Lexus Group Consultancy in Tokyo, Japan Dividend Stock Investing Strategy

Lexus Group Consultancy in Tokyo, Japan: Dividend Stock Investing Strategy – How to
Choose the Best Dividend Stocks
Many investors find themselves experiencing extreme emotional shifts in
concert with the unpredictable rises and falls that come with stock market
investing. Anxiety may hit like a ton of bricks when prices fall, while
excitement sets hearts racing with exhilaration when they rise.
Those who choose to invest in long-term dividends, however, will not feel
this same angst as stock prices shift. These investors know that the
financial success of their investment is not based on the vagaries of the
market itself, but rather on the long-term success of the company. They
believe that the stock price and dividend will eventually rise over the long
haul, resulting in huge gains over a long period of time.
So, what type of investor should you be? Should you ride the rollercoaster of short term investing, or settle in for the long
haul? Really, it’s all about your personality and financial goals. Read on for some of the how’s and why’s of long-term
dividend investing.
What Is a Dividend?
When a publicly traded company earns a profit, the management generally has three choices:
1. Reinvest the money in the company.
2. Offer a share buyback.
3. Offer a dividend to investors.
Frequently, fast growth companies will keep the proceeds and either reinvests their income in the long-term growth of the
company or offer a share buyback. Share buybacks increase each investor’s proceeds in the future by decreasing the
outstanding shares of stock.
Other companies will issue a dividend, or a share of the company’s profits, which is paid out to investors on a quarterly
basis.
Long-Term Dividend Investing
Dividend stock investing does not often provide the short-term capital appreciation of hot penny stocks. Nor does it match
the excitement of day trading, which during rapidly rising markets can make these investments seem like stodgy, slow
money stocks. Moreover, dividend-paying securities often fall out of favor in rapidly rising bull markets, subsequently
regaining a fervent following during turbulent and unpredictable markets. This is due to the relatively moderate growth
nature of these securities as well as the slow compounding nature of dividends that can be achieved through a long-term,
buy and hold philosophy of dividend stock investing.
However, during slow growth bear markets, more and more investors seek shelter in dividend growth stocks such as blue
chip stocks. In addition, the stability that these stocks can offer makes them an attractive class of security to include as a
component in any portfolio during both harsh and thriving economic times.
Now that you know what dividends are, and how they work in the market, is it the right investing route for you? Here are a
few things to consider:
1. The Power of Dividends
When choosing whether or not to begin this type of investing, it is important to understand the hidden power of dividends.
Take these dividend facts into account:
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You can’t fake a dividend. Unfortunately, recent history has proven that “creative accounting” methods can be
used to falsely inflate a company’s earnings per share and other valuation tools in order to falsely increase share
price. Dividends offer protection from these shenanigans. Companies cannot pay out money that they do not have.
Dividends protect you from the downside. During a bear market, when prices of many securities fall,
dividend-paying stocks actually become more attractive, as their dividend yields effectively increase. This can
result in an artificial stock price floor, preventing the huge capital losses that can provoke panic selling.