The stock market is having another rough go of it these days. It happens. And in times like these every investor needs to know what he's doing. It's why we develop plans and strategies. In fact, plans and strategies were developed for times exactly like these because who needs a plan when everything is going right?
One of the things I always try to remember is that when stocks are going down, yields are going up. Sometimes way up. And while the target price generally remains the same, the delta between the current price and the target price expands causing the one year estimated gain to increase. In addition, for those that monitor the P/E ratios, the ratio often falls to a level that's acceptable or desirable.
So when stock prices start to fall, as they have this week, dividend growth investors like myself start to get excited. Why? Because when prices are down, yields are up. And for dividend growth investors yield is what matters most. They also know that the price of the stock doesn't affect the dividend because the dividend is based on, and paid each quarter out of, the company's earnings - and earnings aren't affected by the stock price's movement up or down.
In fact, when dividends remain steady or improve while stock prices fall, dividend yields will increases proportionally. And dividend yield is where the dividend growth investors are focused when it comes to buying decisions.
Dividend Growth Investors also keep a keen eye on the company's dividend growth rate as well as the dividend payout ratio, but the dividend yield is usually the most seductive.
So when stock prices start to fall, as they have this week, dividend growth investors like myself start to get excited. Why? Because when prices are down, yields are up. And for dividend growth investors yield is what matters most. They also know that the price of the stock doesn't affect the dividend because the dividend is based on, and paid each quarter out of, the company's earnings - and earnings aren't affected by the stock price's movement up or down.
In fact, when dividends remain steady or improve while stock prices fall, dividend yields will increases proportionally. And dividend yield is where the dividend growth investors are focused when it comes to buying decisions.
Dividend Growth Investors also keep a keen eye on the company's dividend growth rate as well as the dividend payout ratio, but the dividend yield is usually the most seductive.
Successful Dividend Growth Investors have learned, over the years, how to discover those unique companies that continually increase their dividends over a series of several years. They usually have their own individual rules on just how many years are needed, what’s the minimum acceptable yield that's needed, and what the minimum growth rate is needed in order to initiate a buy. So when the market falls, as it has for the last few days, dividend growth investors dust off their lists, check their accounts for excess funds, and get ready to go on a shopping spree.
A falling market doesn't last for long and when it does, it's definitely a great time to be a Dividend Growth Investor.
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