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Dividend Stocks Vs Non-Dividend Stocks - Investment - Nairaland

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Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 8:10am On Apr 18, 2013
I noticed that of recent, some stocks for example diamond bank decided not to pay dividend or bonuses so that they can grow and expand, yet some shareholders were displeased with the action leading to a sharp fall in price...

So i want to find out, as an investor, do you prefer dividend paying stocks or non dividend stocks that may rise in value in the future?
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 8:52am On Apr 18, 2013
As for me, i prefer dividend paying stocks becos majority of stocks that pay dividend consistently are healthy...For example: Nestle, okumu oil, Guiness, NB, Gtbank etc...However, thats my own thought.
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 9:54am On Apr 18, 2013
Born 2be Rich: As for me, i prefer dividend paying stocks becos majority of stocks that pay dividend consistently are healthy...For example: Nestle, okumu oil, Guiness, NB, Gtbank etc...However, thats my own thought.


Same here, provided the company does not borrow to pay dividend.
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 10:12am On Apr 18, 2013
manie:


Same here, provided the company does not borrow to pay dividend.

I can guess the company you are talking about... but what of diamond bank, they didnt pay dividend yet they are planning to raise more funds and analyst are rating them as BUY...
Re: Dividend Stocks Vs Non-Dividend Stocks by jamace(m): 10:31am On Apr 18, 2013
I don't want dividend. I want capital appreciation. I also prefer bonus to dividend.

Of what use is dividend to me if the value of my share has to depreciate in order to get dividend? Dividend payment is a delay on my investment appreciation and progress.

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Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 10:50am On Apr 18, 2013
jamace: I don't want dividend. I want capital appreciation. I also prefer bonus to dividend.

Of what use is dividend to me if the value of my share has to depreciate in order to get dividend? Dividend payment is a delay on my investment appreciation and progress.

Generally speaking, when a company's growth slows, its stock won't climb as much, and dividends will be necessary to keep shareholders around. This growth slowdown happens to virtually all companies after they attain a large market capitalization.

However, dividend-paying stocks tend to exhibit pricing characteristics that are moderately different from those of non dividend stocks. This is because they provide regular income, and also still provide investors with the potential to benefit from share price appreciation if the company does well.
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 11:32am On Apr 18, 2013
Born 2be Rich:

I can guess the company you are talking about... but what of diamond bank, they didnt pay dividend yet they are planning to raise more funds and analyst are rating them as BUY...


I can't invest my funds in a bank like Diamond.
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 11:34am On Apr 18, 2013
jamace: I don't want dividend. I want capital appreciation. I also prefer bonus to dividend.

Of what use is dividend to me if the value of my share has to depreciate in order to get dividend? Dividend payment is a delay on my investment appreciation and progress.


Nothing stops me from reinvesting my dividend into same stock, other stocks or other investment outlets.
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 11:36am On Apr 18, 2013
Born 2be Rich:

Generally speaking, when a company's growth slows, its stock won't climb as much, and dividends will be necessary to keep shareholders around. This growth slowdown happens to virtually all companies after they attain a large market capitalization.

However, dividend-paying stocks tend to exhibit pricing characteristics that are moderately different from those of non dividend stocks. This is because they provide regular income, and also still provide investors with the potential to benefit from share price appreciation if the company does well.


Dividend paying stocks like Nestle, Nigerian Breweries, FBN, GTB, Zenith, Flour Mills, Okomu, Julius Berger etc are winners anyday.
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 11:47am On Apr 18, 2013
manie:


Dividend paying stocks like Nestle, Nigerian Breweries, FBN, GTB, Zenith, Flour Mills, Okomu, Julius Berger etc are winners anyday.

Supported
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 11:49am On Apr 18, 2013
manie:


I can't invest my funds in a bank like Diamond.

