Quote:
Originally Posted by Rain Man
Oh, and here's another thing I've been thinking about recently.
A bunch of stocks eliminated their dividends in 2020. Airline stocks, cruise stocks, hotel stocks, some retail stocks, etc. Obviously a lot of them are still down. There are probably other stocks that eliminated their dividends as well.
I don't know if/when those stocks will come back, but I would think that at some point they would reinstate dividends and that'll cause a price bump. Assuming that those stocks are probably not going to go lower, and I don't see that the downward forces are going to get worse, it seems like we should start loading up on them.
|
Honest questions here and I'll start you off with this.
How will you know that these stocks are not going to go lower as you stated above?
Cash dividends reduce the size of a company's balance sheet and paying these out has the company lose part of its liquid assets. What if a beaten down company can't get it's cash flow back? What happens to dividends for companies who never return to glory?
"Investing in the company's future and growth increases the value of the stock as well as expands your returns. That's exactly why high yields should not be chased as they do not reflect well on a company's plan for growth in future returns. This is why you shouldn't only buy dividend stocks."
You do know that dividends come right off the stock price? A dividend is NOT a bonus. When dividends are paid out, the stock price decline in the same amount of the dividend.
Dividends can be a part of a winning plan but IMO you must focus on blue-chip companies that are proven. Given your timeline, I wouldn't risk it on ANY other than great companies that pay a dividend.
You must also not get into the habit thinking that high dividend paying companies will out pace growth stocks over the long term. Many growth stocks that have amazing growth and stock returns, pay no dividends. Granted your timeline is different but this is a statement for the general masses reading this thread.
Don't solely focus on dividends. Focus on overall returns.
https://rationalthinking.net/why-you...vidend-stocks/