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

Carson Investment Research’s Outlook ’23: The Edge of Normal

At long last, The Carson Investment Research team is proud to officially release our 2023 Market and Economic Outlook, aptly titled Outlook ’23: The Edge of Normal. You can download the whitepaper here. As you are all painfully aware, 2022 wasn’t pretty for investors – it was the first year …

What Documents You Should Provide to Your Tax Preparer

Mike Valenti, CPA, CFP®, Director of Tax Planning Tom Fridrich, JD, CLU, ChFC®, Senior Wealth Planner It’s January, so it’s officially tax season! One of the most common client questions heard by tax preparers is, “So, what do you need from me?” The short answer to that question is often, “ …

We Offer Reliable Trust Services in Milldale, CT

Wealth, security, and good financial health are essential for all of us. Trust services can help you protect your assets and build a legacy that will benefit individuals and families far into the future. With trust services secured through Nesso Wealth, you can be confident in knowing that …

Begin Your Legacy Planning in Milldale, CT

Estate and legacy planning is an important financial decision for business owners, entrepreneurs, individuals, and families. With the right plan in place, you can protect your finances while ensuring they will be passed on to future generations. Estate and legacy planning can also provide a …
1 2 3 109 110 111

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