Category Archives: Dividend Tips

Which Dividend Stock Is the Best Buy?

Only you can decide for yourself which is the best dividend stock to buy next. If there are several dividend stocks that you love, but you can only choose one to buy right now, here are some things you can consider.

Keep your allocations in check

You should know how much invested capital you have in each stock holding and each sector and or industry. You also should know how much they’re worth at market value. This is so that you won’t have too much invested in any company, which should help reduce emotional buying and selling.

Here’s a simple example. Let’s say that five years ago, for our portfolio, we originally invested $2,000 in each of Toronto-Dominion Bank (TSX:TD)(NYSE:TD), Emera Inc (TSX:EMA), Alimentation Couche-Tard Inc (TSX:ATD.B), Amgen, Inc. (NASDAQ:AMGN), and Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM).

In other words, we invested an equal amount of money in each company for the equal-weight portfolio. Each holding made up 20% of the portfolio. Read More

Does High Yield Mean High Risk?

Why would some dividend stocks yield 8% while others yield 6%, 3%, or even 1%? Are higher yield stocks riskier? The answer is not as simple as a “yes” or “no”.

grow dividends

The risk in investing in stocks

First, let’s define “risk”. Some define risk as “volatility” — the more ups and downs a stock experiences, the higher risk it’s perceived to have. Volatility is often associated with “beta”.

If a stock has a beta of 1 when the stock market goes up by 1%, the stock goes up by 1%, and if the market declines 1%, the stock also declines 1%. Oh, and the beta changes over time. (So, use that metric as a reference and don’t bet on it too much.)

I think the true risk of investing in stocks is selling at a loss. For some people, it’s difficult to hold on to volatile stocks because they can’t bear to see their investments going up or down too much. So, volatile stocks are risky for those people. (But stocks are inherently volatile because they trade on the market…but that’s a topic for another day.)

The risk in investing in dividend stocks

When you buy dividend stocks, you, of course, expect its dividend to be safe. But as we know, occasionally, stocks do cut their dividends. So, a dividend stock that’s risky would have signs indicating it might cut its dividend.

There are some things you can check to know if a dividend is safe — at least comparatively speaking. Read More

How to Boost Your Income Safely

Are you looking for income to complement your job’s income? Do you have money and time to spare? If you answered “yes” to both questions, you should consider dividend investing.

When you invest in dividend stocks, you can boost your income. However, there are several things you should keep in mind: quality, value, growth, time, and the intention to hold for the long term.

Intention to hold for the long term

I deliberately didn’t say “long-term investment horizon” because some investors have a long-term investment horizon but trade in and out of stocks.

I’m not saying investors shouldn’t do that but perhaps for specific stocks, they should think twice or thrice before they part with them.

Specifically, quality companies that become profitable over time should be held for a long time to maximize your wealth.

Coca-cola logo

Think about Warren Buffett’s yield on cost on Coca-Cola (NYSE:KO). He bought the shares in 1988. His cost basis is now US$3.25 per share, and his yield on cost has grown to 43%!

Since Coca-Cola pays out a quarterly dividend of $0.35 per share, it means Mr. Buffett gets a return of almost 10.8% of his original investment back every quarter. His investment has paid back itself many times over by now! Read More