Purpose of investing is to collect cash
By scheng1
@scheng1 (24649)
Singapore
November 13, 2015 8:19am CST
Many people think like stock traders.
They do not think like investors.
The whole purpose of investing is to collect cash.
If you buy the shares of companies that are cash-cows, you will get cash in the form of dividends.
In this case, you can access the profitability by the ratio of dividend over share price.
If the dividend if 10 cents, and share price is $1, that is a return of 10%.
If the dividend is $10, and the share price is $100, that is also a return of 10%.
Both companies have the same return even if the share prices differ.
Those fools will tell you to buy the company with a share price of $1, and not $100.
They think that $1 is cheap and $100 is expensive.
They are wrong! You buy the shares of the company that will give you cash every year without fail.
The best is that cash dividend increases year on year, and the historical record shows that the company has been paying increasing rate for more than 20 years.
1 person likes this
1 response
@chance216 (278)
• United States
13 Nov 15
Dividends are good for a recurring revenue but it is slow going and you have to have a lot of capital. Not only that but you must be knowledgeable. My uncle lived off of his dividends, so seeing his success my brother tried the same thing. But he was not knowledgeable so he lost a ton of money.
1 person likes this
@scheng1 (24649)
• Singapore
13 Nov 15
I think your brother is greedy.
He wants more dividend than average, so he goes for those stocks that pay unusually high dividend in a single year.
Some companies give out special dividend because of special event, such as selling off a subsidiary.
I will always discount the special dividend, and look only at the dividend history of past 10 to 20 years.
