Lux Investing
Are there any negatives to dividend investing?
i.e. say we are in a recession and my div. stock goes down 5% for the year. Yet I still receive a 3% dividend for the year. So here I am paying tax on an investment that lost me 2% on the year! Or am I just not looking at this correctly?? Thanks
Public Comments
- It is worse than that. If the dividends are cut, the stock price will go down -- so you will have lost capital as well. There is always risk to investing. You have to decide if the expected reward is worth the risk.
- Think of it this way -- That dividend is sought after by many retired investors looking for current income and slow growth. So if your company did not pay the dividend, it very well may have gone down 10% instead of 5%. Also you buy dividend paying stocks as investments for retirement (think long term, 10+ years as opposed to gambling type "hot" stocks for day trading). Looking back, there most likely have been a LOT less 10+ year periods where you would have lost money than periods where you would make money. Another point, if you pick the proper companies, ones that keep increasing their dividends each and every year, by the time you retire, you will be living off the dividends with no need to touch the principal, so short term movements shouldn't matter.
