Categories

Investing Observation & Opinion

Tools

  • Economy & Politics
  • Investing
  • Personal Finance
  • Related Posts


    Decorated Cop Allegedly Breaks Into Woman’s Home, Says ‘Sometimes I’m A Bad Guy’ And Beats Her
    Japan Stunned After Biggest Ever, $617 Billion “Fat Finger” Trading Error Slams Stocks
    Equity Futures Fail To Surge Despite Ongoing Bad News Onslaught
    What Happened In Yesterday’s “Crazy” And Biggest Ever “Window-Dressing” Reverse Repo?
    Why Is China Hoarding Gold? Alan Greenspan Explains
    Does Surging Demand For Gold & Silver Coins Signal A Bottom?
    More Lies: Watchdog Finds Government “Greatly Exaggerated” Success In Funding Small Businesses Last Year
    Caught On Tape: HFT Algo Manipulating GOOGL 1000 Times Per Second
    Investors Are Too Comfortable In The Fed’s Win-Win Conditions For Taking Risk
    “Russia Could Ditch Dollar In 2-3 Years”
    Singapore Global Gold Hub Cometh – Launches Kilo Bar Contract And Gold ATMs
    Firechat Was Sparking Interest In India, Even Before It Became A Mainstay Of The Hong Kong Protests
    Alcohol, Sex, Chocolate Or The Internet: What Indians Would Rather Have
    Stock Futures Begin Fourth Quarter Flat, Data Awaited
    Commerzbank To Cut 60-70 Fixed Income, Currency Jobs


    Why I Have Never Said To Invest With Warren Buffett

    I have never advised my readers to invest in Warren Buffett’s Berkshire Hathaway (BRK-A).

    And it’s not because a single share of the Class A stock costs $164,690 or because I think it is overvalued or because of any of the other usual reasons, for that matter.

    The reason is actually quite simple.

    It’s because Warren Buffett has vowed time and time again to never pay Berkshire shareholders a cent in dividends.

    Consider this: In the most recent quarter, Berkshire Hathaway collected more than $1.35 billion in dividend and interest income from its holdings.

    Yet none of that money made its way back to shareholders.

    Granted, Buffett’s style is to try to turn that money into more money. But for me, I’d rather collect a steady stream of cash with which I can do what I please.

    This is not to say that buying Berkshire’s Class A or Berkshire Hathaway B (BRK-B) shares is a terrible investment. In fact, it could be a nice addition to an income portfolio for people also looking for capital growth.

    But when it comes to collecting steady and rising income streams, investing in dividend-paying stocks is one of the wisest choices an investor can make.

    Apparently, I’m not the only one who feels this way. Other investors seem to prefer dividend stocks over non-dividend payers as well. That’s because these stocks not only provide income, they perform.

    In fact, Ned Davis Research found that from 1972 through Sept. 30, 2012, U.S.-based dividend-paying stocks in the Standard & Poor’s 500 index returned 8.7 percent annually, far exceeding the 1.6 percent return for non-dividend payers.

    Description: http://www.streetauthority.com/images/DivPayersRockBarChart2.gif

    As you can see, the difference between non-dividend payers and dividend payers is stark. If you invested $10,000 in non-dividend payers in 1972, you’d have $18,961 by September 2012. The same amount in dividend-paying stocks would be worth $302,800. That’s almost 16 times more.

    This study supports my conviction that dividends are one of the most powerful investing tools available. However, as Chief Investment Strategist behind High-Yield Investing, I am biased.

    But one look at Warren Buffett’s portfolio shows that the man likes dividend-paying stocks himself. Of his 40 holdings, 30 pay dividends. Not to mention, many of those companies have a proven track record of raising or maintaining dividends.

    The simple fact is that if you’re ignoring dividends, you’re missing out on one of the safest ways to make money in the market.

    But not all dividend stocks are created equal. I’m not suggesting that you just go out and buy a stock simply because it sports a high yield — that’s a risky proposition that can leave you with dividend cuts and losses if you choose unwisely.

    In addition to high yields, you should be looking for high-quality income investments — ones that pay large, rising dividends with a degree of safety. When picking stocks to add to my High-Yield Investing portfolio, these are some of the criteria I look at when evaluating an income investment:

    1. Long track record of paying consistent and rising dividends.
    2. Matching history of improving earnings.
    3. Strong cash flow sufficient to pay dividends and then some.
    4. High projected growth that can lead to dividend increases.
    5. Zero or little debt, because debt-free companies have more cash to distribute.
    6. Noncyclical business models that can profit in all markets and at all times.

