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Last week, as I pulled the trigger on my regular stock purchase, I realized that I forgot to write about my previous purchase. However, all is not lost, for I have bought the same stock for my last two purchases. When buying dividend stocks, it is important to strike a right balance between the price paid leitfaden fur handel mit binaren optionen the dividend prospects. The goal is to pay a fair price for the expected value of the stream of future dividends. If you pay too much, you run the risk of receiving less in dividends then the price paid for the stock.
With the overall advance of the stock market so far this year, many great dividend stocks are now simply overvalued. For dividend investors, this is bad. When you look hard enough, there is always some great stocks at fair prices out there. This is why, for my last two purchases, I decided to increase my stake in Deere and Co.
So, not only was John Deere yielding, and still yields, about 2. For me, such a combination of good yield, great dividend growth, leitfaden fur handel mit binaren optionen payout ratio and fair price is a good example of a right balance between the price and the dividend prospects of a stock.
Dividend investing is not simply buying dividend stocks and hoping for the best. The secret of successful dividend investing is to pay less than the value of the future dividends you will receive. In my dividend portfolio, October is not very active with respect to dividend increases.
Still, I managed to collect two. Leitfaden fur handel mit binaren optionen October 2o, AbbVie Leitfaden fur handel mit binaren optionen. ABBV increased its quarterly dividend by Personally, this most recent increase was unexpected as ABBV leitfaden fur handel mit binaren optionen yet to establish any pattern of regular dividend increases. The last increase was in February of this year. Though I will gladly take the increase, it seems as if ABBV was trying the change the focus after the cancelled takeover of Shire.
Speaking of the failed takeover, I would have preferred ABBV to still go with it, as Medtronic is doing with its takeover of Covidien, despite attempts to stop leitfaden fur handel mit binaren optionen inversions.
With or without tax inversion, the combined companies would still have been a great company to own. AFL increased its quarterly dividend by 5.
This leitfaden fur handel mit binaren optionen is very much in line with previous ones. That being said, I understand that AFL is playing safe. Two years ago, you bought a dividend stock with great potential. The stock appeared undervalued and the dividend prospects enticing. The price of a dividend stock tends to grow over time. The reason is simple. As the dividend paid by the stock grows, the stock becomes more attractive and thus more valuable. As the stock becomes more valuable, investors bid up the price of the stock.
Dividend investors will typically bid up the price leitfaden fur handel mit binaren optionen the dividend prospects are no longer interesting. However, dividend investors are not alone in buying and selling dividend stocks, other investors can and will affect the prices of dividend stocks.
For instance, if a company is in a hot sector or rumored to be acquired, these non-dividend investors can bid up its stock price beyond what dividend investors would pay. At some point, the price of the stock may become so high that it is no longer in line with the dividend prospects of that stock. If you sell the stock, you will unlock the purchase price of the stock i. It is not because you could immediately get more dividends by unlocking some capital gains that you should do it.
Dividend investing is a long-term process. Selling decisions must not be taken for short-term gains. So, when does it make sense to sell dividend stocks to reinvest the unlocked purchase price and capital gain? Simply, it makes sense to sell a dividend stock if you stand to receive more dividends over the long-term by selling the stock and reinvesting the proceeds into a new dividend stock, than by keeping the current stock. To properly decide whether you should unlock that capital gain, you have to make two calculations:.
If you stand to receive more dividends from the hypothetical new position, sell your current position. At the time, the stock was yielding about 2. So, I estimated how much dividends I would receive over the next 20 years should I keep my Walgreens shares, using the yield on cost. Then, I estimated how much dividends I would receive should I reinvest all the proceeds in a new dividend stock.
For Walgreens, I used the yield on cost about 3. For the other stock — I had General Electric in mind — I used a yield of 3. You have to remember that dividend investing is about generating dividends, not about chasing capital gains.
This is in fact one of its major strengths. Though capital gain is a common and nice side effect of dividend investing, it should never be its main focus. Your dividend stocks will accumulate significant capital gain. But think twice before selling them. The stock has doubled in price, way beyond your wildest expectations. What do you do with that stock? What do you do with the capital gain?
Why you should sell a dividend stock for capital gain? At this point, you may want to consider selling the stock to unlock that capital gain. When you should sell a dividend leitfaden fur handel mit binaren optionen for capital gain? How to decide to sell a dividend stock for capital gain?
To properly decide whether you should unlock that capital gain, you have to make two calculations: You have to estimate how much dividends you will receive from your current position. You have to estimate how much dividends you would receive from a hypothetical new position purchased with the proceeds of the sale of your current position. Then, you compare both numbers. Let me give you a real example from my own portfolio.
I seriously thought about selling my shares. But, I had to back my decision with numbers. This time, Walgreens leitfaden fur handel mit binaren optionen and I kept my shares. Next time could be different. What to do with capital gain?