Friday, January 14, 2011

Dividends

We all know that the mood of the typical investor can swing violently between extreme bullishness and despair. When one has magically (typically by accident rather than by deliberate choice) hit on a investment that return mutiple times on the original vested sum over a short period of time (eg buying OSIM when the price is low), there is a tendency to be carried away with how easy money can be made. Vice-versa, we often turn into despair when we see our invested counters plunging in value day after day. One of the way to smoothen over such period is really to devote a substantial  portion of your investment into good quality stocks that give  a decent dividend regularly. From example,

Berkshire Hathaway pays no dividend. However, yield-bearing companies still represent a major chunk of Buffett's portfolio. Aside from being leaders in their respective fields, Buffett positions including Coca-Cola, Proctor & Gamble and Johnson & Johnson are also notable dividend payers.
As we saw last year, distributions have become essential to navigating today's volatile economic climate. The constant reminders of economic turmoil facing both the U.S. and abroad can lead to unexpected shake ups and gut wrenching dips.

Consistent dividends can help alleviate some of this volatility, providing conservative investors with some comfort and confidence.

Having a large number of quality companies sharing the fruits of the success regularly with their investors also lead to a healthier and functional market, In China, despite the booming economy, the market is still at its doldrums because very few (less than 5%) of the companies pay any dividends at all. There is really no point in investing in such companies because whatever fruits of the success of these companies will eventually be swindled away or gambled on some foolish business expansions, if management consciously overlook investor interest over a long period of time.

My dividends for Jan 2011
Suntec Reit
Singtel

1 comment:

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