ETFs and liquidity risk

Posted by on November 17, 2011 in Dividends

Another day, another glut of new ETFs on the market. While there has been a correct emphasis on fees and tax effects- arguably the only two factors an investor can control-investors should also be award of liquidity risk. Liquidity risk describes the situation where a seller of an asset cannot sell it because there are [...]

Should companies pay dividends or hold onto excess cash?

Posted by on November 10, 2011 in Dividends

There has been a school of thought that the economy is in a liquidity trap. A liquidity trap, in the simplest sense, describes a situation whereby monetary policy (lowering of interest rates, increase in money supply etc.) fails to stimulate the economy. In plain English, pumping money into the economy is not resulting in it [...]

Should dividend yield become more important as you get older?

Posted by on April 14, 2011 in Dividends

I have a long running debate with my Dad about dividend stocks. My Dad’s mantra is “dividend yield, dividend yield, dividend yield.” For years, I would ask him to consider factors such as dividend payout ratio, dividend growth rate and the price to earnings ratio but, invariably, he would say “yes, but what about the [...]

Can an investor predict dividend increases?

Posted by on January 6, 2011 in Dividends

Academics have spent the better part of 50 years attempting to analyze factors that go into a dividend policy. The result has been an articulate and highly mathematical “I don’t know.”  In 1961, two academics named Miller and Modigliani theorized that, in a perfect capital market, paying a dividend to a shareholder would not affect [...]

Dividend stock or corporate bonds?

Posted by on November 23, 2010 in Dividends, Investment Strategy

Since the credit crisis, investors have shifted their asset allocations from equities to fixed income. Over $600 billion have been invested in bond funds in the United States since 2008. It is accepted as investing wisdom that most investors should have a mixture of fixed income and equities in their portfolio. However, the large scale [...]

The effects of dividends on decreasing volatility

Posted by on May 5, 2010 in Dividends

Dividend signaling is the concept that a company that pays dividends is signaling to the market that management is optimistic about its prospects. The theory being, quite simply, that a company would not continue to maintain or increase a dividend unless it knew the immediate future was bright; the act of returning cash to investors [...]

How many bank stocks should be in your dividend portfolio?

Posted by on March 18, 2010 in Dividends

From the mid-1990’s onward, bank stocks were the backbone of dividend investing. Bank stocks increase dividend quarter over quarter and year over year. However, all good things must come to an end and gravy train which was bank stocks paying dividends skidded off its tracks badly. In 2007, the 5 largest American financial services stocks [...]

How to spot warning signs as a dividend investor

Posted by on February 17, 2010 in Dividends

Management incompetence and dividend paying stocks are not mutually exclusive concepts. Even though research shows that dividend paying stocks tend to consist of the majority of stock market returns during down markets, it cannot be concluded that all dividend paying stocks will ride out all economic cycles smoothly. A 24 month period of dividend decreases [...]

Will income trust conversions lead to yield chasing?

Posted by on January 19, 2010 in Dividends

In August 2008, I mused that the implementation of a 31.5% tax on previously tax exempt Canadian issued income trust would force many income trusts to convert to corporations before January 1, 2011 (the day the new tax regime is effective) and lead to distribution cuts in the range of 40-75%. In a January 15 [...]

What is a realistic expectation of return for stocks and real estate?

Posted by on January 18, 2010 in Dividends, Investment Information

I wrote earlier this year that New Year’s resolutions tend to fail because goals are set which ignore the realities of the market. Many commentators have also wondered how perfectly intelligent people can buy into Ponzi schemes promoting unrealistic returns. Therein lies the problem. Most average investors have no conception of what an “average” return [...]