The attractiveness of high-dividend stocks
Understanding the attractions and risks of investing in high-dividend stocks
While high-dividend stocks can be a stable source of income for investors, there are also many points to be aware of. In this article, we explain how to choose high-dividend stocks for investment and discuss the risks to support wise investment decisions.
While high-dividend stocks can be a stable source of income for investors, there are also many points to be aware of. In this article, we explain how to choose high-dividend stocks for investment and discuss the risks to support wise investment decisions.
How to choose high-dividend stocks
When selecting high-dividend stocks, it is important to keep the following points in mind.
1. Always check the dividend yield.
• Dividend yield is an indicator calculated as "annual dividend per share ÷ share price".
• A yield of around 3% to 5% is a benchmark, Above 7%there may be hidden risks.
2. Evaluate the soundness of dividend payout ratio
• Many companies use 20-50% as the benchmark for the dividend payout ratio (the ratio of dividends to net profit).
• 50% or below 70%Therefore, if it is between this range, companies can be determined to have the flexibility to reinvest some of the profits into business expansion.
3. Check the financial health.
• Companies with high equity ratios and low debt have high stability in management.
• If the operating marginPointed out to be over 10%.is high, profitability can also be expected.
4. Emphasize stability of performance.
• The stability of past years' revenue and profits is an important factor in predicting future dividends.
• Companies that manage to avoid dividend cuts and falling into deficits even in times of recession are particularly commendable.
5. Focus on industry characteristics
• Industries less affected by the economy (such as electrical utilities, communications, food, etc.) can expect stable dividends.
6. Confirm the shareholder benefits
• Shareholder benefits are also one of the attractions. However, let's not be swayed by the benefits and evaluate the company's value calmly.
When selecting high-dividend stocks, it is important to keep the following points in mind.
1. Always check the dividend yield.
• Dividend yield is an indicator calculated as "annual dividend per share ÷ share price".
• A yield of around 3% to 5% is a benchmark, Above 7%there may be hidden risks.
2. Evaluate the soundness of dividend payout ratio
• Many companies use 20-50% as the benchmark for the dividend payout ratio (the ratio of dividends to net profit).
• 50% or below 70%Therefore, if it is between this range, companies can be determined to have the flexibility to reinvest some of the profits into business expansion.
3. Check the financial health.
• Companies with high equity ratios and low debt have high stability in management.
• If the operating marginPointed out to be over 10%.is high, profitability can also be expected.
4. Emphasize stability of performance.
• The stability of past years' revenue and profits is an important factor in predicting future dividends.
• Companies that manage to avoid dividend cuts and falling into deficits even in times of recession are particularly commendable.
5. Focus on industry characteristics
• Industries less affected by the economy (such as electrical utilities, communications, food, etc.) can expect stable dividends.
6. Confirm the shareholder benefits
• Shareholder benefits are also one of the attractions. However, let's not be swayed by the benefits and evaluate the company's value calmly.
Risks and countermeasures for investing in high dividend stocks
1. Decrease in dividends risk
• SummaryThere is a possibility that dividends may decrease due to deteriorating performance.
• CountermeasuresChoose financially healthy companies with a dividend payout ratio of 50% to 70% or less.
2. Risks of Stock Price Decline
• SummaryIf the stock price falls even with dividends, the total return decreases.
• Countermeasures1. Confirm the stability of stock prices and invest from a long-term perspective.
3. Financial Risks
• SummaryRisk of deteriorating financials due to prioritizing dividends.
• CountermeasuresKeep an eye on equity ratio and debt ratio.
4. Trap of yields
• SummaryDrawn in by high dividend yields, there is a possibility of overlooking risks.
• CountermeasuresWhen evaluating, consider performance and financial indicators other than dividends yield.
5. Impact of Taxes
• SummaryWhen it comes to dividends, a tax of 20.315% is imposed.
• Countermeasures: Utilize tax-exempt systems such as NISA and iDeCo.
6. Industry Risks
• SummaryConcentration of risks by focusing on specific industries.
• CountermeasuresDiversifying investments across multiple industries.
7. Economic fluctuation risk.
• Summary: Industries sensitive to economic conditions have a high risk of reduced dividends.
• CountermeasuresDefensive stocks are selected.
8. Risk of dividend suspension
• SummaryThere is a possibility that dividends could be suddenly suspended due to economic crises or regulations.
• CountermeasuresChoose companies with a long-term dividend history.
Summary
High-dividend stocks are attractive investment opportunities that offer stable income, but you can reduce risks by keeping the following points in mind.
1. Carefully review the performance and financial situation of the company.
2. Evaluate comprehensively not only the dividend yield, but also the dividend payout ratio and stock price trends.
3. Diversify investments to avoid specific risks.
4. Maintain a long-term perspective and do not be influenced by short-term market fluctuations.
After understanding the risks, let's make careful investment decisions.
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