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First choice for low-risk investors: Read the investment value of interest-bearing stocks in one article

If a friend who has never bought stocks asks youHow to Make Money Buying StocksHow would you answer?

Many people may say that it is naturally looking at the stock price, and when the stock price rises, it means you make money.

Is this right? Right, not all right.

Because there are actually two sources of income from stocks, one part is the gain from the share price increase and the part is the profit from the corporate cash dividend, expressed in a formula:

Stock income = share price increase or decline+dividend income

In the US equity market, dividends can even be said to be the main source of income for equity assets. For example, since 1991, the cumulative increase in the S&P 500 Full Yield Index, which includes sample dividends in index earnings, is twice the yield of the S&P 500 index.

Philip U. Straehl's study of long-term U.S. stock yields has also found that “dividends+repurchase” gains can explain the vast majority of the historical returns of U.S. stocks.

Dividends are therefore a very important indicator for long-term investors, especially in times of intense market volatility, and companies with sufficient cash on hand can provide investors with a greater sense of security.

Why is Buffett's investment so successful? In addition to his ability to choose high-quality companies, there is also a big investment “trick”, isFavor Dividend。

COCA-COLA: INVESTMENT YIELDS MORE THAN 6X 30-YEAR DIVIDEND

BUFFETT BEGAN BUYING COCA-COLA IN LATE 1988, AND BY 1994 HAD AMASSED ITS TOTAL HOLDINGS TO 1 BILLION SHARES AT A TOTAL COST OF $13 BILLION (CORRESPONDING TO A PURCHASE COST OF $13 PER SHARE).

After a series of divestments in Coca-Cola, Buffett now holds 4 million shares, representing 9.25% of Coca-Cola's total floating shares, with a market capitalization of more than 220 billion. That is, the increase in share price alone has brought Buffet more than 16 times cumulative earnings ($220.13 billion = 16.9).

But the more important change comes from dividend income. As shown in the figure below, Buffett received a dividend of $7800 million in 1994, but with the year-on-year growth of the company's dividend per share and the decline in the cost of ownership after the split, by 2022, the annual dividend received by Buffett had grown to $7.04 million, corresponding to its current yearDividend rate has reached 54%。

AND BUFFETT HAS GENERATED CUMULATIVE DIVIDEND INCOME OF $109 MILLION OVER 29 YEARS, COMPARED TO $13 BILLION IN INVESTMENT CAPITAL. DIVIDEND INCOME HAS ALSO BEEN BROUGHT TO BUFFETT.MORE THAN 6X CUMULATIVE REVENUE。

Maybe someone will say it's Buffet.The amount of money invested is large, so how much do you earn?

Here we assume that Little A also followed Buffett in 1994 by buying 100 shares of Coca-Cola at a cost of $13 per share.

So like Buffett, the cumulative dividends he received in 10 years could reach $1464, more than the cost of buying it; with a cumulative dividend income of $1,090 in 2022, compared to $1,300 in investment capital, the dividend yield also gave Little A more than 6 times the cumulative income.

Isn't that exaggerated~

And, over time, the absolute number of dividends has more and more impact on investment returns,The impact of stock price rises and falls is no longer a decisive factor。

COCA-COLA'S SHARE PRICE, FOR EXAMPLE, ENTERED A 15-YEAR BEAR MARKET AFTER PEAKING IN 1998, AND ITS SHARE PRICE FELL BY AS MUCH AS 50%. In the meantime, Coca-Cola's dividend continued to grow, eventually stabilizing at around 3%, and Berkshire's dividend income totalling $41 million, nearly three times its capital, helped Buffett through its darkest days.

Source: yahoo

Until now, Buffett does not do anything every year, and even if the stock price drops, he can receive a fixed dividend of $7 billion (Spending $1,300 at the beginning of the corresponding period Small A for holding 100 shares is $700 per year), it's all very wonderful to think about.

This isThe Amazing Dividend Compensation that Time Brings。

This also fits in with Buffett's philosophy of buying stocks, which is buying a business. A consistently stable dividend is a stepping stone for investors to cross the bull. It is also Buffett's “secret weapon”.

S&P 500 High Dividend: Historic Yield Surpasses 11%

Many investors may also ask:NOT ALL STOCKS ARE BIG BULLS LIKE COCA-COLA. BUFFETT IS GOOD AT CHOOSING STOCKS, WE CAN'T!

