Categories

Investing Observation & Opinion

Tools

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


    Bill Dudley Explains Why The New York Fed Is Not A Subsidiary Of Goldman Sachs
    The S&P’s GAAP P/E Ratio Rises Above 19X
    Goldman’s Two-Word Summary Of The PBOC Rate Cut: “Slightly Useful”
    Gold Repatriation Stunner: Dutch Central Bank Secretly Withdrew 122 Tons Of Gold From The New York Fed
    Gold Tops $1200 As China Cuts, Draghi Jawbones
    Shocking Pictures Of A Russian Potash Mine Disaster
    Wall Street Stunned As Iceland Dares To Jail Banker Involved In 2008 Crash
    Stability Vs Opportunity
    3 Things Worth Thinking About
    Now You Can Download Wall Street’s Favorite Networking Tool
    The World’s Oldest Monopoly Is Finally Coming To An End
    The Return Of The Dollar
    SpareChair Aims To Become The Airbnb Of Coworking
    Nutanix Beating EMC By Cutting Customer IT Costs 62%
    10 Companies Smack Down Wall St. Analysts


    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.

    Apple’s New Barrier: $118.54
    Banks Defend Their Commodities Activity
    Renegade Mini-Jeep On Sale ‘Well Below’ $20k
    More Gains, More Volatility, In 2015: JPMorgan Funds
    Metals Stocks: Gold, Copper Jump On Central-bank News From China, Europe
    Blackstone To Buy GE’s Japan Property Business For More Than $1.6 Billion
    Carnival, Fincantieri Explore Possible Chinese Shipbuilding Venture
    Inventory Surges At Ann Taylor Brand
    The Man Who Called The Last Stock Crash Is Already Blaming The Fed For The Next
    Fed And Markets More Co-Dependent Than Ever
    Philly Fed Explodes To 21 Year Highs, Beats By 10 Standard Deviations
    The Highlights From The Senate’s Finding That Banks Manipulate Physical Commodities
    The Latest Scandal: Goldman, Fed Employees Busted For Illegally Sharing Confidential Information
    Retail Rapture: UK Grocery Sales Drop 1st Time In 20 Years, Dollar General To Shut 4000 Stores
    Senior Citi Banker Found Dead In Bathtub With Slashed Throat
    The Objectivity Of U.S. Media In One Chart
    These 7 Firms Paid Their CEO Over 60% More Than Uncle Sam
    Uber Tracking Raises Privacy Concerns
    Wolff: My Role In Uber/BuzzFeed Fracas
    Norwegian Completes Acquisition Of Oceania, Regent
    Six Most Overvalued Big Tech Stocks
    Shoppers Ditch Black Friday As Sales Expand
    Target Beats Estimates For Third Quarter
    Wall Street To Slip At Open On Global Growth Worries
    Dollar Tree Posts Best Same-store Sales Growth Since 2011
    Best Buy Profit Doubles As U.S. Sales Rise
    Shares Punctured By Two-pronged Slowdown In China, Europe
    Arizona Sues General Motors For $3B, Says It Hid Safety Defects
    Swiss Banks Asked To Hand Over More Data In U.S. Tax Case
    Changan-Ford Auto Sees Sales To Rise Around 10 Percent In 2015
    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.