@manie, did you just say that you cant invest in stocks like diamond bank....Please tell me why...you get experience pass me for NSE, let me learn from you
Re: Dividend Stocks Vs Non-Dividend Stocks by valdubem(m): 12:03pm On Apr 18, 2013
Dividend stock all d way; U wanna know why?
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 12:07pm On Apr 18, 2013
val_dubem: Dividend stock all d way; U wanna know why?

Please kindly share with us why you prefer dividend paying stocks
Re: Dividend Stocks Vs Non-Dividend Stocks by saintneo(m): 12:09pm On Apr 18, 2013
Keep it coming...

I've being involved in lots of theories, just joined the market lately....

Willing to learn...
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 12:22pm On Apr 18, 2013
manie:


Dividend paying stocks like Nestle, Nigerian Breweries, FBN, GTB, Zenith, Flour Mills, Okomu, Julius Berger etc are winners anyday.

Examples of dividend paying stocks: Nestle, Okumu oil, Guinness, NB, Unilever, Julius berger, Gtbank, flourmills, WAPCO have shown constitency in paying dividend and yet they also increase in price appreciation...

I would advise that investors looking for exposure to the growth potential of the equity market, combined with the safety of the (moderately) fixed income provided by dividends, should consider adding stocks with high dividend yields to their portfolio.
Re: Dividend Stocks Vs Non-Dividend Stocks by jamace(m): 12:37pm On Apr 18, 2013
manie:


Nothing stops me from reinvesting my dividend into same stock, other stocks or other investment outlets.
What is the value of the paid dividend compared to the depreciation of the stock after payment of dividend? Dividend paid is ALWAYS meager compared to depreciation of stock. What is the value of stocks that have paid dividend presently compared to their prices before the announcement of dividend?

Dividend is like giving you part of your money which ultimately depreciates your capital (Share value) at the point in time.

Most smart investors don't wait for dividend. They sell off once it is time for payment of dividend in order to retain their share value and then buy again after share depreciation.
Re: Dividend Stocks Vs Non-Dividend Stocks by Uziehot(m): 12:45pm On Apr 18, 2013
jamace: What is the value of the paid dividend compared to the depreciation of the stock after payment of dividend? Dividend paid is ALWAYS meager compared to depreciation of stock. What is the value of stocks that have paid dividend presently compared to their prices before the announcement of dividend?

Dividend is like giving you part of your money which ultimately depreciates your capital (Share value) at the point in time.

Most smart investors don't wait for dividend. They sell off once it is time for payment of dividend in order to retain their share value and then buy again after share depreciation.
ok
Re: Dividend Stocks Vs Non-Dividend Stocks by dozydre(m): 12:57pm On Apr 18, 2013
With the present state the market is, i would prefer dividend stocks atleast to keep my hopes alive pending when the market will rebound fully in terms of capital appreciation.
Re: Dividend Stocks Vs Non-Dividend Stocks by otokx(m): 12:57pm On Apr 18, 2013
subscribing
Re: Dividend Stocks Vs Non-Dividend Stocks by mrjingles(m): 2:03pm On Apr 18, 2013
Looking at Diamond Bank's decision not to pay a dividend at face value may be misleading. The decision was taken in order to raise the capital adequacy if the bank so it can create more risk assets, it is also planning to raise some additional money (about $500m) to boost loanable funds so it can financed more business. It means the bank is boosting its "war chest"
This is a smart move considering the projected expansion of the Nigerian economy because if capital adequacy is insufficient it may be barred from creating new risk assets and thus suffer and opportunity cost of missed income. The present MD is a smart guy and he definitely knows what he is doing.

Anytime a company pays out dividends it is reducing investible funds and thus denying itself the opportunity to "compound" income and hence shareholder value. It is in effect telling shareholders:" we do not see any positive npv projects and we cannot earn a return on the money higher than our cost of capital so here, take back some of your money"

Think about this- why would a bank stress staff with high deposit mobilization targets to enable it grow the business then turn around and shovel cash out of the business via dividends?
In a growth industry with lots of opportunities smart managers will hoard money to finance growth but in stable or declining market, dividend payout would be encouraged.