For example, many investors prefer to measure the investment value of a stock only from the high and low yields, butA stock with a historically high dividend yield does not represent a stable dividend in the future.

The essence of high dividends is a sufficiently stable earning capacity and cash flow, behind a very good industry landscape。 Otherwise, using only high and low dividends, it is easy to see a situation where dividends are taken and capital lost.

LIKE SHIPPING, REAL ESTATE, ETC., OR STOCKS IN HIGHLY LEVERAGED SECTORS, CORPORATE EARNINGS FOLLOW THE ECONOMIC CYCLE. THE SAYING “3 YEARS WITHOUT OPENING, OPEN FOR 3 YEARS”: THEY EARN MORE WHEN THE MARKET BOOMS, BUT WHEN THE MARKET DECLINES, THEY NOT ONLY FACE LOSSES, BUT ALSO SHARE PRICES CAN A severe drop in profit losses becomes a false high dividend trap.

Here is a suggestion from Futubull:For the average investor, if there is no certainty of an individual investment opportunity, a more efficient way to buy a high-dividend index fund is to buy a high yield index fund directly, which is equivalent to buying a bunch of high-dividend stocks.

High-Dividend Index Funds are stock-based funds that build a bunch of stocks that pick from the market with a high dividend yield and a large percentage of cash dividends. In terms of actual historical yield rates, both developed and emerging capital markets have shown good earnings performance.

Taking the example of the U.S. S&P 500 High Dividend Full Yield Index, it selects listed companies from among S&P 500 index constituents that have steadily increased their dividend every year for at least 25 years over the past 25 years. Achieved the S&P 500 High Dividend Comprehensive Income Index Calculating Dividend Income Since 1991Annualized Yield 11.2%, which is 10.4% higher than the S&P 500 Full Yield Index.

In the case of Hong Kong stocks, if dividends are reinvested,$Hang Seng High Dividend Yield Index (800754.HK)$There is no excess compared to the big plate, but after thinking about it, it is a big win. It is worth mentioning that while Hong Kong stocks have performed far below US stocks in recent years in share price earnings,$Global X Hang Seng High Dividend Yield ETF (03110.HK)$As of nowThe dividend yield TTM is 8.34%, much higher than the same period$SPDR S&P 500 ETF (SPY.US)$of 1.45%,

How to choose a high-dividend investment portfolio? What's right for you is the best

If investors prefer to choose stocks with high dividend potential, here is a stock option instrument.Futubull App Discovery Page-Market-Opportunities-Selector-Generating Stock Strategy——

For Hong Kong stocks, we can quantify to the following stock options standards:

1. Circulating market capitalization≥HK$10 billion

2. 1 DAY TURNOVER ≥HK$1 MILLION

3, ROE≥ 8% (NET ASSET RETURN RATE)

4. DIVIDEND RATE TTM≥ 2% (ANNUALIZED DIVIDEND RATE FOR THE PAST 12 MONTHS) AND DIVIDEND RATE LFY≥ 2% (DIVIDEND RATE FOR THE PAST FISCAL YEAR)

5. Market profit rate TTM≤15

6. Cash flow from operating activities TTM≥100 billion HKD

Obtain the following qualifying shares:

Source: Futubull App Discovery Page-Market-Opportunities-Selectors-Creation of Option Stock Strategy, Statistical Date to August 30

Then we can go through the overview of the individual stock analysis page,View its historical dividend status, excluding those stocks with periodic dividends。

Also, if you feel that choosing a stock is too risky and don't want to spend too much time researching, you can choose to track a bunch of ETFs with high dividend stocks.$Global X Hang Seng High Dividend Yield ETF (03110.HK)$It's a good choice. Especially considering:

1. THE CERTAINTY OF HIGH DIVIDEND ASSET YIELDS IN THE LOW INTEREST RATE ENVIRONMENT IN THE DOMESTIC LOW INTEREST RATE ENVIRONMENT, THE DIVIDEND RATE OF THE GX HANG SENG HIGH DIVIDEND INCREASED TO MORE THAN 8%, GRADUALLY WIDENING THE YIELD GAP WITH THE DOMESTIC 10-YEAR NATIONAL DEBT RATE;

2. In the context of economic recovery, high-dividend assets and regular cycle blocks are more concentrated, which is expected to benefit from the upward trend in the regular cycle industry;

