information you should be looking at when it comes to buying and selling stocks or investing your hard earned money. What about the condition of the economy? Is it stable? See what’s going on in Washington. If the U.S. Treasury is printing out money like it’s going out of style, then realize that the dollar isn’t worth what it was before the increase of currency. Unemployment plays a major role in the condition of the markets and when you see the unemployment rate climbing, then it’s going to push the overall markets down.
What about the new tax laws (or the end of old tax breaks) that will effect your gains? In 2011, the Bush tax credits will come to an end and traders as well as investors are going to pay more in capitol gains taxes. The will be increases across the board when it comes to investment taxes. There will also be increases on dividends.
Have you given any thought about investing in precious metals? Gold, silver and platinum are a good way to hedge against the falling dollar. No matter what happens to our currency (or any other), gold will always be the investment of choice when the economy is getting worse. Gold has been a great investment during those times of trouble.
Just remember that looking for stock market information, you need to look further than just a bunch of stock tips.
Tags: capitol gains taxes, currency, dividend, dividends, dow, due diligence, economy, investment, investor, investors, money, precious metals gold, selling stocks, Stock Investing Basics, Stock Investing Tip, stock market, Stock Market 101, Stock Market Basics, stock market information, Stock Market Software, stock tip, stock tips, stock trading, Stock Trading Information, Stock Trading Information, stocks, tax breaks, tax credits, tradesRelated posts
Stock Market Software
The stock market is the place where traders and investors, willing to undertake high risks, meet to strike a deal and make lots of money. Stock markets exist in almost all the important countries of the world, comprising of markets for equities, currencies and derivative instruments.
Globally, stock markets have been performing pretty well in most of the countries, especially, India and China. However due to the economic downturn in the United States initiated by the sub-prime crisis, the stock markets of the US have not yielded much return to their traders and investors.
This gives rise to the role and importance of stock market trading software. Stock market trading software is extremely essential for the investors, and more importantly for the short-term traders because all different types of calculations have to be done before entering into a particular stock.
One such software available in the market is the ‘JStock’. It consists of a watch list for stocks, a snapshot comprising of the Intra-day price movements of the stocks, a Stock market indicator. One can sign up for receiving alerts via both SMS and e-mails. There are features for managing the portfolio as well as giving useful tips. People have found it to be one of the best stock market software ever. Traders have reviewed that the technical analysis done by this software has really helped them in taking intra-day decisions.
Atomic Trade Pro is excellent stock market trading software specially designed for traders and investors of various risk appetites. It encompasses some magnificent tools for designing charts on the basis of predications and researches will be made. It comprises of a predictive score which is built on the basis of advanced technology by the usage of neural networks. One can do the trend analysis for the markets with the help of this software thereby helping in the buy/sell/hold decisions. They are beneficial to traders not possessing very honed analytical abilities to predict the movements of the markets.
E-Gate is comprehensive stock trading software which provides the traders and investors with web-based service for getting the quotations regarding the real-time stock price movements. The software is totally reasonably priced and will not pinch the pockets of the trader. They not only do a thorough technical analysis of the stock, but also conduct give indications of the fundamentals of the stock, thereby enabling decision-making with respect to the stock. They also provide latest news about the company and its corresponding stock. Fibonacci tools are used in this software along with different chart tools like OHLC, Candlestick and Close Line. One can also check his profit and loss statements by exporting the entire sheet on an excel file.
Basically stock market software should provide indicators for studying the Price-to-Earnings Ratio, Earning per share and the different trends the stock has shown over a period of time. They should also help the Pigs, i.e. the investors with a very high risk appetite to take decisions quickly so that they can make big money in a short period of time. For all these reasons, the need of stock market software has increased over the past two decades.
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