# A Few Stock Dividend Questions

• kyphysics
In summary: In theory, yes. In practice, imperfections such as tax, frictional costs of bankruptcy, imperfect information and moral hazard of executives make that principle only ever a loose approximation. Often it can depend on an investor's tax status as to whether they prefer high or low dividends.1) In summary, dividends are a way for a company to distribute profits to shareholders. They are usually paid out as 'cash' (i.e. not in additional shares) and the amount of dividend per share isn't a very interesting number. If the shares are trading at $10 each then a 1c #### kyphysics https://www.nasdaq.com/symbol/antm/dividend-history 1.) How do you read dividend information from a company's financials? E.g., The link above goes to Anthem (health insurer)'s dividend info. page. I see that there are quarterly dividend payments. Under "Cash" - is that the amount per share they pay each quarter. E.g., the top row says .7 Would that mean if a person owned 100 shares of this stock, then they'd get 100 x .75 =$75 for that quarter?

2.) Is there a number that investors think of as a good dividend rate?

3.) Following from #2, suppose you had a stock and you knew its price would never change for all eternity. But, that stock paid .10/per share for all eternity. Would that be considered a good stock?

4.) In the real world, do shareholders have any say over dividends? If you buy a stock and there are no dividends, can the shareholders force one? And can they force the rate to go up through voting?

Just trying to better understand this aspect of stocks, so thanks in advance!

4) Shareholders have no direct control over dividends, which are decided by the company's board. If enough shareholders don't like the current board's dividend policy they can vote to replace the board with one that will implement a dividend policy they prefer, if that policy is actually possible.

3) There did exist securities that are contracted to pay out a constant amount in perpetuity. They are UK securities called Consols. They have now all been bought back and canceled by the UK government. The value of a consol that pays P per annum is P/r, where r is the annualised long-term interest rate. A consol would be considered a good buy if you could get it for less than P/r. The US government issued consols too. Wikipedia doesn't say whether any of them are still extant.

2) Profits can either be distributed to shareholders as dividends or reinvested in the business. Other things being equal, reinvested profits should grow future profits, and hence future dividend capacity. So in an ideal world the choice would be between a high dividend that grows at a low rate or a low dividend that grows at a high rate. The stock price would be expected to grow in line with the dividend stream so, on average, prices would grow faster for low dividend stocks.

Miller and Modigliani showed that, in an ideal world, it make no difference to the value of a stock what level of dividend it pays. In practice, imperfections such as tax, frictional costs of bankruptcy, imperfect information andr moral hazard of executives make that principle only ever a loose approximation. Often it can depend on an investor's tax status as to whether they prefer high or low dividends.

1)
kyphysics said:
Under "Cash" - is that the amount per share they pay each quarter. E.g., the top row says .7 Would that mean if a person owned 100 shares of this stock, then they'd get 100 x .75 = $75 for that quarter? Yes. 'Cash' is stated to distinguish it from other possibilities such as the dividend being paid in additional shares. nearly all dividends are 'cash'. kyphysics The amount of dividend per share isn't a very interesting number... If the shares are trading at$10 each then a 1c per share dividend isn't very exciting (0.1%). However if the shares are trading at 10c each that's a 10% dividend.

You need to be careful because an apparently high dividend could be because the market think the company is heading for hard times. Eg the share price is low because they don't think the dividend will be maintained.

Some companies pay out good dividends even when they arent doing very well. You should look at the dividend "cover". This tells you if they paid the dividend from income, how much income they used (none left for investment?) or if they had to dip into capital. It tells you if the dividend is sustainable.

kyphysics
Typically investors will tolerate a lack of dividend if they see the company as a growth stock. An example would be Tesla. Their FAQ says they have no plans to pay a dividend for the "foreseeable future". On the other hand something like a utility company is unlikely to be able to grow rapidly so investors expect dividends.

