Custom «Impact of Dividends» Essay Paper Sample

Impact of Dividends

What is dividend? Is it really indicates the value of the company? This is an interesting question. There are even more challenging aspects with respect to dividends. Thus, whether to chose high or low dividends may be rather interesting and puzzling for the modern people. There is a need to clarify pros and cons of these two phenomena. Moreover, in the modern context of challenging economic situation, at times of market downturn there is a need to take into account investment challenges. If to choose high or low dividends, it should be noted that there are different aspects of advantages of making investments in one or another type of stocks.

Dividend yield should be considered prior to discussion of pros and cons of high/low dividends. Thus, for example, high dividend yield underlines that the stock has a lower price, than its real value. Moreover, there is a doubt that future payments of dividends may be not so high, as the dividends pay currently. This tendency indicates that the company experienced numerous hardships at times of depression (Is a High or Low Dividend Yield Better). We can see that during different periods of times there is a need to redirect our feelings and emotions to the most appropriate decisions, which are profitable at a given period of time and would benefit in the future.

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In accordance with low dividend yield it should be noted that stocks have a larger value, than in reality; future dividends may be considered to be more promising than currently. In other words, the financial stability of the company may be promising and profitable for the potential investors.

It should be also noted that the implementation of the dividend yield factor should not be a determinant one in the process of stocks choice. This can be clarified as follows: if the company is growing rapidly, it needs investing money in further developments and research. Thus, it is possible to reach higher payments only in the course of time. Such company is Microsoft. It directed all its money on future developments and innovations and in the result it reached enormous growth in dividends. In the beginning of its history, it did not pay for its stocks, but in the result its stocks cost much more (Kennon).

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Here is the table with the best dividend yield of Hong Kong companies:

It should be noted that China gains benefits from its undervalued currency. Within the past decade, there is an immense growth of Chinese stocks. Fiscal year 2011 signifies high yield stocks up to 16.86 %. The average dividend yield in Hong Kong stocks is 3.65 percent.

Therefore, it is better to take into account the payout ratio. This ratio gauges the percentage of the company’s profits, which is paid to investors of the company. Basically, stock market is rather dubious and the investors are putting a lot of their efforts to clarify the possible strategies for choosing low or high dividends.

It should be also noted with regards to high dividends that they are increasing stock value. Capital gains are less predictable than dividends. There is less risk about dividends than about capital gains; dividend income has a greater value in comparison with the capital gains. There is a high retention of low dividends. We can summarize in accordance with data considered above that investors would gain better opportunities for investment higher dividends

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We should appeal for our common sense, appeal for inner emotions and feelings when we want to make our investments in the market downturn. High dividends are considered to be rather risky for any stocks. Under conditions of market downturn it is relevant to reduce risks and get involved in less risky investment operations (How to Make Money When the Stock Market Is Down).

There are the following conditions for buying high yield dividend stocks: high pay dividends are more profitable than a high yield saving account. In accordance with the fact that stock market cannot be properly predicted and analyzed, it is possible to learn hard to know different aspects of stock trade.

Short-time selling is less risky and thus under conditions of market downturn it is relevant to reduce risks in potential investments. There is an option to save money in high yield saving accounts. There is an option to make money on interest payments. To cooperate with the government is also favorable for your wallet. Thus, it is possible to invest money into government bonds.

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In order to give an essential piece of advice, one should buy US Treasuries, corporate bonds or municipal bonds (Is a High or Low Dividend Yield Better). In any case, cooperation with governmental organizations and making investments in the governmental organizations is also beneficial and profitable and there is less risk.

Another non-standard decision can be as follows. There is a need buy beaten down stocks. Sometimes a company cannot meet its forecasts, leading to stocks buying at an essential discount rate. There is another option of buying index funds at a low rate and during a long period. There is another name for this strategy, which is Dollar Cost Averaging. This strategy is advantageous for investors. In the process of this investment strategy it is better to buy small amounts of stocks (How to Make Money When the Stock Market Is Down).

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Therefore, it is on behalf of the individuals to make investment decisions. Nevertheless, there is no doubt that making essential investment, which is profitable for investors. High or low dividends may be both risky. In accordance with the modern economic context, it is possible to decide whether to invest into the stocks with high or low dividends. On the other hand, it is evident that making investments in the governmental companies or organizations is much more beneficial.

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