top of page

Some really bad advice

How make money and sleep at night, well according to Yahoo, buying these crap dividend companies is the way to go...

And they quote Warren Buffet? Now that's daring... Why? Because Warren Buffet doesn't believe in paying dividends, and he's a really smart guy. So here are the 3 stocks they recommend you keep forever, as they produce dividends and dividends are good... Wrong.

Dividends are a way for a company to show stability for their stock, and some do it well and some don't. The 3 stocks they recommend, are crap... lets have a look at them. AT&T with a 7.7% dividend sounds good right? Wrong, the stock has been dropping like a rock since Dec of 2019, and no end in sight, it has lost 50% of its value, so they only way to get people to buy is to pump the Dividend. And the earnings per share and PE are non existent, that is a clear warning sign to stay away.


AT&T



Next up is Enbridge, ok at least we can see a PE for this one, but its terrible. Over 40 is not good, and again an enticing dividend at 7.35 %. But the capital growth has dropped 20% in the last year, at the same time Oil is skyrocketing... something just isn't right. More on this later, as I am a player in the Oil market, but this doesn't thrill me.


ENB



Look at some point in time, you are going to want to sell a stock to get a capital gain, that is how we make money, not a piddly dividend. And this is why Warren doesn't believe in dividends and doesn't give any. He reinvests the cash back into the company to increase the stock value. And he has been doing it successfully for many years. If you want something to buy and hold forever, until you retire, and or buy an island in the Caribbean, its a no brainer. Instead of trying to emulate Warren Buffet... just buy Warren Buffet.


BRK-B



Now this is a chart I like, progressive, leads the market indexes, non volatile. And great capital growth. Oh, no dividend... who cares... I know in 10 years I can cash this and it will make money. Oh sure, it drops during a recession or downturn... but that is my secret to really making money... you buy more... yep. Which is exactly what I did at the bottom of 2009, and in 2020. This, is my keep until you die stock, and its the only one. Berkshire has given back close to 15% compound capital gain, for years, and now sits at about 10% for the last 5 years. Everything else you should keep balanced, meaning sell some at the top, create cash buy back in at the bottom. Whatever it takes to keep a 70/30 split.

I like good equity stocks, and the key here is, good equities recover handsomely with a market upturn. That is the only bet that we are making... so with that in mind why not just buy the market index? Exactly... stay away from individual stocks and you will do fine, and sleep at night.


But if you want to try to do better, and I do... this is what I use for my benchmark.


RY.TO Royal Bank



This is a chart I can live with, 100% growth in the last 10 years equates to a 7% compound return on investment, and add to that a 4% Dividend. Buying individually this stock is also qualifies for DRIP, compounding even more. Yes, it drops, sometimes drastically, but this is just an opportunity to buy more. If you have the cash. Buying and holding this stock has proven to beat the TSX Index, and thats not bad.

5 views0 comments

Recent Posts

See All

Comments


bottom of page