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Anonymous

07 Jun 2019

General Investing

Is it wrong to think of buying a dividend paying stock and ignore the paper gain or loss for long term?

Is this line of thinking wrong:

Buy a dividend paying stock (e.g DBS,SGX) and get X% of dividend yield return/ yr but ignore the paper gain/loss since i m looking for long term and don think i will sell soon. So essential its like parking your money in a long term 'bond'/perpetual and getting coupon of X%/yr.

Discussion (9)

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Isaac Chan

07 Jun 2019

Business at NUS

Hello! Here’s a brief response to your question.

First, it depends on whether the company can even sustain giving dividends in the long term, and what is the dividend pay-out policy of the company. Has the company been paying dividends for a long time, or has it recently been paying dividends only? Also, pay attention to a company’s cashflow. If the company does not have enough cash on hand for its operating requirements, then it may stop paying dividends after a while so that it can fund its operations. You can look at a company’s cashflow by looking at the Cashflow Statement found it its annual or quarterly financial reports.

Second, do look at a company’s share price as well! If you can sell the share and make a healthy capital gain (the gain from selling a share higher than when you bought it), then you might consider this alternative. If you would prefer a portfolio that pays more dividends, then the gains from this sale could help you to buy more shares with a steady dividend pay-out too.

Third, what do analysts and other investors say about this company’s share? Do the others see it as an investment for the share’s dividend yield, or for selling the shares? Seeing what other investors think may help you frame your thought process also.

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Nicholes Wong

07 Jun 2019

Diploma in Business Management at Nanyang Polytechnic

Starhub pays 9% of dividend but they borrow money to pay shareholders their dividends. You should definitely not ignore for long term. If every year dividend payout and stock prices drops together, you wont make much out of it.

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Gabriel Tham

15 Feb 2019

Tag Team Member at Kenichi Tag Team

It is not advisable to just buy a stock for dividend and forget about it.

Dividend policy is not g...

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