If you’re investing for the long term, you need to find something tangible on which to base your decision.
The first thing investors often look at is the dividends paid out over the last 12 months, divided by the share price, expressed as a percentage.
The pros understand the real driver of stock market returns is income, not just capital gains. This is the crux of income investing.
In the 2015 financial year, the RBA reports that Australian companies paid out $78 billion in dividends to shareholders.
There is one way to participate in those dividends without having to hold on to the shares throughout the year — it’s called dividend stripping.
If total market profits fall further than dividend payouts, the ratio will increase. That’s part of what happened in 2008 and 2009.
Westpac’s institutional lending business was hit hard, which left them $299 million short of net profit expectations.
Instead of putting extra money into the market, though, one solution is to make your existing portfolio work harder…but how do you go about it?
It's going to be difficult for the bank stocks to replicate the massive growth they've enjoyed over the last 20 years. If you're in the chase for dividends, you need to open your sights further.
Dividends can mean a lot to investors. If a stock is paying steady, high dividends that can sometimes be enough for investors.