Using stock dividends to buy more shares

[gggg...@gmail.com]

If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?

[gggg...@gmail.com]

On Tuesday, March 5, 2019 at 11:13:58 PM UTC-10, gggg...@gmail.com wrote:
> If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?

Also for tax purposes, rather than selling all the shares at once, isn't one better off selling smaller amounts over time?

[John Weiss]

If the company is indeed failing, then yes, the worst case scenario is
as you described. That is why you should choose carefully and monitor
performance regularly.

Long-term capital gains are all taxed at the same rate, unless you have
investment income beyond the threshold where the Obamacare tax starts
($250K for joint filers).

[Dennis]

On Wed, 6 Mar 2019 01:13:56 -0800 (PST), gggg...@gmail.com wrote:

>If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?

How is that any different than taking the dividends as cash and
putting the money in some other investment? Any investment has risk.

Dennis (evil)
--
My output is down, my income is up, I take a short position on the long bond and
my revenue stream has its own cash flow. -George Carlin

[gggg...@gmail.com]

On Tuesday, March 5, 2019 at 11:13:58 PM UTC-10, gggg...@gmail.com wrote:

> If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?

Thanks to all for your quick and informative replies.

So does it work like this?:

- As the price of the stock increases, I can buy fewer shares with the dividends,

- As the price of the stock decreases, I can buy more shares with the dividends.

And the younger I am, the more I can better afford to hold on to the stock even if the price decreases because then I will be accumulating more shares over time which, if the price subsequently starts going up, will increase the value of my shares?

But if I am older I should sell the stock before the price starts going down because I can less afford to wait for the price to go up again?

[John Weiss]

On 3/6/2019 13:23, gggg...@gmail.com wrote:
> On Tuesday, March 5, 2019 at 11:13:58 PM UTC-10, gggg...@gmail.com wrote:
>> If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?

> So does it work like this?:
>
> - As the price of the stock increases, I can buy fewer shares with the dividends,
>
> - As the price of the stock decreases, I can buy more shares with the dividends.
>
> And the younger I am, the more I can better afford to hold on to the stock even if the price decreases because then I will be accumulating more shares over time which, if the price subsequently starts going up, will increase the value of my shares?
>
> But if I am older I should sell the stock before the price starts going down because I can less afford to wait for the price to go up again?

As for buying more shares, yes. The concept is often called "dollar
cost averaging".

As for younger vs older, not quite... You should ALWAYS look at the
potential of a stock or fund before buying. You should also decide WHY
you are buying that particular position, and what your goal for it is.
If you are investing for the long term, you should be prepared to ride
the ups and downs. If you have a specific price target, sell when it
reaches that target.

Review your long-term holdings once or twice a year. Decide whether you
will continue to hold, or set a new sell price target. Your age only
comes into play when you decide to retire and need to liquidate the
stock for income...

[gggg...@gmail.com]

On Wednesday, March 6, 2019 at 11:39:59 AM UTC-10, John Weiss wrote:

Thank you for your quick and informative reply.

Concerning dividends, the higher the dividend, then the more it's worth accumulating shares since the more shares accumulated the amount collected in dividends will increase over time?

[catalpa]

<gggg...@gmail.com> wrote in message
news:1792227f-1a2e-4d7f...@googlegroups.com...

For decent dividend paying stocks the higher the dividend yield the higher
the risk.

CTL (8.65%) is riskier than T (6.84%) which is riskier than VZ (4.33%).

If you are investing in individual stocks you need a portfolio of at least
10 stocks (from multiple industries) to spread the risk.

[gggg...@gmail.com]

Thank you.

[tra...@optonline.net]

Just because one stock is paying a higher dividend than another stock or a
stock that pays no dividends, doesn't mean it's a better investment.
The highest dividends are usually stocks in very mature, slow growing
industry's, like utilities. They have no good use for the money that can
expand the business, so they give it to stockholders. Meanwhile,
companies like Apple, Intel,
MSFT, Ebay, etc that performed spectacularly didn't pay dividends,
at least during their most explosive decades of growth. Would you be
better off with a stock that went from $20 to $26, while paying a 5%
dividend or a stock that went from $20 to $200 with no dividend?
I remember an old lawyer telling me decades ago to never buy a stock that
didn't pay a dividend at least as high as the bank. If you followed that
advice, you would have missed almost all of the huge winners.

