Financial-Budget

The Too-Good-To-Be-True Dividend

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Published by Brett Carson

We’ve all heard the saying, “if it’s too good to be true, it probably is.” That’s how I feel about high yielding investments in this ultra-low rate environment. Just recently, my father asked me to look into a stock that was trading at nearly a 19% dividend yield that he heard about from a friend. Considering that a US 10-year Treasury currently yields less than 2%, I understood the attraction but knew that it was likely a high-risk investment that may cut its dividend soon. In fact, not only was it an oil and gas driller with volatile earnings, but it also carried an enormous amount of debt. It wasn’t a question of “if” it was going to cut this dividend but rather “how much.” That’s only part of the risk. Likely, the largest downside comes from what happens to the stock’s price after the dividend gets slashed.

In short, be wary of high yielding investments. Master Limited Partnerships have soared in popularity over recent years due to Central Bank’s “zero interest rate policy.” However, many cannot sustain current dividends without having to sell additional stock or raise debt, which will eventually result in dividend cuts when access to the capital markets becomes difficult.

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

Charitable Giving Strategies in a High-Income Year

Tom Fridrich, JD, CLUⓇ, ChFCⓇ, Senior Wealth Planner  The end of the year offers an ideal opportunity to look both forward and back — reflecting on recent achievements, while setting goals for the upcoming months. For many of my clients, it’s also a time to review their finances and i …

Let’s Talk About Midterm Elections and Your Investments

This week was midterm elections and we’ve had many questions about what it all could mean, which we’ll tackle in today’s blog. We consider it a great honor to vote, and while we may not know the final results of the election for days (or even months), what we do know is the election will …

3 Nontraditional Ways to Give That Still Qualify for a Tax Deduction

Kevin Oleszewski, Senior Wealth Planner ‘Tis the season to give. In fact, 37% of charitable giving occurs during the last quarter of the year — 20% of it in December alone, according to a survey conducted by the Blackbaud Institute. And while the holidays are traditionally a time to reflect …

Considering Tax Loss Harvesting? What You Need to Know First

Kevin Oleszewski, CFP® Senior Wealth Planner As the tax year draws to a close, many high-income investors will look to reposition their portfolios to intentionally generate losses as a way to offset gains — an investment strategy known as tax loss harvesting.
1 2 3 4 5 106 107 108
Financial-Budget

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation