tell me about dividends and which div stocks
Discussion
So I admit I know nothing about dividends bar some companies give them out.
looking for future investments rather than the fun current gambling ones are dividend stocks a good route to take? how long do you normally have to hold them to get the dividend? any current stocks looking rosey for a long term hold for dividends? do people tend to just reinvest dividends in the shares or take it as income?
any pointers appreciated thanks
looking for future investments rather than the fun current gambling ones are dividend stocks a good route to take? how long do you normally have to hold them to get the dividend? any current stocks looking rosey for a long term hold for dividends? do people tend to just reinvest dividends in the shares or take it as income?
any pointers appreciated thanks
Have a look here for company dividend data: how often it's paid, yield etc:
https://www.dividenddata.co.uk/exdividenddate.py?m...
https://www.dividenddata.co.uk/exdividenddate.py?m...
The alternative to paying a dividend is to reinvest in the company (or buy back shares). So a company that pays a dividend is in someways saying "we've run out of growth opportunities".
Dividends are measured in either dividend per share or as a yield (%). If a company trading for £10 a share announces a £1 dividend, the yield is 10% and the dividend per share is £1. If the next days the share price increases to £20, the yield is now 5% but the dividend per share remains at £1 per share.
Other metrics to consider are the dividend cover, which is how many times the dividend being paid is covered by the profit of the company. The higher the better. If a company makes £10000 as profit and pays £5000 in dividends, the dividend is covered 2x. Sometimes companies paid dividends that are not covered by their profit, such as BP most recently meaning the dividend is unsustainable in the long run. That dividend is either paid from cash reserves or by taking debt.
IMO some people get too hung up on dividends. They are nice, but as long as the company is making the money, and reinvesting it for a good return eventually you will see the value of that dividend become yours as the company expands and the share price rises.
For what its worth, of the 5 companies i own, only 1 doesn't ordinarily pay a dividend, and the other 4 have suspended their dividend. I am not concerned as the companies currently have no certainty over how long this situation will last and i think its prudent not to pay out money that they may need.
Dividends are measured in either dividend per share or as a yield (%). If a company trading for £10 a share announces a £1 dividend, the yield is 10% and the dividend per share is £1. If the next days the share price increases to £20, the yield is now 5% but the dividend per share remains at £1 per share.
Other metrics to consider are the dividend cover, which is how many times the dividend being paid is covered by the profit of the company. The higher the better. If a company makes £10000 as profit and pays £5000 in dividends, the dividend is covered 2x. Sometimes companies paid dividends that are not covered by their profit, such as BP most recently meaning the dividend is unsustainable in the long run. That dividend is either paid from cash reserves or by taking debt.
IMO some people get too hung up on dividends. They are nice, but as long as the company is making the money, and reinvesting it for a good return eventually you will see the value of that dividend become yours as the company expands and the share price rises.
For what its worth, of the 5 companies i own, only 1 doesn't ordinarily pay a dividend, and the other 4 have suspended their dividend. I am not concerned as the companies currently have no certainty over how long this situation will last and i think its prudent not to pay out money that they may need.
petemurphy said:
thanks all - food for thought
I'd start with asking yourself if you need income or if it's (respectfully) the illusion that dividends are "free" money.Benbay001 gives a really good explanation but if you have time also search out Terry Smith of Fundsmith's comments.
Terry Smith warns dividend investors worse is to come
Let's say he's not a fan
There are firms who are paying decent dividends that will be largely unaffected by the current situation. Some of these are a good place to start for safe investing. National Grid is an example of one such. Currently yielding 5.2% and a solid 10yr chart.
The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
hstewie said:DaveGrohl said:
There are firms who are paying decent dividends that will be largely unaffected by the current situation. Some of these are a good place to start for safe investing. National Grid is an example of one such. Currently yielding 5.2% and a solid 10yr chart.
The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
stupid question but are you literally getting 5.2% back on your money? if so isnt that a no brainer compared with banks etc. is it just a case of higher risks of share price going down?The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
Pretty much but if you had shares in a company that ended up on a downward decline your money is eroded slowly despite getting dividends.
Also what if you put £1000 into say airlines a year ago. Your value would be say £250 now and no payout as well as risk of going bust and all your capital gone. Or airlines never recover to a previous peak .
Also what if you put £1000 into say airlines a year ago. Your value would be say £250 now and no payout as well as risk of going bust and all your capital gone. Or airlines never recover to a previous peak .
petemurphy said:
DaveGrohl said:
There are firms who are paying decent dividends that will be largely unaffected by the current situation. Some of these are a good place to start for safe investing. National Grid is an example of one such. Currently yielding 5.2% and a solid 10yr chart.
The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
stupid question but are you literally getting 5.2% back on your money? if so isnt that a no brainer compared with banks etc. is it just a case of higher risks of share price going down?The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
There is no guarantee that the dividend will rise, or even be maintained, and there is certainly more risk of the share price remaining static or dropping vs a company reinvesting the money.
Edited by 98elise on Wednesday 20th May 08:33
petemurphy said:
stupid question but are you literally getting 5.2% back on your money? if so isnt that a no brainer compared with banks etc. is it just a case of higher risks of share price going down?
