When is a dividend not a dividend?
The latest thing "conservative" brokers are preaching these days is to buy stocks that pay dividends. Everyone likes dividends. I know I do, but when Wall Street tells me something I am automatically suspicious because they lie to me every day. Is this a new scam? Let's take a look.
When you buy a bond or a CD at the bank it pays interest and is a real dividend. You might get a check every month, quarter or annually or receive a credit to your account. The amount of your principle (what you paid for it) remains the same. Yes, that is a true dividend.
Companies make big splashes about raising their dividend. It was 50 cents per share, but we have raised it to $1.00. Big deal. Yes, you will receive a check and at least you know the company has cash available to pay you. That is an indication the company is in good financial condition, but there have been many of the big names on the NYSE that have continued dividends even when they have lost money. How can that be?
Currently Microsoft has announced a dividend of $3.00 per share. The talking heads on CNBC-TV tell us they are loaded with cash and want to distribute it to their stockholders. Many people buy the stock in anticipation of the dividend as they think they will be getting an extra $3.00 per share. They are in for a big surprise.
The day that dividend is paid Microsoft stock (symbol MSFT) will automatically drop $3.00 per share. Today $27.00; tomorrow $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 not have one extra penny after the dividend than he did before. In fact he will have less. Why?
The stockholder will now be allowed to pay income tax on the "dividend" distribution. To make that "dividend" seem even better the Bush administration has reduced dividend taxes from 38.6% to 15%. Thanks, Mr. Bush. Thanks for nothing. I can't blame him for more Maul Street smoke and mirrors. He has just made it cost less to get back your own money.
Companies seldom pay large dividends and they are paid quarterly. A $30 stock that pays a 4% dividend ($1.20) on a quarterly basis shows a decrease in the stock price that day of 30 cents per share and is lost in the noise of trading. Few notice that part of the price change is due to the "dividend".
When you own the stock of any company the most important criteria is to find one that is in a long term upward trend. Never buy a stock that is showing a decline no matter how "good" the company may be. Even sideways movements should be avoided. Keep in mind you are buying the stock to make money. Forget the dividends and all other "reasons" and remember if it isn't going up, don't buy it!
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
taxi o'hare Wisconsin Dells ..No, this is not a symbol for some Latin number.... Read More
Everybody is riding the Wall Street Roller coaster. Even if... Read More
Both the stock market and oil prices rallied recently, which... Read More
What does it take to be a stock trader? It... Read More
If you have a pension plan at work you will... Read More
The Winter Games for the Olympics are coming up soon... Read More
Stock trading can be a very profitable activity. You can... Read More
Intervention. Now don't let that big word scare you. The... Read More
The gleam and bright lights of Wall Street lure in... Read More
Everything you invest in has risk so you want to... Read More
One of the basic laws of physics is that a... Read More
In today's volatile and confusing stock markets everyone is searching... Read More
How is it possible that trash Companies are posting less... Read More
Before you buy another car you walk around the lot,... Read More
A few years back ? it seems like an eternity... Read More
The stock market is very unstable at this time going... Read More
Regardless of the fact that the world's stock markets have... Read More
Everyone who invests in the stock market wants to be... Read More
Let's go into the details of why non-indexed mutual funds... Read More
We've all heard of the stock market and probably have... Read More
When the stock market is going up and all your... Read More
There are many good penny stock investments available, which could... Read More
With the stock market stubbornly refusing to settle down and... Read More
Sometime in the third quarter of 1997, someone told me... Read More
Every publicly traded company is required by the SEC(Securities and... Read More
bmw rental chicago Ackley ..Just about now everyone is confused as to which way... Read More
One of the greatest challenges of investing in stocks is... Read More
Carefully thinking through your goal as a trader is of... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
I am taking the time to help others learn the... Read More
Before we get into all the good news out there,... Read More
One of the great "secrets" of successful people is discipline... Read More
If you are going to be a winner in the... Read More
Stock trading can be a very profitable activity. You can... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
Robert Rodriguez likes to buy stocks at their lows. When... Read More
How many times have you said to yourself, "I'd like... Read More
We need a rabbit!This was a pretty horrible week for... Read More
Refuse is a serious issue in any society, about as... Read More
Have you been listening to the talking heads on CNBC-TV?... Read More
A Guide to Using Stop Loss Orders Stop losses are... Read More
Forget making a profit; instead focus on the income provided... Read More
One of the great truisms of Wall Street is "Don't... Read More
Ever have one of those sample boxes of candy? Each... Read More
You have decided to buy some stock or mutual funds,... Read More
There is a famous cliff on the ocean in Acapulco... Read More
It has been said that low cost or even free... Read More
∙ Make every investment in the stock market a long-term... Read More
When it comes to 401k's there is an overabundance of... Read More
The Winter Games for the Olympics are coming up soon... Read More
Stocks & Mutual Fund |