moved to dogs of the dow... but is it worth it?

[CorsePerVita]

so here's the deal.... the market has been volatile, of course, as most know.

there is of course.... always an opportunity to be had if you are aggressive enough or patient enough or tricky enough or just lucky enough as we all know.

however, because I am still novice to stock trading i decided to take the advice of a friend and go with "the dogs of the dow" and go for dividend stocks. My strategy would be essentially to hold all dividends, pay taxes on them at the end of the year, and the next year, go buy more stocks with the leftover amount from taxes once paid. essentially a snowball.

This seems like this would be a really slow gain until I got enough to really make a large amount nice enough to really throw into them. Keep in mind I am not richie rich, so I am trying to maximize my trades and returns, but at the same time keep it safe.

With AT&T being the largest return on dividends at over 5% it seems like a smart move considering there isn't a damned cd out there or any sort of bond that would be over that amount without keeping my money tied up for a significant amount of time.

On top of that, AT&T seems to be moving UP since I bought them, so even if I deem it to be a "eh.. whatever..." return, I can always cash out and run and pay capital gains later.

Thoughts? Opinions? Anyone else here invest specifically in dividend stocks due to the economy for longterm gain?

I was holding many stocks for longterm but as of late am not liking what I see, I cashed out and went dividend stocks. I took a small drop, but I just don't like my gut feeling on them anymore and no longer trusted those stocks.

What would you do for a guarantee return type investment, or do you think this would be an "okay move?"

Note: I'm already in the stock.... i'm simply asking others what they think.:urock2:

:coffee::thankyousign:

 

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[Guest3722A]

I'm sure you're well aware that there are millions of opinions out there so my personal opinion is that the chart looks strong on T (At&t) but as the short-term trader I am, I would still have a tight stop-loss in place.

As a side observation, I think you may want to decide if you're going to be a trader or an investor or both, as these are two different animals.

 

[CorsePerVita]

Good information and good point. Thank you topherea.

 

[Guest3722A]

You're very welcome. Anytime!

 

[Russ H]

I'm not a paper assets guy, so please take what I'm about to say with an appropriate grain of salt:

Seems like stocks w/qualified dividends (ie, those dividends that were taxed at only 15% as part of the Bush tax cuts) might shift around a bit.

Why?

Because some investors might want to get out of something where they might get taxed at a much higher rate next year (if the tax cuts are allowed to expire without renewal).

In other words, if taxes on qualified dividends (OR capital gains from sale of stock) go from 15% to 25-39.6%, that will be a strong incentive for investors to sell these stocks before the end of this year.

Perhaps some are even waiting to see what happens, before they make their move.

The earlier it's announced/decided (prior to Dec 31), the more time to sell. And the less overall effect, I'd think. Just a general downward trend, due to big volumes.

But if it's right at the end of the year, I'd expect a sell off-- which would hurt the Dow, and bum everyone out.

(except for the bargain hunters-- that's us and other savvy investors who are more long-- who would be ready for it and would grab a bunch of blue chips at a discount).

Seems logical, right?

Of course, I should stress that if you put me in charge of a multi-billion dollar stock portfolio, I could pretty much guarantee you I'd lay it all to waste using my lack of knowledge and bad instincts. It's just not by area of expertise! :smx8:

Feedback from experienced investors on my logic here is encouraged.

-Russ H.

 

[GlobalWealth]

It really depends on what is going to happen with the tax cuts by the end of the year. If they are allowed to expired and dividends are taxed at your personal tax rate, then yes, expect a sell off.

However, I think some of the tax cuts will be extended as the Democrats cannot afford to lose so many votes in a mid term election year. Likely the dividend/cap gains tax rate will go from 15% to 20%, which will have some impact, but not a huge amount. There will likely still be some sell off on the news, but this means in January there will probably be a good buying opportunity.

With my investment partnership, I invest in a lot of dividend payers and am enrolled in each company's DRIP. Generally I keep 15-25% trailing stops and adjust for dividend payments. I usually hold less than 20 stocks (25 right now though) and basically follow the Graham/Buffett philosophy of value investing. In addition, I sell puts and calls for income and use the income to buy more shares.

I find dividend payers to offer lower volatility and they constitute the majority of my fund. They tend to move with less volatility as investors don't move in and out as much due to the income they generate for portfolios. My aggregate yield for my fund is 4.6% as of the end of July. And this includes a 26% cash holding which pays basically nothing.

 

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[Russ H]

I forgot to mention the latest strength of the dollar-- lots of flight to quality this week (30 year bond went down to 4%!).

Me, I'm just gonna stick to what I do best. So far, we're up 54% on the year. That's good enuf for me. :banana:

-Russ H.

 

[CorsePerVita]

Well guys, I ended up not having checked my scottrade account and emailed at&t since i had not received any dividends. I logged in today and low and behold I had more money than I started with. Dividends were paid, I am impressed with the return. I want a long term investment that I can not have to horribly worry about. So far they are a slow mover (I can sleep at night). I think I am going to stick with it, it seems like a good investment for longterm and I want to keep buying in for more return on dividends. Snowball effect, so to speak.

The info on here is great. I'm still fairly new to trading, I have been doing it for about 3-4 years, but am only really self taught and have had limited advice from people which has been very helpful, but I'm still learning. So if anything I say sounds "novice" well, that's why.

 

[CommonCents]

One thing to check out on AT&T is their dependence on the iphone. Heavily dependent. Verizon is keeping up similar growth w/out it and there are stronger and stronger rumors that Apple will open things up in near future. The risk is AT&T could lose big revenue while others gain if/when this happens. Apple obviously has tremendous branding but droid phones like the Incredible and EVO have the potential to erase a lead quickly. Apple could even get surprised as the capability and appeal of alternatives surpass the iphone. There is a growing sentiment that Apple is the establishment rather than the creative outsider, and could be a backlash in the making even by early loyalists.