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David Stafford
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Student of markets, enjoys following their course.
My book:
Around the World in Several Pieces
  • Reflections On High Dividend Yielding Stocks, And Volatility Being Associated With Risk. 0 comments
    Jun 12, 2012 11:18 AM

    Are high dividend rates the fictional "soma" of investing?

    People often have an opinion concerning the dynamism of investing. The popular concept of volatility being a risk seems to manifest the view that it may be seen as a hobgoblin.

    However, to the steady hand, is volatility really a risk? Perhaps in so far as managed portfolio type investments' returns are concerned, but even then, most seasoned fund of fund managers and the like will attest to the benefits of overlooking one down year for the sake of a more long term perspective in regards to ones investments.

    For high dividend yielding stocks, perhaps this sort of potential bugbear is almost ruled out entirely. Especially when they are relatively low premium, aka price, like MPW, and other 10 dollar or so high dividend yielding investments.

    Why is this the case?

    Of course the obvious answer to this question, is that by having a high yield dividend, an investment essentially creates its own sort of in the money straddle option around its self, that pretty much ensure profitability or positive returns in most market conditions.

    Over the course of this year, for example, MPW hasn't wavered too far above or below 80 cents of around 8.50 for too long, and hence may it go up 20 cents a day, and down 50 cents the next, the investor still makes a profit.

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