The Dividend Investor v.23 ”Dividends don’t lie”

There are several advantages of dividends and we shall in this series of articles take up a variety of them. We begin with a very powerful thing with dividends, they aren’t lying. The reported profit goes to twist and turn and is almost a work of an artist. A company may feel lousy but still report a profit. Something you cannot get with or beautify it is money in his fist. A few years can a company manage to share out the money they really don’t have but to several years of term to pay a good dividend year in and out it is possible only if the business actually generates money.

An advantage here is that the dividend shares are easier to evaluate compared with shares that do not pay at all. Only prosperous companies can afford to pay dividend regularly, and so sort it quickly and easily removes the ”bad” companies when you choose out those that don’t pay dividends. Certainly, there are examples of good companies that don’t pay dividends, but they fall away in the crowd and it is not them we should focus on in this article, if the dividend shares. Thanks to the right to the dividend is the dividend shares, easier to assess, they have the additional key figures to look at on analysis. You can look at how the dividend and other performance indicators have been developed and also see how the company has been valued historically based on the dividend. If a company, usually traded at 3% yield, but right now it is trading at 2.5%, it may say something about the valuation. Maybe it’s expensive now, it can give a hint, at least, and something worth looking closer at.

It is a company’s cash flow that provide real support for the dividend, and the need to cover the good and well for the dividend should be sustainable. For the company is a strong cash flow is important and you are investing in dividend shares may, after all, a private cash flow in the form of dividends. A cash flow, you can freely do as you wish with. Just as for the company, it is also for you a strength to have a good cash flow. A current cash flow to reinvest in new shares or whatever you wish to do so. Maybe one of your portfolio companies need to do a stock issue and then it is fine to have it where the cash flow of dividends instead of maybe being forced to sell holdings to participate in the issue. Your cash flow of dividends also means that you can constantly purchase new shares without having to sell anything. You can reinvest all in the same company you get your money away or pick out a specific holdings you want to bet more on the. That money is steadily ticking in the portfolio gives you the flexibility and the financial strength!

A common misconception is that you choose either the dividend or share price appreciation. It is possible to get both in the same investment. It is possible to find companies that pay dividends and have good growth. We are now inside of two different kinds of dividend shares; Högavkastare which, like the name suggests pays a high yield but often do not grow these as much per year. The second type of utdelningsaktie is the one with good dividend growth. This is often the yield is a bit lower but on the other hand rises the dividend in Swedish kronor steadily with time. If the dividend rises, so rises the share price in the long term.

Dividend shares are common, it is for all. To leave the small investor who wants to have a better pension, for barnsparet, for the trader who wants to have a stable portfolio on the side. To invest in sound companies that steadily pay dividends is a good strategy in the long term, should provide a return at the level of the index or actually even better. There are a number of academic studies around the dividend shares, as we will check in later parts of this series. Studies show that the dividend shares will give better returns than a stock market index in the long term.
With the dividend in focus, you can find great investments, at least as good as any other strategy. The dividend is an important part, but not all, of course, it should also be a good business with good prospects, etc, With the dividend as a starting point, one can look further at other criteria to find a company to invest in. Do you make a nyckeltalssortering in all Swedish stock lists of companies with at least 0.5% dividend yield, you get over 300 hits. It is a really great base to then filter further to find just what you are looking for.

Keep in mind to double check all the information in the company’s annual report once you have come so far that you have found it you want to invest in. When you search for your investment you may be using programs or web sites to find precisely what you want. For the most part is true information but it is you yourself who is responsible for your investment decisions is correct. Therefore, it is good to always verify the info with the company itself, via their annual report or website.

This is the introduction and the first part in a series of articles about dividend shares. This will be followed by more parts with more information about the dividend shares, and after that we are ready to move on to the articles about the specific case and utdelningsinvestering in general.

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