kyphysics
1) A dividend of .75 means 75 cents per quarter. With Anthem at $250 per share, this is 1.2%/year. A bit below a good savings account rate. 3) A 30-year Treasury pays around 3%. A stock that paid$0.10/share annually would therefore be worth no more than $3.33/share, because it if were, I could generate the same income stream at equal or lower risk by buying a Treasury. Furthermore, this shows why the premise is impossible. As the Treasury changes its rates, the value of this stock must also. One question you didn't ask - does the dividend affect the price of the stock. Absolutely. If a company is worth$10 share, and they give out $1 per share, how much is it worth now? Dividends aren't "free money" as far as the investor is concerned. They come out of the value of the company, which is reflected in the stock price. The stock price normally drops by the amount of the dividend when the dividend is paid (more precisely on the ex-dividend date). This is often masked by the normal daily fluctuations in prices of individual stocks, but it's more visible with mutual funds, which don't fluctuate as much. This is a Morningstar "growth chart" comparing the Vanguard High Dividend Yield Index fund (VHDYX, which contains stocks that pay large dividends) with the Vanguard Total Stock Market Index fund (VTSMX). Each fund starts with$10,000 in 2008, and all dividends are reinvested. Sometimes one is ahead a bit, sometimes the other, but in the long run they're pretty much equal. (Note which one is ahead at the moment! )

This is why many investors (including me) don't pay attention to dividends, but just look at the "total return" of a fund or stock: dividend yield plus capital appreciation. When we're in "withdrawal mode" e.g. in retirement, we take whatever dividends we get, and sell shares to make up the rest of what we need. We keep the total within a safe limit.

My wife has some AT&T stock that she inherited from her mother years ago. It pays a nice dividend, about 6%, but its share price is down about 10-15% from what it was 15 years ago. whereas the market as a whole has gone up a lot.

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jim mcnamara, Astronuc, russ_watters and 1 other person
andrewkirk said:
2) Profits can either be distributed to shareholders as dividends or reinvested in the business. Other things being equal, reinvested profits should grow future profits, and hence future dividend capacity. So in an ideal world the choice would be between a high dividend that grows at a low rate or a low dividend that grows at a high rate. The stock price would be expected to grow in line with the dividend stream so, on average, prices would grow faster for low dividend stocks.

Miller and Modigliani showed that, in an ideal world, it make no difference to the value of a stock what level of dividend it pays. In practice, imperfections such as tax, frictional costs of bankruptcy, imperfect information andr moral hazard of executives make that principle only ever a loose approximation. Often it can depend on an investor's tax status as to whether they prefer high or low dividends.

Very helpful. What did you mean by "frictional costs of bankruptcy," andrewkirk.

Also, regarding the bolded section, is this a danger for older companies. I see some older companies that don't seem to grow their earnings as fast and the stock price doesn't really move much - if at all - but they pay a dividend that looks decent. ...That's sort of my thinking behind my Question #3 above, by the way.

I.e., Are there "safe" stocks that are just really good for consistent dividends, but where you pretty much just know that company is all done growing otherwise. And is it worth owning? Say, you knew (I know you can't in reality - not including Consols - since the market is a free flowing thing) that some company would pay an averaged out annual dividend of 5% for all your money in it. And that would go on in theory indefinitely. True, you're not going to make lots of money on the stock and you might lose out long-term to say some index fund, but is that not at least better than a bank savings account?

CWatters said:
The amount of dividend per share isn't a very interesting number... If the shares are trading at $10 each then a 1c per share dividend isn't very exciting (0.1%). However if the shares are trading at 10c each that's a 10% dividend. Good point! Yeah, I was just looking at that very specific example, so as to know how to read the dividends, but you're right that that number itself doesn't tell us much. You need to be careful because an apparently high dividend could be because the market think the company is heading for hard times. Eg the share price is low because they don't think the dividend will be maintained. Some companies pay out good dividends even when they arent doing very well. You should look at the dividend "cover". This tells you if they paid the dividend from income, how much income they used (none left for investment?) or if they had to dip into capital. It tells you if the dividend is sustainable. Yeah, this is the part I've seen discussion on and am looking up online now. Some people do say to be suspicious of high dividends. It could even bankrupt that company if they're not growing through reinvesting that money back into it. Vanadium 50 said: One question you didn't ask - does the dividend affect the price of the stock. Absolutely. If a company is worth$10 share, and they give out $1 per share, how much is it worth now? Yes, I totally forgot about that. Answer:$9

So, in theory, if some hypothetical company could give a dividend rate of 4% annually forever, would that be a good buy (let's assume for theory's sake that stock never grows in price ever again - take out inflation concerns and pretend it does grow to match inflation at least and grows enough to cover the dividend that is minused from its price, but doesn't grow in additional value other than that). That would be better than a bank savings account if you could have a dividend at 4%+, no?

jtbell said:
(Note which one is ahead at the moment! )
You own the other eh?

This is why many investors (including me) don't pay attention to dividends, but just look at the "total return" of a fund or stock: dividend yield plus capital appreciation.
Are there charts or figures that give this "total return."

Normally, when I look at Nasdaq or CNN Money's charts, they are all for stock price. At least on the main page of the stock you go to. The first big chart you see is the stock price fluctuation.

You have to dig further for dividend info. Earnings over the past year. P/E etc. But not in chart form.

kyphysics said:
Are there charts or figures that give this "total return."
Morningstar.com can give you either growth charts (default) or price charts for mutual funds. So far all I've been able to get from them for individual stocks is price charts. The "growth of $10,000" option on their individual stock charts apparently doesn't assume reinvested dividends. The result looks like it's simply proportional to the price chart. kyphysics said: So, in theory, if some hypothetical company could give a dividend rate of 4% annually forever It would be today. But in the early 80's, when the Treasuries were at 14%, it's a lousy deal. But again, the premise you have is impossible. kyphysics said: I.e., Are there "safe" stocks that are just really good for consistent dividends, but where you pretty much just know that company is all done growing otherwise. And is it worth owning? Sure. AT&T (Symbol: T) fits that category. It returns 5.5% in dividends and its price today is pretty much what it was 5 years ago. On the other hand, the SP500 has grown enormously over the same time period. Which is better for you depends on what your goals are. Unless you have a lot of time to do research it might be better to look at Mutual Funds, Investment Trusts, ETF or similar collective investments rather than individual stocks. A lot depends on your age, investment objectives and attitude to risk. CWatters said: Unless you have a lot of time to do research it might be better to look at Mutual Funds, Investment Trusts, ETF or similar collective investments rather than individual stocks. A lot depends on your age, investment objectives and attitude to risk. I like the process of choosing stocks, but would likely put my money into a low-cost index fund to begin. I agree stock picking and managing is serious work! You always have to watch it for catastrophic news. Having said that, I still plan to have a part of my portfolio in stocks some day. Not sure if the balance between funds vs. stocks. Will have to figure that out someday. Vanadium 50 said: It would be today. But in the early 80's, when the Treasuries were at 14%, it's a lousy deal. But again, the premise you have is impossible. Sure. AT&T (Symbol: T) fits that category. It returns 5.5% in dividends and its price today is pretty much what it was 5 years ago. On the other hand, the SP500 has grown enormously over the same time period. Which is better for you depends on what your goals are. Vanadium, what about using a "safe pick" like AT&T (thx for that example, btw) to serve essentially as a savings account? I know some people like the cash option (i.e., just put it into a savings account at low interest to have that cash instantly available for use in the future), but for those wanting a higher interest than what a bank can offer, would this not be the same as having a "stock savings account" (using the dividends as interest)? That's not to say I wouldn't eventually want to purchase other types of investments like funds or growth stocks. But if you're just trying to get something better than a bank interest rate and don't think you'll need that money for at least a year, would plugging it into a stock like AT&T be better with not much risk (assuming AT&T doesn't have some crazy sudden collapse)? option 1.) put your spare$ into a savings account
option 2) put your spare $into AT&T kyphysics said: What did you mean by "frictional costs of bankruptcy," THe assumptions used in above analyses - perfect markets, costless transactions, optimising shareholder wealth etc - tend to break down badly when a company nears or enters bankruptcy. Very large transaction costs arise because of liquidator and legal involvement, and company staff become much more focused on managing their own future outside the company than in the orderly and efficient realisation of the company's assets. To reduce the expected cost of this, there are advantages to holding greater capital (retaining more profits) than the simple, efficiency-assuming models advocate, in order to reduce the likelihood of incurring those frictional costs. Also, regarding the bolded section, is this a danger for older companies. I see some older companies that don't seem to grow their earnings as fast and the stock price doesn't really move much - if at all - but they pay a dividend that looks decent. ...That's sort of my thinking behind my Question #3 above, by the way. I.e., Are there "safe" stocks that are just really good for consistent dividends, but where you pretty much just know that company is all done growing otherwise. And is it worth owning? There are stocks that have good, consistent dividends but whether one regards them as safe depends on the economic context. Utility stocks like power and water companies are high, constant dividend stocks. It used to be phone companies too, except that they are being disrupted by new technologies. These stocks are typically called 'value stocks' and are contrasted to 'growth stocks' like Tesla. There is no intrinsic reason why one should return more than the other, but an investor's tax situation may give them a preference for dividends over growth or vice versa. Also their risk profiles can differ. If you think we may be in a bubble, value stocks are safer, while if a recession is feared, growth stocks - as long as they are not highly dependent on the economy's growth - may seem safer. I follow CWatters' philosophy. I don't think it's feasible to consistently beat the market so I just invest in index-tracking funds. They have much lower fees than actively managed funds. I don't expect the latter to be able to earn enough additional return to recoup their higher fees. But there might be less of a dilemma doing that here in Australia because the index pays an average dividend of about 3.5% and dividents are tax-advantaged compared to retained profits, which makes the dividend more like 4.5% after adjustment for tax. In comparison US indices typically pay 2% or less in dividends, and don't have tax advantages for dividends. andrewkirk said: In comparison US indices typically pay 2% or less in dividends, and don't have tax advantages for dividends. Actually, if stock (and stock fund) dividends meet certain conditions, they do qualify for a reduced tax rate compared to bank and bond interest, and income from work. With a fund, some percentage of the dividends are thus qualified. With index funds, the percentage is usually higher than for actively-managed funds. I'd have to dig out my tax forms to find the exact number, but I'm pretty sure Vanguard's Total Stock Market Index fund had 90% or more of its dividends qualify last year. This is for federal tax. Some states have a reduced state income tax rate for dividends, others don't. andrewkirk said: I follow CWatters' philosophy. I don't think it's feasible to consistently beat the market so I just invest in index-tracking funds. I plan to do both - index funds and individual stocks. The upside with single stocks is huge, of course, if you scored with something like Google/Alphabet, Chipotle, ULTA, etc. in the early days. I'm always on the lookout for new companies/products/services around me and have a bunch of links to stuff on them in a folder of my browser. I check for IPOs all the time. One should come out in a few years. Hopefully, I'll have good spare cash to go in if the price is right. jtbell said: Morningstar.com can give you either growth charts (default) or price charts for mutual funds. So far all I've been able to get from them for individual stocks is price charts. The "growth of$10,000" option on their individual stock charts apparently doesn't assume reinvested dividends. The result looks like it's simply proportional to the price chart.

I've seen the name Morningstar a lot. Haven't read it yet. How does it differ from a place like CNN Money?

Does anyone recommend paying for a quantitative analysis site like Zack's?

What investing news & analysis websites do you all use?

kyphysics said:
Vanadium, what about using a "safe pick" like AT&T (thx for that example, btw) to serve essentially as a savings account?

First, you are redefining safe. Now you seem to mean "preservation of capital". No stock is guaranteed to do that. Even blue chips. GM, Sears, Kodak, etc. If you followed this strategy with T starting two years ago, you would be down about 7-8% per year, even with the dividend.

Second, as they say "bulls make money, bears make money, and pigs get slaughtered". You are adopting the third strategy. (Which I really shouldn't be warning you against - because if you keep it up, eventually I - or someone like me - will own all your stuff) Treasury yields aren't good enough for you? Mutual fund yields aren't good enough for you? You're chasing high yields and underestimating the risk - AT&T is much closer to Kodak than to the US Treasury in terms of risk.

Yesterday you didn't know how to read dividend information and today you're saying how you want to buy single stocks instead of mutual funds so as not to miss out. (Excellent, my pretty...) . Pigs get slaughtered.

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russ_watters
andrewkirk said:
I follow CWatters' philosophy. I don't think it's feasible to consistently beat the market so I just invest in index-tracking fund.

I tend not to invest in tracker funds, for growth I prefer funds that specialise in a region - UK Smaller Companies, North American Smaller Companies etc.

First, you are redefining safe. Now you seem to mean "preservation of capital". No stock is guaranteed to do that.
No, I was aware of that (i.e., that stocks can drop at any time), which is why I wrote (in my post to andrew above):

kyphysics said:
I.e., Are there "safe" stocks that are just really good for consistent dividends, but where you pretty much just know that company is all done growing otherwise. And is it worth owning? Say, you knew (I know you can't in reality - not including Consols - since the market is a free flowing thing)
A few people on this forum do this a lot, where you assumed things I never intended rather than reading carefully what I wrote previously or giving a person charity (and not being a word Nazi) and not assuming the worst. Then, going after them and making a big deal out of it.

Second, as they say "bulls make money, bears make money, and pigs get slaughtered". You are adopting the third strategy. (Which I really shouldn't be warning you against - because if you keep it up, eventually I - or someone like me - will own all your stuff) Treasury yields aren't good enough for you?
No, I never said that. I was merely asking a theoretical question (above - I said numerous times over and over that this was a hypothetical and theoretical) of using stocks with dividends as a "savings account." I don't know entirely how Treasuries work, so will look into that as well.

But, yeah, that's what learning is. Sometimes, you start from nothing and literally don't know what a balance sheet of "financials" page is saying on a particular line (which is mostly trivial, as it's learning something that's a formality like the nomenclature of something - in this case, what a dividends cash line is referring to) to what a concept is (which is more important). So, yup, I didn't know what that line read and I'm not ashamed to ask! Talk trash all you want, I still appreciate your help. I learn things even from those who are presumptuous and rude.

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kyphysics said:
But if you're just trying to get something better than a bank interest rate and don't think you'll need that money for at least a year, would plugging it into a stock like AT&T be better with not much risk
Here's a Morningstar chart for AT&T for the past ten years. It's not a "price" chart because it starts with $10,000 of the stock, but it's not a "growth" (total return) chart either, because it doesn't include reinvested dividends. Nevertheless, it's proportional to the share price, and shows the value that an initial$10,000 worth of shares in 2008 would have if you took the dividends and did something else with them.

(I don't know what that "+473.87 | +4.74%" is relative to.)

Considering how much it's dropped in the last couple of years, even after adding the dividends you'd probably still have lost money.

If I didn't have a whole lot of money and expected I might need it in the next year or two (for e.g. a car or a down payment on a house), I'd put it in a money market fund or online savings account or something else that preserves the principal. You might be able to find one that yields about 2%. Local brick and mortar banks won't get that high except maybe for CDs.

The money market fund in my brokerage account yields about 1.5%. I use it just as a temporary holding-place for dividends and sales from my mutual funds, so I don't have a great urge to eke out a bit more yield there.

Stocks and mutual funds should be only for money that you won't need for decades, e.g. retirement, because that gives you time to ride out the dips, even big ones like 2008-09.

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russ_watters and kyphysics
kyphysics said:
No, I was aware of that (i.e., that stocks can drop at any time), which is why I wrote (in my post to andrew above):

A few people on this forum do this a lot, where you assumed things I never intended rather than reading carefully what I wrote previously or giving a person charity (and not being a word Nazi) and not assuming the worst. Then, going after them and making a big deal out of it.
No!

I was thinking much the same as @Vanadium 50 (started writing a post I never finished), because what you said there is just so wrong. A stock and a savings account are fundamentally opposite savings vehicles.

A savings account is safe because it is federally insured. The US economy or country would literally have to be collapsing or on the verge of collapsing in order to lose your money in a savings account.

A stock - a single stock! - has a real risk of dropping to zero that simply can't be ignored and you CANNOT say a stock is "essentially a savings account".

I was trying to think of a good analogy of a company to AT&T, and Kodak is a good one. Kodak was fat, happy and stable for generations and then missed the boat on a technological shift they helped create. Kaboom. I'm having trouble finding a full history, but a quick google tells me Kodak had a market cap of $30B in 1987 and today is worth$250M. AT&T has so far diversified enough to keep from being overrun by the death of landline phones, but they are one missed tech shift away from disappearing like Kodak did.
Talk trash all you want, I still appreciate your help. I learn things even from those who are presumptuous and rude.
That isn't what happened here. If you are going to speak from ignorance, you can't get defensive when people correct you on it. Either you are here to learn or you aren't.

And if you don't know what you don't know, that's a big problem. Know thyself.

StoneTemplePython
My biggest falls have all been caused by events, many of which are political. The banking crisis, Brexit, Trumps tweets.

russ_watters

1.) Savings accounts are perhaps not as "safe" as people think as they are vulnerable to wipeouts and erosion due to inflation. This was a significant issue in the 1970s in the US though in general we are lucky here. People are prone to forget that this even happened in Western Europe over the last century as well. (Deflation can happen as well though it is not as common and perhaps not in line with governmental habits of printing more money when in a pinch.) Savers in e.g. Peru and Brazil (not to mention Venezuela) over the past few decades know otherwise.

My point here is that savings accounts are "safe" but have an Achilles heel: inflation. Hence some sort of diversification / other return drivers are needed.

2.) There's a quip from Joel Greenblatt that I like, which is basically: "investing in individual stocks without knowing how to estimate future cash flows for the underlying company is like running through a dynamite factory with lit matches -- you may get through it ok, but you're still an idiot."

jim mcnamara, Vanadium 50 and russ_watters
CWatters said:
My biggest falls have all been caused by events, many of which are political. The banking crisis, Brexit, Trumps tweets.
Do you do a lot of short term trading? Except the banking crisis, those don't sound like issues with long term impact...almost by definition, since they are new.

My biggest fail was 3dfx, which was simply a matter of betting on the wrong horse in its race with Nvidia.

I found this on the internet, so it must be true.

EK split in 1965, 1968, 1985 and 1987. Since I don't see any discontinuities, this must be the corrected price, and as such, proportional to market cap. For 35 years (and long before it), it was growing at ~8% per year, returning a bit more than half as dividends. And then it wasn't.

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CWatters said:
Trumps tweets.

Wow.

jtbell said:
Considering how much it's dropped in the last couple of years, even after adding the dividends you'd probably still have lost money.

If I didn't have a whole lot of money and expected I might need it in the next year or two (for e.g. a car or a down payment on a house), I'd put it in a money market fund or online savings account or something else that preserves the principal. You might be able to find one that yields about 2%. Local brick and mortar banks won't get that high except maybe for CDs.

The money market fund in my brokerage account yields about 1.5%. I use it just as a temporary holding-place for dividends and sales from my mutual funds, so I don't have a great urge to eke out a bit more yield there.

Stocks and mutual funds should be only for money that you won't need for decades, e.g. retirement, because that gives you time to ride out the dips, even big ones like 2008-09.
Good advice, jtbell. Is there any type of fee to use a brokerage for a money market account (when cashing out, to maintain it there, etc.)? Or, is it like a bank, where if you have a minimum balance of X, it's free of any monthly fees. Would you use a money market account always over a bank savings one - or have both?

I've literally never had a bank savings account. All checking, due to current/past financial status.

As for the original proposition in question, it was something I was playing around with. Searching for some stocks that might have this stability of price, stability of business, and a decent dividend. Maybe Cisco? Symbol CSCO. I know you can never guarantee anything in the stock market,as there's always some risk, but it was an interesting thing to consider.

In the end, I agree with you that a straight up savings or money market account seems better - especially, if you don't have much spare money.

russ_watters said:
A savings account is safe because it is federally insured. The US economy or country would literally have to be collapsing or on the verge of collapsing in order to lose your money in a savings account.

A stock - a single stock! - has a real risk of dropping to zero that simply can't be ignored and you CANNOT say a stock is "essentially a savings account".

And if you don't know what you don't know, that's a big problem. Know thyself.
Without repeating myself (last time here), we actually don't disagree, Russ.

I specifically said in my post to Van:

would plugging it into a stock like AT&T be better with not much risk (assuming AT&T doesn't have some crazy sudden collapse)?

I take responsibility if it wasn't worded in the most thorough or accurate way. I should have included price minor slippage too (or even dividend slippage). But, I clearly expressed that I knew stock prices could fall suddenly (mentioned in several posts). I suppose I was contradictory. I said that you always have to watch for "catastrophic news" and that prices are not guaranteed to be stable earlier and THEN asked hypothetically if it WERE possible, would you be able to use a stock like that with good dividends as a savings account substitute. Then, I proceeded to throw in the AT&T example that wasn't a great fit just given its recent record.

I'll chalk it up to bad question. Looking back, I was asking a theoretical question first and foremost and then seeing if there juuuuuuust might be some stocks out there that may fit this mold. In reality, it's not possible to have that level of safety with a stock and I should have already stopped at that and answered my own question.

I still stand by my "niceness" principles, though.

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Yesterday you didn't know how to read dividend information and today you're saying how you want to buy single stocks instead of mutual funds so as not to miss out.
Single stock is trading, not saving, regardless of the aimed timeframe.
I'm doing this for ~ 8-9 years already, and maybe I can be considered as a decent junior, finally.
During my years I can't count anymore how many times I said it to some greenhorns on various forums that - please stop right now. Save your money and leave. It is just not for the current you.
Almost none did so. Almost all of them zeroed their account.
Some lucky ones did this within months, without any success. They left and never looked back.
Some others made some profit first - they got hooked and most of them scraped together one more account to burn since they felt they were just a nick away from success.
Some did this dozen times in a row.

The thing I most hate in this business is the mob of 'experts' who shamelessly promise profit and pumping the self-confidence of their paying customers that how easy and fast it is.

russ_watters
StoneTemplePython said:
2.) There's a quip from Joel Greenblatt that I like, which is basically: "investing in individual stocks without knowing how to estimate future cash flows for the underlying company is like running through a dynamite factory with lit matches -- you may get through it ok, but you're still an idiot."

I consider it a job to own single stocks - much more so than funds. So much more risk and things you have to know and constantly keep up with.

I think it is idiotic to not do the work. It's more like gambling then. rather than investing.

Rive said:
Single stock is trading, not saving, regardless of the aimed timeframe.
I'm doing this for ~ 8-9 years already, and maybe I can be considered as a decent junior, finally.
During my years I can't count anymore how many times I said it to some greenhorns on various forums that - please stop right now. Save your money and leave. It is just not for the current you.
Almost none did so. Almost all of them zeroed their account.
When Peter Lynch (who averaged ~29% in returns for Fidelity's Magellan Fund) asked his staff to see how much his investors made on average, they found it was ~5%. Why? Too many pulled out when they shouldn't have and stayed in when they should have sold. Even when you have a guy like Lynch "doing the work for you," you can underachieve.

One thing he says in One Up on Wall Street (yes, that relic of a book that I'm reading) is that it can only take 6 good winners out of 10 to have a very good portfolio of stocks. Your losers can never go below $0.00, so if you put$4,500 into a crappy company, you only lose that $4,500 (if you want to throw in opportunity costs with that money, then fine) if it totally gets wiped out. Whereas, your winners have no cap. Last edited: kyphysics said: As for the original proposition in question, it was something I was playing around with. Searching for some stocks that might have this stability of price, stability of business, and a decent dividend. Maybe Cisco? Cisco is a tech company. kyphysics said: I learn things even from those who are presumptuous and rude. That remains to be seen, doesn't it? kyphysics said: I still stand by my "niceness" principles, though. Just keep pokin' the bear. What could possibly go wrong with that? Rive said: During my years I can't count anymore how many times I said it to some greenhorns on various forums that - please stop right now. Save your money and leave. It is just not for the current you. That's good advice. The OP has a number of problems and misconceptions, sadly reinforced by some of the shows and podcasts he listens to. First, as Russ says "if you don't know what you don't know, that's a big problem". Second, and almost as important, he's not said "Here are my goals" in a clear picture. If you don't know where you're going, any road will take you there. At best, he's outlined his tactical goals: he wants to invest with zero risk (preservation of capital) but he wants a higher yield than typical minimal risk investments: bank accounts, money market accounts, US Treasuries. He hasn't taken the next logical step: if such an instrument did exist, why wouldn't everyone jump from Treasuries to that instrument? And the step after that, which is that since US Treasuries are auctioned, why wouldn't the rates rise to match? Fundamentally, he's hoping to get a better deal than the experts and professionals get. The problem with hoping to get a better deal than the experts and professionals get is "why?" Unless you think you're smarter or otherwise better at their job than they are, you're not going to get a better deal. That means the thing that looks like a better deal has more risk than you think. We see it here - the OP has said he wants to use a stock - a single stock - as a savings account (and this is a direct quote) "without much risk". Later he acknowledges that the particular stock isn't going to meet his goals, and counters with a different single stock. He's systematically underestimating risk, and that's why, as they say "pigs get slaughtered". Dale and russ_watters kyphysics said: our losers can never go below$0.00, so if you put $4,500 into a crappy company, you only lose that$4,500 (if you want to throw in opportunity costs with that money, then fine) if it totally gets wiped out. Whereas, your winners have no cap.

While technically true, I don't see how this is useful. The same argument can be made for horse racing, but I don't think that's a sound investment.

russ_watters
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