Dividend v non dividend depends on the investors risk and return profile and constraints, if one needs cash to meet spending needs then dividend stocks may work but if the spending needs are low one may go the way of non-dividend stock.

my two cents
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 2:03pm On Apr 18, 2013
dozydre: With the present state the market is, i would prefer dividend stocks atleast to keep my hopes alive pending when the market will rebound fully in terms of capital appreciation.

A portfolio with dividend-paying stocks is likely to see less price volatility than a growth stock portfolio. That is why dividends are often considered to be a good recessionary investment option.
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 2:10pm On Apr 18, 2013
mrjingles: Looking at Diamond Bank's decision not to pay a dividend at face value may be misleading. The decision was taken in order to raise the capital adequacy if the bank so it can create more risk assets, it is also planning to raise some additional money (about $500m) to boost loanable funds so it can financed more business. It means the bank is boosting its "war chest"
This is a smart move considering the projected expansion of the Nigerian economy because if capital adequacy is insufficient it may be barred from creating new risk assets and thus suffer and opportunity cost of missed income. The present MD is a smart guy and he definitely knows what he is doing.

Anytime a company pays out dividends it is reducing investible funds and thus denying itself the opportunity to "compound" income and hence shareholder value. It is in effect telling shareholders:" we do not see any positive npv projects and we cannot earn a return on the money higher than our cost of capital so here, take back some of your money"

Think about this- why would a bank stress staff with high deposit mobilization targets to enable it grow the business then turn around and shovel cash out of the business via dividends?
In a growth industry with lots of opportunities smart managers will hoard money to finance growth but in stable or declining market, dividend payout would be encouraged.

Dividend v non dividend depends on the investors risk and return profile and constraints, if one needs cash to meet spending needs then dividend stocks may work but if the spending needs are low one may go the way of non-dividend stock.

my two cents

Thanks boss but a company can talk a big game about wonderful growth opportunities that will pay off several years down the road, but there are no guarantees that it will make the most of its reinvested earnings. When a company's robust plans for the future (which impact its share price today) fail to materialize, your portfolio will very likely take a hit.

Now to the bolded, Nestle is known to be a company that consistently pay dividend yet over the years the share price have out grown even analysts expectation....I dont think paying out dividend affects expansion especially when the company has a good management structure.
Re: Dividend Stocks Vs Non-Dividend Stocks by Katsumoto: 2:20pm On Apr 18, 2013
jamace: I don't want dividend. I want capital appreciation. I also prefer bonus to dividend.

Of what use is dividend to me if the value of my share has to depreciate in order to get dividend? Dividend payment is a delay on my investment appreciation and progress.

How do you know your capital is appreciating in an economy with double digit inflation? Do you adjust capital/revenue growth for inflation?
Re: Dividend Stocks Vs Non-Dividend Stocks by mrjingles(m): 2:58pm On Apr 18, 2013
Born 2be Rich:

Thanks boss but a company can talk a big game about wonderful growth opportunities that will pay off several years down the road, but there are no guarantees that it will make the most of its reinvested earnings. When a company's robust plans for the future (which impact its share price today) fail to materialize, your portfolio will very likely take a hit.

Now to the bolded, Nestle is known to be a company that consistently pay dividend yet over the years the share price have out grown even analysts expectation....I dont think paying out dividend affects expansion especially when the company has a good management structure.
Your points are correct! That is why investing in shares is a RISKY venture, People should buy investments that are appropriate to their circumstances and risk tolerance, growing a bank's balance sheet may increase risk depending on the capital structure and no one knows tomorrow, growth stock investing is not for everyone just as private placements, PE and distressed assets investing isn't for everyone.

