Shares with good dividends

iknorr

After neglecting my portfolio for years Im planning to get back into regular share trading/investments.
Some of the first things Im planning to do to build up a nice secure base.

1-Invest in companies who give decent dividends.
2-Invest in funds such as vanguard or something as good.

What are your thoughts on either of the above?
Any recommendations to look at?

Mr.David

First thing I'd ask is, why limit yourself to firms with a good/high div?

iknorr

Mr.David wrote: »

First thing I'd ask is, why limit yourself to firms with a good/high div?

I was thinking that could be a decent way to earn some return.
EDIT: maybe putting 25% of my portfolio into shares with good dividends.

euroboom13

Greencore

Mr.David

iknorr wrote: »

I was thinking that could be a decent way to earn some return.
EDIT: maybe putting 25% of my portfolio into shares with good dividends.

Well any money paid out as a dividend means the company is worth less. When a dividend is paid, the stock price falls to reflect this. So in effect you haven't really gained as such. Companies that dont pay a div usually reinvest the money instead of paying it out.

There are actually quite a few academic papers that suggest that return is better for companies that dont pay a div than those that do. The reasoning is that companies that pay a div perhaps have stagnated and are failing to reinvest that capital into new projects/future revenue streams.

iknorr

Mr.David wrote: »

Well any money paid out as a dividend means the company is worth less. When a dividend is paid, the stock price falls to reflect this. So in effect you haven't really gained as such. Companies that dont pay a div usually reinvest the money instead of paying it out.

There are actually quite a few academic papers that suggest that return is better for companies that dont pay a div than those that do. The reasoning is that companies that pay a div perhaps have stagnated and are failing to reinvest that capital into new projects/future revenue streams.

Fair point but its still something im going to look into a bit more.

What alternatives would you suggest?

euroboom13

Any money put into a none dividend paying company is not an investment, its a speculation or gamble.(investments have to have return)
Don't get me wrong, speculation is the way to go(imo), but don't confuse it as an investment.(I disagree that dividend paying companies are stagnated, a lot of listed companies are geared for pension investments with good returns and growth{eg;property funds/banks/food/brands})

Good luck

iknorr

euroboom13 wrote: »

Any money put into a none dividend paying company is not an investment, its a speculation or gamble.(investments have to have return)
Don't get me wrong, speculation is the way to go(imo), but don't confuse it as an investment.(I disagree that dividend paying companies are stagnated, a lot of listed companies are geared for pension investments with good returns and growth{eg;property funds/banks/food/brands})

Good luck

From the little research I have done into this it appears that for more short term results for the 'investor' its generally better to go with a dividend paying company.
Longerterm would be better for the company to reinvest but thats in general. For big oil companies who have more money than they know what to do with/that they can reinvest, then they appear to give a reasonable dividend each year.

Mr.David

My point, very simplistically is as follows. Stock ABC trading at $100, ABC announces a div of $1. Stock drops to $99 when div is paid.

So if you own 1 share, you now have seen a drop of $1 in the share price but have been paid $1 as a dividend so effectively the dividend has not increased your wealth.

Sonnenblumen

Good divi paying stocks include:

BP, Royal Mail, GlaxoSmithKline, Greencore, Irish Continental Group, National Grid, Diageo. Where the option is available, I would recommend you also consider re-investing your divi and taking it as additional shares.

The compounding effect is very good and a very cost effective way of acquiring additional shares.:rolleyes:

valderrama1

Be careful of the tax on dividends, it is at your marginal rate and as far as I know it is also now subject to PRSI and USC, so for most people it will be 50%. Also there is dividend withholding tax in the foreign country although you might be able to write that off in your tax return.
Still though if a dividend is increased over time you could actually get a good return after a few years.

Recondite49

iknorr wrote: »

After neglecting my portfolio for years Im planning to get back into regular share trading/investments.
Some of the first things Im planning to do to build up a nice secure base.

1-Invest in companies who give decent dividends.
2-Invest in funds such as vanguard or something as good.

What are your thoughts on either of the above?
Any recommendations to look at?

Hi iknorr,

With the Irish government charging 41% DIRT, I've decided against high yield shares.

There's no disputing that in the long run you're far better off investing in a broad index fund, like you suggested. I saw you mentioned Vanguard, and I'm a huge fan too - they have an excellent ETF which tracks the S&P 500 (VOO), which will save you a huge amount of expenses as dividends will be automatically reinvested for you for a very small fee.

If you want to play it safe, I'd also recommend investing in some government bonds. Fortunately there's another Vanguard index fund which fits the bill nicely (VANEUGB)

If you want to diversify your portfolio a little away from Europe and the US you could choose to invest in a global index fund. Our friends Vanguard come through for us once again here. The global index fund VEU gives you broad exposure to the non US market.

My own plan is to invest in each of these equally over the next decade. It's not a perfect plan but at least it's simple!

tennisfennis

iknorr wrote: »

After neglecting my portfolio for years Im planning to get back into regular share trading/investments.
Some of the first things Im planning to do to build up a nice secure base.

1-Invest in companies who give decent dividends.
2-Invest in funds such as vanguard or something as good.

What are your thoughts on either of the above?
Any recommendations to look at?

Companies with good dividends is a good idea - I guess you should research companies who have a large cash pile and low R&D costs or low re-investment costs so you can be confident the dividend will continue and increase

Sonnenblumen

Mr.David wrote: »

Well any money paid out as a dividend means the company is worth less. When a dividend is paid, the stock price falls to reflect this. So in effect you haven't really gained as such. Companies that dont pay a div usually reinvest the money instead of paying it out.

There are actually quite a few academic papers that suggest that return is better for companies that dont pay a div than those that do. The reasoning is that companies that pay a div perhaps have stagnated and are failing to reinvest that capital into new projects/future revenue streams.

Doesn't apply to many market leading even global Blue chips who far from stagnating, are growing market share, creating new demands whilst often paying divis c 3.0 - 5.0% p.a. (and usually quarterly).

I hope you do not ask for a list, many should be obvious?

OP - it is a very good investment strategy to invest in companies who pay divis and where the opportunity is available, I would highly recommend that you avail of the SCRIP (Share reinvestment scheme) where you opt to take shares in lieu of cash as divi payment. A cost effective way to acquire additional co shares and the compounding effect is impressive.
DYOR