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
Stock Market Basics Presents The Investing Carnival
Welcome to this edition of The Investing Carnival! We have so many informative links to share so let’s get started! 
During uncertain or volatile stock markets, it’s not always clear where to invest now. Investors want to be diversified, but also limit risk by choosing profitable investment vehicles depending on current trends. It’s a good idea to explore investments that may be new to you, such as currencies, futures, ETFs, and other investments.
If you were told that you could get free money in the form of real estate grants that you would never have to pay back, what would you say? Nothing is free these days but if you are looking for a down payment on your mortgage, help towards the closing costs for your home purchase, or money to refurbish your home and then you could qualify for a real estate grant.
Roth IRAs are one of the most missed opportunities in the personal investment world today. So many people miss the great benefits of Roth IRAs because they are not informed about how they work. A Roth IRA differs greatly in the way you pay taxes on the increases, and over time, that makes a huge difference.
Investment property is gaining a lot of support, especially as investors fear their money is no longer safe in the stock market. It’s also good to farm homes or condos in a certain area, focusing your efforts on one location. Orlando investment property is a wise choice due to the location. With tons of recreations and amusement parks in Central Florida, there will always be jobs and a service industry supporting the local businesses. Having locations to rent out to the support staff there means you’ll never be short of potential tenants.
Have you ever been interested in investing in finance companies, but aren’t sure where to start? Perhaps you should consider a financial exchange-traded fund. An exchange traded fund is a type of mutual fund that can be traded on a stock exchange. A financial ETF can make investing simpler for beginning investors who want to dive into the finance marketplace. At the same time, financial ETFs can still be a great investment for more advanced investors who want to balance their portfolio.
Forex investments can be risky, but also very lucrative. Critical skills are needed to profit in this highly competitive investment landscape, but these skills can be acquired through education, training and practice trading utilizing virtual (demo) accounts from the right broker. There is money on the table for those who can follow a system, control their emotions and practice good money management methods.
In the aftermath of the financial crisis a growing number of North Americans are reconsidering their investment and lifestyle choices. Many are looking beyond US borders at countries in Central America, where real estate is cheaper and the cost of living more affordable. Real estate in Nicaragua stands out as having the lowest prices in the region according to data from Reveal Real Estate.
So You Want to Be a Real Estate Investor? Have you been thinking about buying investment property for a long time? Have you read all the books and watched all the infomercials, but just didn’t know where to start? Here are some quick steps to get you started toward your investment property dreams.
Do you find yourself in deep financial trouble, but can’t quite figure out how to get back on the right track? If, so perhaps you should consider declaring yourself bankrupt. Speaking to a financial professional is a great way to evaluate your options while learning a great deal about bankruptcy and other financial repair options.
Forex investing has gotten a bad rap over the years, but the truth is that investing in the forex markets is a legitimate way to strengthen your portfolio. Knowing that there are inherent risks involved with any type of investment is the key to realizing that due diligence should be executed when researching any potential opportunity.
Tags: current trends, etf, etfs, exchange traded fund, finance companies, financial exchange, investment, investment property, investment vehicles, investment world, investor, money, personal investment, profitable investment, roth ira, roth iras, stock exchange, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, stock markets, volatile stockRelated posts
Stock Market Basics: Buying & Selling Stocks
Buying and selling stocks can be a very confusing task because there are many things to learn about the stock market basics.
First, one must understand the basics and the foundation of stocks. Stocks are nothing more than parts of ownership in a company. Basically, a company offers stocks to the public to finance their company. Buying stock makes you a shareholder, and in essence, you own part of the company even if you are buying penny stocks.
There are different types of stock that one could buy. First is common stock. Common stock is exactly as it is stated, common, and holds no preferences. When the company offers a dividend, you are entitled to it. The next step up is preferred stock, which means you get a higher priority when it comes to dividends, meaning you get paid first.
Voting / participating stock is also available, where you can vote on issues of the corporation. Stocks of large publicly traded companies are traded on the open market, at such places such as the New York Stock Exchange, NASDAQ, etc. At the New York Stock Exchange, deals are done face to face in person. Prices are determined by an auction format in essence, meaning whoever pays the most, gets the stock. While this is going on, people can sell stocks at that price, and you are actually “trading” stocks. You may never meet the person you are trading with, but in essence that is what happens in two separate transactions.
Stocks can change constantly, due to many different things. It works on supply and demand, meaning if more people want a stock, the stock prices go up, and conversely, less interest equals a lower price. The most common way to purchase a stock are through brokers.
There are in person brokerage companies, such as Merrill Lynch, or you can go online and trade online yourself or through a broker. Online sites such as Scottrade, Etrade, etc let you trade stocks on a real time basis, and only cost a few dollars per trade. Many people may be enticed to buy penny stocks, but those are almost a sure bet to make you lose money.
Overall, there are some basics that were outlined that are important to trading stocks, but to really be successful, there is a bunch more to learn.
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