The Dividend Investor.
Part 1: Dividends do not lie.
Part 2: Dividend Shares.
Part 3: How to invest in dividend shares.
Part 4: Spread your utdelningsrisker.
To spread their risks is a well-used advice and it is neither a cliche or a cliche. It is always good to diversify their risks when investing but when it comes to investing in the right dividend shares there is a further dimension to the well-worn investeringsrådet to spread their risks. Do not put all your apples in one basket is an expression you probably heard through the years. Imagine that you run a business dependent on the apples, you manufactures maybe äpplemos or cider. You have no other choice than to grow your apples for yourself and stands for the option to have many apple tree or all äppleträds mother, huge and with excellent fruit. The latter option with bautaträdet is smooth, it gives a very nice, fruit and saves time for you pick all the apples on one and the same place. In reality, it has not as cidertillverkare the possibility of a single bautaträd but it became a vivid example for this purpose.
With a single tree that will secure up your oh-so-important cidertillverkning, you are extremely vulnerable if something were to happen to your trees. It can be infested by pests mm and right as it is, you stand there totally without apples. No apples, no cider.
To take this to the aktievärlden so is a similar version of the story if you were to own a single share. There is a lot that can happen in the stock market can result in that the dividend is affected. It can be specific to a company but also the wider events that affect the entire stock market, or even the entire world economy can lead to changes in a company’s dividend. It only took Swedbank in the financial crisis, it got really tough. The company pulled in its dividend entirely for two years. Many companies were affected in the crisis in the banking sector, it was extra tough. Here we take us past the äppleträdet and speak different kinds of fruit. The one that held only bank stocks in the financial crisis, it is also really tough.
There are many different kinds of risk that can diversify away or perhaps better said reduce. Bolagsrisk is just a form, it is the risk in a specific company Swedbank, for example. There are industry risk in which the bank can be an example. The more you dig the more risks and ways to reduce them you can find. When investing in dividend shares, so is just the dividend is important and for many is the something you don’t want to be without, and in several cases, it is something you really can not do without. The pensioner who uses the dividends to boost up their retirement. For the hen it is incredibly important that the dividends ticking into your account, rain or shine.
In the usual case, you talk about investment trusts as a risk-spreading itself, with its many holdings but when it comes to the dividend they shall not be seen as a diversification, but rather that the share at any time. Several of the larger investment companies, cut its dividend in the financial crisis.
In order to spread the risks in your utdelningsportfölj and thus reduce the risk of a major impact of your payoff, it is a good idea to take a number of different companies. You should take companies from diverse industries, with different operations that can potentially be affected different at wide events or unaffected by events in another industry. Consider: Bank, engineering, fmcg, energy and so on. Some companies and industries are more or less sensitive to fluctuations in the economy. Consumer staples is a sector one can generally say are less affected, this includes grocery stores and food we need, of course, whether it is tough times.
You can also lift up your eyes and spread risk through investment in another country and another currency. It can also happen that Sweden get a period of tough times, while for example Norway or the united states is strong and chugging along. By owning shares with a large part of the business in another country reduces their exposure and risk in Sweden. This exposes you indeed for another risk, and it is the currency that can fluctuate over time and affect the value of your holdings and your dividend payments. Over time evens it out themselves but you should keep in mind not to let any foreign currency, weigh too heavy in the portfolio because there is a risk in and of itself, and these, we want to minimize.
You can also look at other investeringsslag order to spread the risk. A closely related, but one of the greatest investment is in preferred shares. They are not valued in the same way as ordinary shares but follow the interest rates like bonds. Preferred shares have, in most cases a fixed dividend that the company can’t deviate from. You can say that they pay dividends all the way into the tile. A reliable issuer, but you should be aware that they are valued differently than common shares. Risks are also, of course, in these shares and they are not bergsäkra in any way. This is a dividend growth rate whereupon the rate of inflation makes the dividend worth less for every year that passes. Worth thinking about.
Another easily accessible investment are bonds that you can invest in through ETFS. In Sweden, the supply scantily but in the U.S. there are a wide range of ETFS with varying content and risk.
In conclusion, keep in mind that spreading your dividends on holdings in different companies and sectors, currencies and countries, and maybe mix in some bonds and preffar to further distribute the risk. Like a fruit basket with many different kinds of fruit. By spreading risks in this way you reduce the risk of large fluctuations in your dividends at the same time. When an industry has it very hard, and any holdings are being forced to cut the dividend, the other holding very well thrive. It is dependent on dividends do not want to happen out for the big changes on the downside.
Over and out!