Are you falling into this common investor trap?
You Might Be Making This
‘Dumb Dividend’ Mistake
You Might Be Making This
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Dear Reader,
Today, I want to warn you of an investment trap many investors walk into...that could be putting your capital at risk.
I call it the ‘dumb dividends trap’.
Let me show you what I mean...
Now, you might be thinking…
These are some of the highest dividend payers on the ASX with yields approaching 10%. And they’re all stable blue-chip stocks.
What could be possibly wrong with them?
Well, take the stock at the top of the list: BHP Group [ASX:BHP].
The Motley Fool says BHP is ‘one of the biggest dividend payers on the Australian share market’.
True, the mining giant has been throwing out big dividends over the past years, thanks to a robust iron ore price.
But iron prices are well off their highs right now and are expected to remain under pressure, so expect that yield to decline in FY24.
Plus, BHP’s share price is still close to an all-time high after a multi-year 300% rally, so don’t expect any big price gains, either.
In other words, BHP only looks like a good dividend play on paper — not in reality.
That’s the danger of chasing stocks with ONLY the highest dividend yields in mind.
Yield alone tells you nothing about a company’s true worth. It’s really just a ‘best guess’ by analysts who cover the stock.
Here’s a smarter alternative…
Take a look at this stock chart:
Notice that it’s paying out regular dividends, just like any good income stock.
But its price is also trending higher, which means any investor over this time period would also have received sizable capital growth.
In other words, it’s a stock that historically pays you TWICE.
That’s the beauty of owning these stocks…and why I think it’s a better approach than simply going for high yields alone.
The folks at Morningstar DividendInvestor agree (emphasis added):
‘It’s not just about current income or yield…
‘You have both the current income coming from those dividend payments…but also the prospect of capital appreciation’.
Of course, investment risks still apply and dividends can be ceased or stopped at any time. But the stocks I target have a history of solid dividend payments.
In my view, this is a super smart strategy in today’s rocky market.
You could get a solid income stream while the market trends sideways. Then, when more favourable conditions return, you’re also well-placed to enjoy capital gains.
The problem is that these stocks are exceptionally rare.
As Nick Kirrage of Equity Value observes, very few companies strike the perfect balance of high dividend yield, capital gains, and consistent income growth.
But I recently ran my valuation methodology over every dividend payer on the ASX…and I believe I found:
You can read about them in my new FREE report, ‘Three Contrarian Dividend Stocks for Capital Growth AND Income’.
Get my report today and you’ll learn all about...
One of the most reliable dividend payers on the ASX. According to Crestone Wealth Management, this undervalued property stock ‘has all the hallmarks of being able to steadily increase its dividend over a long period of time’. And with the end of the RBA rate hiking cycle in full view, this property stock could see an upside — a potential ‘sweet spot’ stock to get into.
The ‘boring’ stock that could solve EV’s biggest Aussie problem. It has a plan to make EVs more affordable to regular Aussies. That gives it the potential for solid returns when EV demand ramps up in the country. But while waiting for that to happen, you can get a steady payout from its 5.8% dividend yield (at the time of writing).
This ETF’s smart ‘dividend diversification’ strategy could give you a stable income — even as markets tumble. The fund only invests in companies (from different industries) that are forecasted to pay high dividends in the next 12 months. If you’re looking for a relatively consistent and reliable income, this is a smart buy.
To be clear, these aren’t part of the ‘top dividend stocks’ lists that come up on page one of a Google search.
Nor are they the usual ‘blue chips’ like Woolworths or the Big Four banks.
In fact, I’m confident these stocks aren’t on most investors’ radars.
Because most people are obsessed only with stocks that pay the highest dividends — while ignoring the huge potential for capital gains some lower dividend payers have.
Few analyse income stocks the way I do, as I explain in my new report: ‘Three Contrarian Dividend Stocks for Capital Growth AND Income’.
Download your copy today and discover...
The best Australian income stock opportunities in more than a decade. It has nothing to do with the economy, the stock market, or even individual companies themselves. Once you understand this critical factor, it’ll open your eyes to more dividend paying growth stocks in the market right now.
The significant dividend advantage that Aussie investors have over EVERYONE else. Not exploiting this advantage is like leaving money on the table.
How to find the perfect income stock with my ‘sweet spot’ strategy. I’ll show you a method for evaluating these ‘double-dip’ stocks so you can spot them yourself.
To get this report, simply take a FREE subscription to Fat Tail Daily by entering your email address in the box below and clicking ‘Subscribe Now’. You’ll get the link delivered to your inbox within the next five minutes.
You can get it when you subscribe to the FREE daily investment email, Fat Tail Daily. Simply enter your email address in the box below and click ‘Subscribe Now’.
We will collect and handle your personal information in accordance with our Privacy Policy.
You can cancel your subscription at any time.
I’ve been in this industry for 25 years.
Throughout that time, I’ve helped many investors make money in the stock market.
My focus is to outperform the returns of typical ‘buy-and-hold’ investors by focusing on quality businesses trading at an attractive price.
In fact, for my advisory service, the average return of all of my recommendtions have regularly bettered the ASX 200 over the last three years.
And many of my readers seem to have done very well out of it, like these happy subscribers:
‘To me, Greg is spot on most of the time, I love the charts he uses for getting the point across, and find he is quite thorough in his research, suggesting buying into the banks were a great example, at the moment some up by 75%. Well done.’
Shane Chasemore, VIC
‘I particularly like Greg's understanding of the macro picture and he explains it in a clear and concise manner, perhaps the best at Fat Tail. Full marks in this area; it's a excellent, achievement in stiff competition.’
Rod B
‘Great respect for this service and Greg’s writings. Am retired with limited funds so keen on the dividend stock advice provided. The balanced views provided are a big help for Self Funded account management.’
Ian
‘Greg explains things very concisely and well and as I invest in the mining space (gold, Silver, Lithium ) I find his work very important in helping me keep a balanced longer term perspective. I would not do without his reports.’
DGH
‘Over the past few years, I have profited from his knowledge and understanding, particularly for instance when markets have become volatile. The benefit of having a logical and analytical voice on your side to make sense of markets and help identify value opportunities should not be underestimated.’
Carl M
If you want to follow these readers into my next recommendations, then read my FREE report, ‘Three Contrarian Dividend Stocks for Capital Growth AND Income’.
I believe investing in ‘sweet spot’ stocks is the smartest strategy for any market.
The prestigious Financial Analysts Journal even concluded that ‘dividend-paying growth stocks have higher returns than non-dividend payers’.
The three stocks I reveal in my report is a good starting point for your research.
You can get it when you subscribe to the FREE daily investment email, Fat Tail Daily. Simply enter your email address in the box below and click ‘Subscribe Now’.
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All advice is general advice and has not taken into account your personal circumstances.
Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.
Calculating Your Future Returns: The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in this report are forecasts and may not be a reliable indicator of future results. Any potential gains in this do not include taxes, brokerage commissions, or associated fees. Please seek independent financial advice regarding your particular situation. Investments in foreign companies involve risk and may not be suitable for all investors. Specifically, changes in the rates of exchange between currencies may cause a divergence between your nominal gain and your currency-converted gain, making it possible to lose money once your total return is adjusted for currency.