[gggg...@gmail.com]

But I thought that the name of the game was to reach a point where you have accumulated enough stock paying high enough dividends such that you can subsequently live just on the dividends?

[tra...@optonline.net]

That could be your game, but there are many other games. You can put your
money in the bank or bonds if you're primary focus is "dividends".

[gggg...@gmail.com]

On Tuesday, March 5, 2019 at 11:13:58 PM UTC-10, gggg...@gmail.com wrote:

> If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?

What can affect dividends?

If a company goes out of business, can the shares become worthless and therefore dividends will end?

Can dividends be affected as the price of shares goes down because stock market stops doing well?,

[ItsJoan NotJoann]

On Friday, October 4, 2019 at 12:38:25 PM UTC-5, gggg...@gmail.com wrote:
>
> What can affect dividends?
>
> If a company goes out of business, can the shares become worthless and therefore dividends will end?
>
> Can dividends be affected as the price of shares goes down because stock market stops doing well?,
>

All I can say is I hope you have a good stock adviser who will keep you abreast
of these situations. I see mine at least twice year.

[John Weiss]

For long-term investors, reinvesting dividends makes sense unless you
need the cash to pay taxes.

If you have a position in a company that is not doing well, you have to
decide whether to hold or sell. If you hold, reinvesting dividends at
the [hopefully temporary] lower prices makes sense.

Not all companies pay dividends on their stock. Invest for total return
- capital growth potential plus dividends. Neither is guaranteed...

[Whoey Louie]

On Friday, October 4, 2019 at 1:38:25 PM UTC-4, gggg...@gmail.com wrote:
> On Tuesday, March 5, 2019 at 11:13:58 PM UTC-10, gggg...@gmail.com wrote:
> > If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?
>
> What can affect dividends?

The company doing poorly and not having any income or enough income
to pay a dividend would be a prime example.

>
> If a company goes out of business, can the shares become worthless and therefore dividends will end?

Of course. But unless it's some sudden fraud or some catastrophic event,
the dividend will be eliminated long before they go out of business and
the shares become worthless.

>
> Can dividends be affected as the price of shares goes down because stock market stops doing well?,

It's affected by the ability and willingness of the company to share some
of the profits as dividends. A smaller percentage of stock, preferred stock,
can carry a fixed dividend, which the company is obligated to pay. So,
it's kind of like a bond in that regard. But unlike a bond, the company
can stop paying it. In which case those stockholders have to be paid
their accumulated dividends before the company can pay any common stock
dividends in the future.

[Whoey Louie]

On Friday, October 4, 2019 at 9:58:31 PM UTC-4, John Weiss wrote:
> On 10/4/2019 10:38, gggg...@gmail.com wrote:
> >> If that is done regularly, isn't the worst case scenario that by the time one wants to sell their shares in the future, that the stock price will have gone down so much that one will end up with a whole lot of cheap shares--possibly worth less than the initial purchase value?
> >
> > What can affect dividends?
> >
> > If a company goes out of business, can the shares become worthless and therefore dividends will end?
> >
> > Can dividends be affected as the price of shares goes down because stock market stops doing well?
>
> For long-term investors, reinvesting dividends makes sense unless you
> need the cash to pay taxes.
>
> If you have a position in a company that is not doing well, you have to
> decide whether to hold or sell. If you hold, reinvesting dividends at
> the [hopefully temporary] lower prices makes sense.

Traders and many investors would call that throwing good money after bad.
But each case is different. I can see maybe doing that if it's something with
good reason to believe that it's temporary, due to unusual circumstances.

[gggg...@gmail.com]

Thanks to all for your quick and informative replies.