I have no problem with investment in Pharma, Big Oil etc those type of companies should be in any well-diversified portfolio - 4% yield isn’t outlandish.
But there’s a bit of a pervasive trend recently in dividend investing of simply looking at yield percentage - then you get dragged in to companies like Vodafone with awful balance sheets but 9% yield.
Then again if your total strategy is to discount stocks that don’t pay dividend then you usually miss out on the high growth innovators that reinvest income in early stages. Microsoft is a perfect example, didn’t pay dividend for a long long time but man you wish you bought that stock early on.
That’s the issue I have with dividend stocks, a good majority of them anyway, little future outlook or investment as the profit goes to appearing healthy and paying shareholders a dividend.
I like the patience and behaviour of Amazon shareholders - no dividend needed as profits are reinvested into growth, driving the price up for stocks far beyond a measly 5% annual dividend payment.
The chances of picking an Amazon or Microsoft at an early enough stage that you would see a huge return would require plenty of good luck, and then you also have to gamble sticking in a large enough sum in a small company (at the time). If you stick to an index etf then your exposure to such companies is only in the low single digit percentage anyway, and you won’t invest in them at all until they are big enough to enter that index.
Also ftse100 and S&P etfs will undoubtably contain a few future duffs.
And not all dividend payments represent a company trying to hide something - sometimes they want to share the profits.
Besides, I’m already invested in the future Amazon/Microsoft (aka. Freetrade). I would also include Monzo in that but I have a sinking feeling Crowdcube are trying to introduce fees for holding my shares in nominee (see their new terms).
Freetrade plans to crowdfund at some point this year (possibly via Crowdcube but no one knows yet).
Unlike any other public comany, Freetrade’s shares will be extremely illiquid once you invest in them so bear in mind it is significantly higher risk unless you find a buyer yourself.
Yeah don’t think measly was quite the correct terminology sorry - I just mean to sit on only dividend stocks is fine for stability but doesn’t really offer much in terms of long term growth.
@Emina1 Thanks for another update, it’s interesting to see what you have in your portfolio.
You’ll find that it’s not uncommon for dividends to arrive a little late. I can’t speak for either Freetrade or US stocks (not using the former yet and don’t own any of the latter) but with UK stocks, sometimes, they can be a little late even with likes of Hargreaves Lansdown.
If you want to receive a dividend how much time before the ex-dividend date would you need to hold for? I know it is technically the day before, but I’ve seen commentary to suggest it can take some time to update share ownership records (up to 3 days?) to reflect the change of ownership and change to dividend receiver?
You only need to hold the stock over ex-date (i.e. as at market open on ex-date) in order to be eligible for the dividend. You’re correct in what you say regarding being on the company’s register in order to receive the dividend from the company’s registrars. Fortunately Crest (the electronic settlement system) automatically raises claims for the majority of distributions. So even if you are not on the company’s register, as long as you’re eligible, you will still receive the dividend.
This is all done behind the scenes so you don’t need to worry too much about this.
Thanks means a lot. Makes sense what you said about Blackstone. Probably won’t plough any more money into them. I love portfolio transparency videos, I know people think it’s personal but we’re all in this together and I think the more people share their experiences the better for all of us.
In his example, for every $1 in dividend you reinvest, you only gain $0.19 capital. Compared to a growth stock where your retained $1 is $1 of capital.
In short you’ll almost certainly be worse off with “income” focused equities.
If you need money in your pocket, just sell shares to get the desired income. You get more capital gains allowance per year than dividend allowance to boot.
:freetrade:
