B1 Intermediate US 33 Folder Collection
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First, before anything else,
well done to you if you're watching this video.
That tells me you have an interest in dividend investing
and in dividend stock strategy which is great.
It is a fantastic strategy.
I personally use it.
And if you're watching this, like I said,
that tells me that not only are you looking
to maybe get into it
but you're also concerned about well,
I saw you need to avoid some things
so I want to be smart about dividend investing
so what do I need to avoid?
And that's what I want to talk about here
is again, yes there is certainly something
that on the surface it makes you think
especially when you're new, oh wow, wow really?
But when you peel back the layers,
which is what I want to do here,
it's not a good situation
and it certainly needs to be avoided
if you're gonna doing a dividend investing strategy
to grow your wealth
and invest in the stock market.
And it all has to do with dividend yield.
Depending on where you are in your journey,
maybe you have seen some dividend yield
and you're thinking, "Whoa, that's gonna pay me
"that amount of a dividend?
"I'm gonna make 10-15% return?
"Wow, I'm getting that stock,
"that's a high yielding dividend."
And that's a term that gets thrown out.
Hey, high yielding dividends, high yielding dividends.
And I see lots of videos out there
and sometimes it's like, please don't be talking about...
That's not where you should be directing people to
because those are high dividends for a reason
and as I'm gonna show here,
the reason is not good.
So, why does this need to be avoided?
Well, because these are very risky companies.
These are companies that
it's not like they're sitting there,
"Yeah, we're so good, so we're gonna pay you 15%."
That's not how they arrive at a high yield.
The way they arrive is well, basically becoming
worse and worse as a company.
And the best way to explain this
is just to show you through the math
of how it all works out.
So the equation for the dividend yield
is dividend per share over the stock price.
I should note that I you have no idea
what a dividend even is, I'll put a link down below
to a video where I talk about just what is a dividend.
But, I am assuming that you know, at least,
the general principal of how a dividend works.
But that is the equation there for yield.
So, just for an example's sake,
let's say there's a company out there
and they are doing $3.00 per share.
So, every share you own in that company
you're gonna get $3.00.
And let's just say that the stock price
is currently $100.
So, over here, we're gonna track the stock price here.
And stock price $100.
So, at $100, what is that giving?
Well, not to insult your intelligence
but three divided by 100 is gonna be .03
and then, of course, remember back to elementary,
bottom multiplied by 100 to turn into a percentage.
So, 3% is what the yield is gonna be at that point in time.
3%, yeah, I mean a good solid dividend.
But time goes on and I don't know why,
but business happens, life happens, the market shifts.
You know, whatever is going on
and all of a sudden, this thing is down...
Maybe I'll just stick with green
or I'll stand here all day picking up different markers.
But this thing is down here at $80.
So, now all of a sudden, what's going on?
Well, if this number now becomes $80,
what does that math do?
Now, I have a cheat sheet up there
because I'm not that good with math
but at that point in time,
the yield would now be 3.75%.
So, from a yield perspective, that's great.
They're paying even more.
True, but how did they get to paying more?
Well, their stock price went down.
Let's keep going.
So, again, life, business happens all that.
And now, all of a sudden,
their stock price is at $50.
So over here we need to get things updated
and well, their stock price is no longer at $80,
it's at $50.
So, let's do the math on that
and I gotta cheat, look up there.
Now, all of a sudden, we're at a 6% dividend deal.
Wow, 6%?
Man, this company must be doing great,
they're paying 6% dividend?
Wait a second, do you get where I'm...
Well, how did it get to 6%?
Well, the stock price just dropped even more.
Let's do this a couple of more times.
I'm gonna cheat ahead
because we're doing this two more times.
So, we'll do there and here.
So, the next pit stop for the price is now at $25.
So, again, well, we gotta redo the math.
This is now at $25.
So you do the math on that and now, all of a sudden,
we're sitting at 12%.
12% dividend!
And if you do a search of high yields
you will see stocks out there that are at 10% and above.
And wow, I get it, it's almost like a tractor beam
you want to just walk into it and grab it
but remember, avoid it.
Why do you need to avoid it?
Again, how did the deal get that high?
Well, because the price keeps dropping of the shares.