Nestle is indeed an interesting "outlier" which demands further analysis, in investing i personally take NOTHING at face value. They pay higher and higher dividends every year and that partly accounts for the high price, i say partly because the unwillingness of a majority of shareholders to sell coupled with high demand may have created upward price pressure.
The regular dividend has made the stock almost like a floating rate bond!

I've not done any in depth analysis to see if the intrinsic value justifies the current price but some questions I would love to answer are:
1 what is the source of profit growth? higher output? higher demand? both? price increases of its product? cost cutting?
2 what is the payout ratio and dividend yield how does that compare to its industry average?
3 How much support does it receive from the parent? where is its competitive advantage? is it sustainable?
4 Is the stock enjoying a sentiment
in short how does the business MAKE money? It may sound silly but its a very important question. I dont have time now to really look at the company but it would be an interesting project.

The bolded you highlighted is still a valid statement but as with all rules there are exceptions but for how long?
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 3:09pm On Apr 18, 2013
Born 2be Rich:

@manie, did you just say that you cant invest in stocks like diamond bank....Please tell me why...you get experience pass me for NSE, let me learn from you


Cos there are other good dividend paying banking stocks to invest in. Why should I buy the so called growth story of Diamond. Although I still have some units of Diamond bank stocks which I bought early in the year.

I will rather continue increasing my holdings in FBN, GTB and Zenith
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 3:12pm On Apr 18, 2013
jamace: What is the value of the paid dividend compared to the [b]depreciation of the stock [/b]after payment of dividend? Dividend paid is ALWAYS meager compared to depreciation of stock. What is the value of stocks that have paid dividend presently compared to their prices before the announcement of dividend?

Dividend is like giving you part of your money which ultimately depreciates your capital (Share value) at the point in time.

Most smart investors don't wait for dividend. They sell off once it is time for payment of dividend in order to retain their share value and then buy again after share depreciation.


It depends on the units of shares you own. I love the depreciation of good stocks after dividend payments, because it gives people like us the opportunity to buy good stocks at lower prices.

1 Like

Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 3:20pm On Apr 18, 2013
mrjingles: Looking at Diamond Bank's decision not to pay a dividend at face value may be misleading. The decision was taken in order to raise the capital adequacy if the bank so it can create more risk assets, it is also planning to raise some additional money (about $500m) to boost loanable funds so it can financed more business. It means the bank is boosting its "war chest"
This is a smart move considering the projected expansion of the Nigerian economy because if capital adequacy is insufficient it may be barred from creating new risk assets and thus suffer and opportunity cost of missed income. The present MD is a smart guy and he definitely knows what he is doing.

Anytime a company pays out dividends it is reducing investible funds and thus denying itself the opportunity to "compound" income and hence shareholder value. It is in effect telling shareholders:" we do not see any positive npv projects and we cannot earn a return on the money higher than our cost of capital so here, take back some of your money"

Think about this- why would a bank stress staff with high deposit mobilization targets to enable it grow the business then turn around and shovel cash out of the business via dividends?
In a growth industry with lots of opportunities smart managers will hoard money to finance growth but in stable or declining market, dividend payout would be encouraged.

Dividend v non dividend depends on the investors risk and return profile and constraints, if one needs cash to meet spending needs then dividend stocks may work but if the spending needs are low one may go the way of non-dividend stock.

my two cents



Then what happens when management increase their salaries.


Dividend payment increases the investible fund of the investor. Mr. Oyebode will tell you 1001 things he can do with the 126 Million Naira dividend he will get from Okomu Oil when the dividend declared is paid.
Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 3:32pm On Apr 18, 2013
mrjingles:
Your points are correct! That is why investing in shares is a RISKY venture, People should buy investments that are appropriate to their circumstances and risk tolerance, growing a bank's balance sheet may increase risk depending on the capital structure and no one knows tomorrow, growth stock investing is not for everyone just as private placements, PE and distressed assets investing isn't for everyone.