If you buy a single £1000 share in a company on the day it goes XD and a 5% dividend is paid the share price will drop by 5% and at the end of the day your share will be worth £950.A month or so later you'll receive your "free" dividend of £50.
The UK FTSE is full of (current circumstances aside) dividend payers.
Look globally and at the US in particular and dividends is less of a thing but they are full of growth companies who use profits to grow the business.
It has numerous other advantages around taxation which Warren Buffett explains better than I ever could.
If you ever look at a graph of the FTSE 100 with and without dividends it's stark.
My personal view is that unless you literally need a reasonably fixed income it's better to invest for total return and take what you need when you need it.
98elise said:
petemurphy said:
DaveGrohl said:
There are firms who are paying decent dividends that will be largely unaffected by the current situation. Some of these are a good place to start for safe investing. National Grid is an example of one such. Currently yielding 5.2% and a solid 10yr chart.
The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
stupid question but are you literally getting 5.2% back on your money? if so isnt that a no brainer compared with banks etc. is it just a case of higher risks of share price going down?The other thing that hasn't been mentioned is that a decent company paying a div should increase its div as the years go by. If you only ever invest in that company once then your div return will increase every year as the div goes up. That fact alone will tend to drive the share price higher so you make capital also.
There is no guarantee that the dividend will rise, or even be maintained, and there is certainly more risk of the share price remaining static or dropping vs a company reinvesting the money.
Edited by 98elise on Wednesday 20th May 08:33
A couple of posts here have sought to cloud this by talking about the day before and after the div is paid which is just diverting from the point I was making to someone who doesn't understand this by their own admission. I fully realise the points made however before I get pulled up on it. Yes the share will drop by 5.2% the day after but you look again in two or three months in a normal market situation, all of that 5.2% will have been made up again and may be higher. Also share prices tend to lift just before a company goes ex-div precisely for the reason that some investors are looking for that div hit. Judge the share price over time, not a week.
I specifically used National Grid rather than something like an airline for reasons that were pretty obv to those with a bit of investing experience. The current market situation is highly unusual but not remotely unprecedented.
Btw I was in no way making a share recommendation for National Grid.
Another general point I would make is that warning a guy new to investing away from companies that actually pay a div isn't really helpful. Some companies pay and div and grow at the same time.
Just out of interest, what do the anti-div crowd think of City of London Investment Trust? Currently yielding 5.6%? It's raised its div for 54 years consecutively and has grown its share price imensely over the same period in spite of the current market situation. I'm not recommending that one either although maybe I should.
Another general point I would make is that warning a guy new to investing away from companies that actually pay a div isn't really helpful. Some companies pay and div and grow at the same time.
Just out of interest, what do the anti-div crowd think of City of London Investment Trust? Currently yielding 5.6%? It's raised its div for 54 years consecutively and has grown its share price imensely over the same period in spite of the current market situation. I'm not recommending that one either although maybe I should.
DaveGrohl said:
Yes the share will drop by 5.2% the day after but you look again in two or three months in a normal market situation, all of that 5.2% will have been made up again and may be higher.
If you look at long term trends you'll see that's not the case. When a dividend is paid "value" leaves the company and is never recovered.The best way to see this is to look at the FTSE 100 and compare it with the S&P500 (American market). In round numbers FTSE has been yielding (paying) about 4% dividend and S&P has been yielding about 2%. This effect compounds over time and if you look at 5 or 10 year charts of the two indexes you will see that S&P has vastly outperformed FTSE in terms of rise in the index.
In very round numbers, over a period of 10 years a yield differential of 2% p.a. means that FTSE companies will lag S&P companies by at least 20%. The dividends paid have held back the value of the FTSE companies.
The real question is what shareholders do with their dividends. If they use the dividend to buy more shares in the same company they will roughly end up in the same position as if the dividend had never been paid in the first place.
DaveGrohl said:
I feel that a couple of posts on here are unduly negative about my post
A couple of posts here have sought to cloud this by talking about the day before and after the div is paid which is just diverting from the point I was making.
A couple of posts here have sought to cloud this by talking about the day before and after the div is paid which is just diverting from the point I was making.
DaveGrohl said:
Why on Earth are you comparing the FTSE and S&P? All you're doing is confusing the poor fella.
New investors are IMO better off learning a bit about the world of investment than relying on random share tips from a bloke on the internet.petemurphy said:
So I admit I know nothing about dividends bar some companies give them out.
looking for future investments rather than the fun current gambling ones are dividend stocks a good route to take? how long do you normally have to hold them to get the dividend? any current stocks looking rosey for a long term hold for dividends? do people tend to just reinvest dividends in the shares or take it as income?
any pointers appreciated thanks
What you certainly should not be considering is buying single company shares in order to get the dividends, as a novice this is a very high risk strategy. Your first £100k+ investments are likely to be much better put in a fund or investment trust which itself invests in a basket of shares. This way the collapse of one share does not bankrupt you. There are funds/trusts that specialise in certain areas, such as high dividend stocks, these will have fallen significantly the past couple of months but certainly not as much as some of the individual shares within them. looking for future investments rather than the fun current gambling ones are dividend stocks a good route to take? how long do you normally have to hold them to get the dividend? any current stocks looking rosey for a long term hold for dividends? do people tend to just reinvest dividends in the shares or take it as income?
any pointers appreciated thanks
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