I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!

Click to email CW8888 or Email ID : jacobng1@gmail.com

Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down

Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Sunday 1 August 2010

High Dividend Yield Stocks? - Part 7

Read? High Dividend Yield Stocks? - Part 6

Next obvious question to ask:

"Is high dividend yield stock at 10% make a better investment than the one at 6% over longer horizon?"

Let assume:

Company C pays out 90% of its earning and that gives you a 10% dividend yield while company D pays out only 30% of its earning and that only gives you 6% dividend yield.

Which company do you think is a better investment over longer horizon?
What is your answer?

C or D?

Management Mind

Most CEOs if not all will know that most investors love dividends. The more dividends the merrier.

CEO doesn't need much of a brain to give out most of its earning as dividends. It is rather easy to do that!

Do you think that those CEOs choose to retain most of the company's earning to build up internal resources instead of giving out most of the company's earning as dividends to make most investors happy are dummies?

Company Future Growth

It is too simplistic to think that Management can grow the company without pumping in more financial resources. Where do you think the additional financial resources come from?

Three possible sources:
  1. Retained earning
  2. Debts
  3. Equities
So those with less retained earning will have to turn to more debts and/or equities to fund its future growth.

Long-term company evaluation

Over long-term the market is a forward looking mechanism, it will most likely to evaluate the companies higher when companies have shown better visibility of higher future earning through their growth capacity.

Lastly, my Answer

I still don't like Company C even though I am hungry for dividend yield.

You leh? What is your final answer?

C or D?

No comments:

Post a Comment

Related Posts with Thumbnails