Nestle is indeed an interesting "outlier" which demands further analysis, in investing i personally take NOTHING at face value. They pay higher and higher dividends every year and that partly accounts for the high price, i say partly because the unwillingness of a majority of shareholders to sell coupled with high demand may have created upward price pressure.
The regular dividend has made the stock almost like a floating rate bond!

I've not done any in depth analysis to see if the intrinsic value justifies the current price but some questions I would love to answer are:
1 what is the source of profit growth? higher output? higher demand? both? price increases of its product? cost cutting?
2 what is the payout ratio and dividend yield how does that compare to its industry average?
3 How much support does it receive from the parent? where is its competitive advantage? is it sustainable?
4 Is the stock enjoying a sentiment
in short how does the business MAKE money? It may sound silly but its a very important question. I dont have time now to really look at the company but it would be an interesting project.

The bolded you highlighted is still a valid statement but as with all rules there are exceptions but for how long?


NESTLE is a great company that produces great products that people want to consume (i dont need to mention them since we know their products). It also has a good management structure, so i will say that yes to your number 4 question but the stock is not only enjoying sentiments but people have confidence in the company's strong fundamentals...I believe that nestle is receiving maximum support mostly from foriegn share holders...The compact nature of the outstanding shares of the company and the preponderance of buy-and-hold retail investors that see the stock as their nest eggs will also continue to mediate the share price fluctuation, making it resistant to downtrend. Now, most investors holding the shares don’t easily sell off and as a consistent dividend-paying stock, Nestle provides cushion against the downturn at the secondary market.

And with recent huge investments in new factory, and expansions, the company appears to have operational supports to drive fundamentals and market consideration.

To sum it all, Nestle is a good investment...
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 3:41pm On Apr 18, 2013
Management will always sell the never ending growth story, so that they wont pay dividends and maybe to dupe shareholders.

Management should match non-payment of dividends to shareholders with non-payment of salaries and other benefits to top management staff.

Then, I may buy their growth story.

1 Like

Re: Dividend Stocks Vs Non-Dividend Stocks by Born2beRich1(m): 4:02pm On Apr 18, 2013
manie:


Cos there are other good dividend paying banking stocks to invest in. Why should I buy the so called growth story of Diamond. Although I still have some units of Diamond bank stocks which I bought early in the year.

I will rather continue increasing my holdings in FBN, GTB and Zenith

@manie, Diamond bank has good management structures so why dont you believe their growth theory?
Re: Dividend Stocks Vs Non-Dividend Stocks by manie(m): 4:07pm On Apr 18, 2013
Born 2be Rich:

@manie, Diamond bank has good management structures so why dont you believe their growth theory?

Some banks have better structures.

Most you buy all banking stocks, I have FBN, GTB, Skye, UBA, Zenith and some units of Diamond. But I will not increase my holdings in Diamond, I will rather increase my holding in other banks.
Re: Dividend Stocks Vs Non-Dividend Stocks by jamace(m): 4:14pm On Apr 18, 2013
manie:


It depends on the units of shares you own. I love the depreciation of good stocks after dividend payments, because it gives people like us the opportunity to buy good stocks at lower prices.


The more units of shares you own, the more the loss after payment of dividend because the value of shares will drop drastically due to price depreciation. Why depreciate the value of my shares in order to pay me dividend? Why use my money to pay me, thereby delaying my progress?

For instance, the price of ZENITHBANK was around N25.00 before announcement of dividend. Now, check the price depreciation on ZENITH BANK compared to the dividend that will be paid to individuals. As at today, the price of ZENITHBANK is under N20.00, that is a depreciation of N5.00. Did ZENITHBANK pay N5.00 dividend? NO! So, it is a loss on the part of the investor who waited for dividend instead of selling at N25.00 or even N23.00.

On the whole, do you notice the adverse effect of payment of dividends on the stocks of the NSE? Blood on the street! Panic selling every where. Some investors are even scared that stocks will go into recession again and are just selling to be a little on the safe side.

This is my position anyway. Keep on investing anyway. cheesy

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