01-13-2009, 12:40 PM
Zephyrs Wrote:Another thing to keep in mind is that some stocks he advocates to his clients right now are paying very large dividends. Why does this matter?
Well one he talked about on a show he was on had the stock price so depressed that the dividend payed 30% of the stock price. Thus in 3 years even if the stock goes down in value you have already gotten your money back in the stock.
Its a way to earn "rent" on your money. Thus even if my portfolio were to drop 40% I still get my X dollars a year from dividends.
A 30% dividend yield is fantastic, yes, but will earnings at those companies be able to support that dividend moving forward? We'll see. So far, average estimates for corporate earnings are down 20%.
Also, it would stand to reason that most of his clients purchased those stocks before the stock prices fell off a cliff. In other words, your 3 year estimate for making your money back only applies to those people who bought the stock after the market crash.
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