    Very few stocks actually possess all these criteria. In fact, our research team ends up rejecting 99 out of 100 potential high-dividend stocks and funds because our test eliminates companies that may be unable to meet our standard for secure, steady and growing dividend payouts.

    Action to Take –> Remember, there are no "absolute" guarantees. No matter how sound an investment may seem, anything short of a U.S. Treasury bond can lose money. But in my experience, if you’re researching a company and it fits most or all of these metrics, you may have found a winner.

    And as I mentioned earlier, history clearly shows that investing in dividend-paying stocks is one of the best ways to beat the market and collect a healthy stream of income at the same time.

    Carla Pasternak

    P.S. – In case you’re wondering what kind of stocks meet our standards, my research team has just identified 10 high-yield stocks that could give you a second income stream. Not only do these stocks pay dividend yields up to 15.2 percent, but they also have the potential to pay you an extra $25,000, $45,000 and even as much as $55,000 a year. To learn more about these stocks, including several names and ticker symbols, follow this link now.

    Carla Pasternak is a leading income investing expert, serving as Director of Income Research for High-Yield Investing and Dividend Opportunities. Together, these newsletters put her expertise in the hands of more than 200,000 subscribers each month.

    | All posts from Carla Pasternak

    Discuss this Story:

    Comment Policy: We encourage open discussion. Comments including racist statements, profanity, name calling or spam will be removed at our discretion. We use filters for spam protection. If your comment does not appear it is likely because it violates the policy.

    Lackluster Factory Data Hits World Stocks, Dollar Strong
    JPMorgan To Face U.S. Class Action In $10 Billion MBS Case
    Adidas Seeks To Placate Investors With Share Buyback
    If Analysts Don’t Ask Questions, Expect Stock Declines
    U.S. Orders Airlines To Replace Cockpit Displays On 1,300 Boeing Airplanes
    Mercer Cuts Ratings On Pimco Funds, More Outflows Could Follow
    Microsoft Names Next Operating System ‘Windows 10′
    BNY Mellon To Shut Derivatives Sales, Trading Business
    6 Things Investors Need To Know About October
    Jackpot: Stocks That Hit 40% Gains In Q3
    Ebola Stocks Soar After Infection Hits U.S.
    Goldman Tapes Shows Fed Weakness
    EU Reveals Details Of Apple Tax Probe
    7 Big Companies Are About To Lose Money
    Good Riddance To Eric Holder
    Carl Icahn Wins Again: eBay To Spin Off PayPal; CEO John Donahoe Is Out
    A Day Of Global Economic Disappointments Is Just What The Stock Ramp Algo Ordered
    Europe, China Start Direct Trading In Euros, Yuan As De-Dollarization Expands
    Study Finds Treated Fracking Wastewater Still Too Toxic
    The Goldman Tapes And Why The Delusion Of Macro-Prudential Regulation Means The Next Crash Is Nigh
    Nobody Cares About Privacy, Not Even Criminals
    How American Parenting Is Killing The American Marriage
    Netflix Is Making An Original Movie—but It Won’t Come Cheap
    Drugstore Chain Walgreen’s Quarterly Sales Rise 6.2 Percent
    EBay Jumps In Premarket, To Spin Off PayPal
    EBay To Spin Off PayPal In 2015
    Euro Zone Inflation Slows In September, Weakens Euro Versus Dollar
    EU Says Ireland Tax Deal With Apple Was State Aid
    Vanguard, BlackRock May Reap Billions From Pimco After Gross Exit
    Morningstar Strips Pimco Total Return Fund Of Its Gold Rating
    Read more from Investing...

    Liberty Investor Digest

    Get today's most important
    financial headlines all in
    one place by email!



    Sources


    close[X]

    Sign Up For Liberty Investor Digest™!

    Get Liberty Investor Digest FREE By Email!

    Input your name and email address in the fields below and get today's most important financial headlines sent straight to you inbox!

    Privacy PolicyYou can opt-out at any time. We protect your information like a mother hen. We will not sell or rent your email address to anyone for any reason.