Category: Stocks

Stock and Fund Dividends

February 28, 2018 at 8:24 pmCategory:Investing | Stocks

When is a dividend no longer a dividend?

The modern-day element “conservative”
agents are preaching in recent times is to shop for shares
that pay dividends. Everyone likes dividends. I
realize I do, however whilst Wall Street tells me something
I am automatically suspicious due to the fact they deceive
me each day. Is this a brand new rip-off? Let’s take a
appearance.

When you buy a bond or a CD on the
financial institution it will pay interest and is a actual dividend. You
would possibly get a check every month, area or yearly
or acquire a credit to your account. The quantity of
your precept (what you paid for it) stays the
equal. Yes, that may be a authentic dividend.

Companies make large splashes approximately
raising their dividend. It became 50 cents according to percentage,
but we have raised it to $1.00. Big deal. Yes, you
will receive a take a look at and as a minimum you know the
enterprise has cash to be had to pay you. That is an
indication the corporation is in precise financial
circumstance, but there have been many of the large
names on the NYSE that have persevered dividends
even if they have misplaced cash. How can that be?

Currently Microsoft has announced a
dividend of $3.00 in step with proportion. The talking heads on
CNBC-TV tell us they’re loaded with cash and need
to distribute it to their stockholders. Many
human beings purchase the stock in anticipation of the
dividend as they suppose they will be getting an
greater $3.00 according to percentage. They are in for a huge
wonder.

The day that dividend is paid
Microsoft stock (image MSFT) will routinely
drop $3.00 in step with share. Today $27.00; day after today
$24.00. Folks, this is NOT a dividend. This is a
distribution of capital. You are being paid in
your own asset. The fool that believes the Wall
Street mumbo-jumbo will no longer have one extra penny
after the dividend than he did earlier than. In reality he
will have much less. Why?

The stockholder will now be allowed to
pay earnings tax at the “dividend” distribution. To
make that “dividend” seem even higher the Bush
administration has decreased dividend taxes from
38.6% to 15%. Thanks, Mr. Bush. Thanks for
nothing. I can not blame him for greater Maul Street
smoke and mirrors. He has simply made it fee less
to get returned your very own cash.

Companies seldom pay huge dividends
and they may be paid quarterly. A $30 inventory that will pay
a 4% dividend ($1.20) on a quarterly basis indicates a
decrease within the stock rate that day of 30 cents
in keeping with share and is lost inside the noise of buying and selling. Few
notice that a part of the fee trade is due to the
“dividend”.

When you personal the stock of any corporation
the most crucial criteria is to locate one that is
in a long time upward fashion. Never buy a inventory
this is showing a decline no matter how “appropriate” the
agency can be. Even sideways moves should be
avoided. Keep in mind you are buying the inventory to
make money. Forget the dividends and all different
“motives” and remember if it isn’t always going up, don’t
purchase it!