|
Today is Dividend Day.
The series where I teach you 5 things about dividend investing in less than 5 minutes.
 |
1️⃣ Dividends = Profit Distributions
It’s a common misconception that paying out a dividend lowers a company’s stock price.
The image shows why that’s not true.
As the profits increase, so does the company’s value.
When they pay a portion of those new earnings as a dividend, in theory, the value goes down by the amount paid out.
You aren't losing stock value, you are just receiving your cut of the business's profit.
 |
2️⃣ Investors Chase Performance
Your biggest enemy in investing?
Your emotions.
They make you feel good buying stocks when they’re expensive.
And selling when they’re cheap.
The image shows that the most money flows into the market after periods of the best performance, and then flows out at the low points.
 |
3️⃣ An Investing Quote
It’s easy to look at a chart in hindsight and swear you’d never make those mistakes.
But when the market actually tanks, it’s incredibly hard to stay logical.
The image above proves that most people can’t.
Peter Lynch says that it’s not because people can’t understand the logic, but because they can’t handle the emotions.
“In the stock market, the most important organ is the stomach. It’s not the brain.”
— Peter Lynch
 |
4️⃣ Low Expectations Lead to High Returns
Researchers looked at stocks with the most optimistic and pessimistic growth forecasts.
They found a predictable cycle:
Analysts overreact: Fast growth makes analysts assume the trend will last forever, the same is true when growth is slow
Nothing lasts forever: The growth trend almost always changes, forcing analysts to cut their optimistic predictions, or raise the pessimistic ones.
Returns are the opposite of expectations: Stocks priced for perfection end up delivering low future returns, and the opposite is true for low expectation stocks.