Stocks with high dividend ratios are traps

[desura]

Every time I buy a stock with a dividend payout ratio higher than 5%, it dips and I lose substantially more in principle than I make up in dividend payments. Bought SSW over a year ago to get an 8% dividend, and it has dropped by half since then!

 

[edro]

Well yeah... you and everyone else bought it for the dividend, that's why it turned around.

 

[ControlD]

Are you still getting a dividend? If yes, then you haven't lost anything and you are still making money. You only lose money on that stock when you sell it or they go bankrupt. Hold it, keep taking the dividends and wait for the stock to go back up. Then decide on whether to hold it or sell it.

It also shows me a DIV/YIELD of 16.09% right now. Dang.

 

[Exterous]

In this low interest rate market generally asking for more than 5% is reaching IMO. Lots of people scrambling for higher payout which is only going to hurt. Plenty of great options in the 3% range: KO, GIS, INTC, MCD etc. That said I do have a few in higher payout REITs but its not a large commitment % wise

 

[dullard]

Stocks that pay a dividend aren't traps, but they are in a bubble since everyone bought them hoping to magically get a low risk return in a low interest rate era. Bubbles pop or deflate.

When everyone is doing something, then you need to (a) do the opposite or (b) do the same and get out before others get out. Option (b) is very hard to time.

 

[KB]

I have been burned by high dividend stocks too but I have also made some money from high dividend stocks. What i have found is that High dividends are usually high for a reason, because the companies stock price has fallen due to uncertainty in their business and falling revenue. If you want high dividends its best to stick with companies that:
-Have a growth component, preferring revenue growth over EPS
-have a less than 50 percent payout ratio
-aren't growing debts significantly
-are growing the dividends yearly

Almost no company matches them all. This is why I own VYM, the vanguard high dividend S and P fund which pays only 3 percent but lets me sleep soundly at night.

 

[monkeydelmagico]

at least it wasn't Hanjin. Sea shipping getting whipped right now. Contrarian investor would back up the truck and load up....

 

[Imp]

Is the yield up because the stock price dropped? Or is it a company with little/no hope for growth?

I had one stock I bought for dividends get bought out, nice 10% one-day gain when that happened. And I've held onto garbage with a 10% dividend because the stock price fell 50%........................................

 

[edro]

And I've held onto garbage with a 10% dividend because the stock price fell 50%.

Is the dividend still at 10%?

 

[Imp]

Is the dividend still at 10%?

No, the piece of shit lost almost another 50% from that point before doubling back to 50% down from my original buy price. Then they got bought out. It was an oil stock.

Another company I tracked got a ~8% dividend due to losing ~50% from its 2 year high. Its historical dividend was closer to 4.5%. No surprise, dividend got cut and is now like 2.5%.

 

[desura]

I was talking to a guy who bought Linn Energy for the dividend...it was really high, right? He said that he hoped to make a few hundred a month off of the dividend...