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

A Life Defined Starts Here

Many people set goals, yet on average they only attempt them less than once. Those who do reach their goals attribute their success to setting tangible, measurable objectives – and pursuing them with focus and determination, even when faced with challenges. Click here to open fullscreen

Don’t Treat Your Home Like A Cash Cow

Published by Ron Carson Almost everyone once thought of their house as their largest and safest investment—until the bubble burst. For generations, prudent “savers” would put sizable chunks of their incomes into their homes.

Is your Legacy in a Dynasty…Trust?

Published by Mark Petersen Many people struggle with determining how much inheritance to leave their children and future generations. As Wealth Planners, we often here the goal, “I want to leave enough wealth to my children to provide them with opportunity. However, I do not want to leave t …
1 2 3 87 88 89 90

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