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3 mistakes I’ve made (and you don’t have to make them)

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dividend schedule dividend stocks dividend strategy monthly dividend

A monthly dividend is, in theory, something special. In the end, it is the regular interval that should make handling easier. After all, costs like rent or insurance are also incurred on a monthly basis, and you can offset this with distribution.

However, a monthly dividend is what it is. It should not be overestimated. Many errors stem from this. Let’s take a look at three mistakes I’ve made on this topic that you’d better avoid.

Monthly dividend: make up for low payouts with performance

First of all, we must reiterate that a monthly dividend does not automatically mean more total payments. A dividend yield of 4% on a €1,000 share is a gross dividend of €40 per year. That we receive it once, 10 euros per quarter or 3.33 euros per month: it does not matter.

However, some investors are trying to make up for the low payouts. Or with the highest possible dividend yield. Some dividend stocks, which are not necessarily the best option from a trading perspective, can help here. Or even ETFs that reveal a strange cyclical mix. This may be fine for a while. However, the enterprise-oriented mix is ​​the basis for future distributions.

Therefore, you should not attempt to offset a maximum allotment monthly dividend because of its denomination. Excessive cluster risk and sometimes companies that would not be shortlisted with quarterly or annual dividends should not be prioritized based on pay interval.

Just focus on this topic

Financial freedom and a looming pension gap can be blinding to some degree. That is why the focus on a monthly dividend should not characterize the entire approach. Even when moving to quarterly payments, the timing of receiving a payment every month of the year also presents tradeoffs you wouldn’t make without the gap.

It is good to receive a monthly dividend. It can also help you make ends meet with passive income every month. However, there are plenty of quality and better options out there, often with a payout range that you may not like.

Monthly dividend: Other qualities

Therefore, instead of looking for a monthly dividend, it is better to look for other qualities as well. This includes the selection of values ​​in an enlarged circle. Possibly also that the dividend yield and the payment interval are subordinated to the growth potential. Perhaps even forgoing a payment altogether because you’ve recognized a very clear non-dividend opportunity.

In general, thinking too narrow a field is a costly mistake. In this matter of passive income with a fixed interval, it is very often seen that reason is subordinated to greed.

Monthly dividends: 3 mistakes I made (and don’t need to make) The article first appeared in The Motley Fool Germany.

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Motley Fool Germany 2022

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