Stock and Fund Dividends

When is a dividend not a dividend?

The up-to-the-minute thing “conservative”
brokers are preaching these years is to purchase stocks
that wage dividends. Everyone wishes dividends. I
cognize I do, but when Wall Street states me something
I am automatically leery because they lie to
me every day. Are this a new scam? Let’s take a
look.

When you purchase a chemical bond or a cadmium at the
bank it pays interest and is a existent dividend. You
might get a check every month, one-fourth or annually
or have a credit to your account. The amount of
your rule (what you paid for it) stays the
same. Yes, that is a true dividend.

Companies do large splashes about
raising their dividend. It was 50 cents per share,
but we have got raised it to $1.00. Big deal. Yes, you
will have a check and at least you cognize the
company have cash available to pay you. That is an
indicant the company is in good financial
condition, but there have got got got been many of the big
name calling on the New York Stock Exchange that have continued dividends
even when they have lost money. How can that be?

Currently Microsoft have announced a
dividend of $3.00 per share. The talking caputs on
CNBC-TV state us they are loaded with cash and want
to administer it to their stockholders. Many
people purchase the stock in expectancy of the
dividend as they believe they will be getting an
extra $3.00 per share. They are in for a big
surprise.

The twenty-four hours that dividend is paid
Microsoft stock (symbol MSFT) will automatically
drop $3.00 per share. Today $27.00; tomorrow
$24.00. Folks, this is NOT a dividend. This is a
statistical distribution of capital. You are being paid in
your ain asset. The sap that believes the Wall
Street mumbo-jumbo volition not have got one extra penny
after the dividend than he did before. In fact he
will have got less. Why?

The stockholder will now be allowed to
pay income tax on the “dividend” distribution. To
do that “dividend” look even better the Bush
disposal have reduced dividend taxes from
38.6% to 15%. Thanks, Mr. Bush. Thanks for
nothing. I can’t incrimination him for more than Maul Street
fume and mirrors. He have just made it cost less
to get back your ain money.

Companies seldom pay large dividends
and they are paid quarterly. A $30 stock that pays
a 4% dividend ($1.20) on a quarterly footing shows a
lessening in the stock terms that twenty-four hours of 30 cents
per share and is lost in the noise of trading. Few
notice that portion of the terms change is owed to the
“dividend”.

When you have the stock of any company
the most of import criteria is to happen one that is
in a long term upward trend. Never purchase a stock
that is showing a diminution no matter how “good” the
company may be. Even sideways motions should be
avoided. Keep in head you are buying the stock to
do money. Forget the dividends and all other
“reasons” and retrieve if it isn’t going up, don’t
bargain it!