Dividends are cold hard cash. The purpose of dividends is to return wealth back to the share holders. A dividend (cash) is a payment made by a company out of its earnings to investors in the form of an electonic transfer check.
Investors will consider dividend paying stocks as a way to share in the stock markets gain and earn some income. With high unemployment corporations will have reduced labor payroll and more cash on hand. Investors can look at more than the size of the last dividend the stock paid out.
Look at the cash history of the company you are considering. Has the company maintained an adequate cash reserve. Cash reserve helps reduce investor risk. Cash reserve can indicate a company is spending less than it earns. Investors like the cash reserve.
How has the company hsitorically spent its money. Is money invested in research and product development. Are salaries paid adequate to support a stable level of staff. Money flowing in to product development and staff can demonstrate a long term management approach. Reinvesting and developing can improve future success of the company.
Cash history can help an investor understand how long the company can keep dividends at an attractive level. A company with cash available (cash reserve) can usually keep paying a dividend. When the stock market experiences a down cycle, a company with cash is less likely to stop paying the investor dividend.
As the cash reserve (increased risk) lessens the investor can anticipate the company will stop the dividend payment to shareholders to compensate for the loss. Home Care Path encourages seniors to speak with a qualified investment counselor prior to buying or selling a stock.
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