Why do share prices drop?
Something's wrong with the company.
What is wrong with the company?
I mean, there's a lot of different reasons
and theories out for that.
But the point here being,
if yields are going up because stock prices are going down,
not good.
And then finally, just to finish this off
but, I probably hammered this home good enough.
But we'll just finish it off.
You have the stock price now at $15.
So you do the math on that and that equates to 20%.
Whoa 20%!
Yeah, well, remember when the share price used to be at $100
and now it's all the way down to $15?
Not good.
So, again, just to kind of map out the general rule here.
If, so the big if,
the dividend percentage is going up because,
and then stock price going down,
this is the exact thing that needs to be avoided.
You do not want to be out there chasing yield,
as it's called, if you want to sound smart.
Oh man, I got caught chasing yield.
If you are chasing yield,
you're not being smart, you're not considering
all the factors of how that yield got to where it was.
So, that's one thing you need to avoid.
It's very common.
I did it before.
What was that?
STON, I tried it.
And they paid me a couple of hug dividends
but then the company said fine,
we're not paying the dividend any more.
Because eventually what happens
is that companies can no longer afford
to pay the dividend.
So, when they announce that the dividend has been slashed,
guess that happens?
Well, now this price absolutely just plummets
that much further down.
And I mean it can get really, really nasty
in many situations.
So, companies, they're gonna pay that dividend
for as long as possible.
But when the dividend reaches those sorts of percentages,
yeah, it may be there temporarily,
but not for very long
and then, like I said, when the company says...
They wave the white flag.
"We can't pay for it anymore."
See ya later, stock price.
That's gonna plummet it that much more.
Again, I want to reiterate, I'm not here saying
that dividend investing is a stupid strategy.
No, it's a great strategy
but you gotta make sure you avoid certain pitfalls out there
and chasing yield, again,
just focusing on strictly the yield itself
is something that definitely needs to be avoided.
So, if you have any questions,
leave those down below.
Maybe, let me know this,
what are some of your favorite dividend stocks
that you're invested in
and do you have any horror stories?
Do you have any stories where you did chase the yield
and then you got burnt by it?
Like I said, STON was my kind of high dividend yield thing
that I chased and got burned.
Luckily, I kind of knew it going in
so it's not like I threw my entire life savings into it.
It was just a little bit.
Let's see if this thing can turn around.
But, no, it didn't turn around.
So, yeah, leave any horror stories down below
or just let me know
what some of your favorite dividend stocks are out there.
I'd love to hear that from ya.
And if you enjoyed the video
and would like for me to keep making these sorts,
hit that like button and subscribe to the channel,
lots of other videos on the channel.
So, check it out and if anything though,
just hit that like button and leave a comment down below
and I'm very curious to hear
what stocks you're looking at.
And who doesn't like a good horror story?
So leave those down below too.
And I'll see you back for the next video.
First off, thanks so much for watching the entire video.
Real quick before you go,
I want to invite you to a live webinar,
web class, training, workshop, online event,
whatever you want to call it.
But it will be me, live revealing to you
what I've discovered that has allowed me
to transform myself from being an employee
to being my own boss,
including how I had only one losing day
out of 73 days in total.
I'm gonna cover three keys that have helped me
unlock profitable consistency
within the markets.
The first key is super weird
but in a productive type of way.
The second key is super awesome because
it quite literally is wired into our DNA as humans
making it very easy to use.
But in a cruel way, this becomes a pit fall
for many traders.
I'll explain it all, though,
including how to avoid the pit fall
that it creates for some.
And yeah, the third key, when you hear it,
sounds way too good to be true,
but it's not and I'll show you how it all works.
Then, at the end, I open it up
for a question and answer session
that is, again, totally live.
Even if you can't make the live session,
please still sign up
as it will be recorded and you can go back
and watch the replay that I will send you.
Click the image on the screen or click the link
down in the description box
so you can get the date and time and claim your spot,
which I should note is limited
due to the fact this truly is a live event.
If you have any questions, let me know.
If not, I'll be seeing you soon.
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How To Invest: Dividend Investing Strategy (Avoid Doing This!)

33 Folder Collection
王惟惟 published on January 13, 2020
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