3. The premium of AH shares is at a historical high, and Hong Kong stocks will gain room or greater in the future.

Likewise,For US stocks, we can also quantify to the following stock options standards:

1. Circulating market capitalization≥US$1 billion

2. 1 DAY TURNOVER ≥$1 MILLION

3、ROE≥ 8%

4. Dividend rate TTM≥ 2% and dividend yield LFY ≥ 2%

5. Market profit rate TTM≤15

6. Cash flow from operating activities TTM≥100 billion US dollars

Source: Futubull App Discovery Page-Market-Opportunities-Selectors-Creation of Option Stock Strategy, Statistical Date to August 30

In addition to traditional resource stocks such as crude oil and ores, utilities such as US power, rail transport, will gradually become monopolies after early investment and entry are completed. Stable income will no longer require sustained high investment, and long-term stable dividends will boost valuations. Companies in these blocks can focus on.

Figure: Growth in Capital Expenditure by Industry in the United States 2011-2020

Also, if you feel that choosing a stock is too risky and don't want to spend too much time researching, you can choose to track a bunch of ETFs with high dividend stocks.

HERE WE SIFT THROUGH THE 7 MOST MAINSTREAM DIVIDEND INDEX FUNDS ON THE MARKET (ASSET SIZE GREATER THAN US$50 BILLION), AGGREGATING THEIR CORE METRICS, AND INVESTORS CAN CHOOSE FROM A VARIETY OF FUNDS BASED ON THEIR RISK PREFERENCES AND ASSET ALLOCATION NEEDS:

Source: Futu Restructuring, the statistical date was reduced to August 30, missing the 5-year forecast index for the beginning of 2018 to the end of 2022

In which,$Schwab US Dividend Equity ETF (SCHD.US)$The largest size,$Spdr Series Trust Spdr Portfolio S&P 500 High Dividend Etf (SPYD.US)$ the highest dividend yield;$Vanguard High Dividend Yield ETF (VYM.US)$The current rate is the lowest.

However, due to different ETF resale industries, historical stock price performance differs, e.g.$Vanguard International High Dividend Yield Etf (VYMI.US)$Currently, more than 1300 international stocks from emerging and emerging markets have high spreads, but historical stock prices are not far behind other US stock indices. Analytical mooers of tool tags can inquire further in the relevant ETF details of the Futu App.

Summary: The correct way to open dividend stocks

High-dividend companies are more suitable for long-term investors, is not friendly to most investors who prefer short-line investments or have a high risk preference. Corporate dividends are divided by interest from the share price, short-term holders also pay dividends tax. For them, speculation is fine, the starting code is zero and game, and dividends are negative and game.

But if you can understand dividends from the perspective of doing business, such as you invest in a restaurant opened by a friend, then the only income you can get from this investment is the restaurant's dividend (dividend), thus roughly predicting how many years it takes to recover the cost. Approximate, we can also place dividends or high dividend indicesTreated as a special bond, interest yield is slightly higher, but volatility is also higher than treasuries.

Overall, investing in high-dividend stocks is a good investment strategy, whether in a mature European and US stock market or in the history of Hong Kong stocks. Keeping an eye on the following points in actual investments can greatly increase the winning rate of your investment:

1. BUY A COMPANY WITH A STABLE DIVIDEND HISTORY, AND IT IS RECOMMENDED TO LOOK AT THE AVERAGE DIVIDEND RATE FOR THE LAST 5 YEARS OR A FULL UPWARD AND DOWNWARD CYCLE;

2. Using deducted non-net profit to calculate the company's dividend to exclude, for example, a large number of medical device companies with many epidemic-related non-recurring gains during the three years of the pandemic;

3. In the absence of in-depth knowledge of the industry and the fundamentals of individual stocks, try to avoid buying strong cyclical stocks and high debt ratio stocks as much as possible;

4. Ordinary investors can also consider buying high-dividend index funds directly, which is equivalent to buying a bunch of high-dividend stocks.

5. The valuation of high dividend indices looks mainly at the dividend rate, but when choosing a related ETF, you should also pay attention to the complex factors of its management size, rates, historical earnings performance, etc., to choose the one that suits your criteria.

6. Investors with lower risk can also consider investing in high-dividend ETFs to avoid short-term fluctuations in relevant benchmarks more.

If you have any questions or suggestions about investing in dividend stocks, feel free to leave a comment in the comment area~

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