@oldsports_ , we were talking about RDS.B the other day and why I like it. You had said "but aren't stocks sketchy during a recession".
I never got to answer, so here goes. Stock PRICES go down during a recession, correct, but if you don't sell you don't lose. That's why I buy quality dividend stocks such as RDS.B so I'm getting paid nicely to wait through a recession. It pays $ 3.76 per year and they have not reduced the dividend since 1945. Right now it's frozen at $ 3.76 a year because the acquired BG, a natural gas company, but that's still a 6.3% Yield on today's closing price. I don't even worry about them raising it when I'm getting 6.3% on my money. That's a lot better than any bond or CD will ever pay.
And if you buy at today's price, that 6.3% is locked in for you. Now to hedge your bet, I suggest taking each dividend in cash and only reinvesting during said recession. You may get it at a 10% yield during a recession and those shares are locked in at 10% for as long as you hold them. Let's say you buy today and hold it for 5 years and take every dividend in cash and that they don't raise the dividend (which they said they will start doing again in a year or 2). Over five years, you'll receive $ 18.80 in dividends, which means you would break even if the stock price dropped by $ 18.80 in five years and you sold after 5 years. That's one heck of a cushion. If it dropped by $ 18.80 in five years, that would put the stock price at about 41/share. That's a 9% dividend yield on any shares bought at that price. In short, by staying in for a while and holding the dividend in payments in your account instead of reinvesting you are reducing your original cost by $ 3.76 a year and getting paid back. I'm not saying it's right for everyone, but to me it's been a no-brainer.
I never got to answer, so here goes. Stock PRICES go down during a recession, correct, but if you don't sell you don't lose. That's why I buy quality dividend stocks such as RDS.B so I'm getting paid nicely to wait through a recession. It pays $ 3.76 per year and they have not reduced the dividend since 1945. Right now it's frozen at $ 3.76 a year because the acquired BG, a natural gas company, but that's still a 6.3% Yield on today's closing price. I don't even worry about them raising it when I'm getting 6.3% on my money. That's a lot better than any bond or CD will ever pay.
And if you buy at today's price, that 6.3% is locked in for you. Now to hedge your bet, I suggest taking each dividend in cash and only reinvesting during said recession. You may get it at a 10% yield during a recession and those shares are locked in at 10% for as long as you hold them. Let's say you buy today and hold it for 5 years and take every dividend in cash and that they don't raise the dividend (which they said they will start doing again in a year or 2). Over five years, you'll receive $ 18.80 in dividends, which means you would break even if the stock price dropped by $ 18.80 in five years and you sold after 5 years. That's one heck of a cushion. If it dropped by $ 18.80 in five years, that would put the stock price at about 41/share. That's a 9% dividend yield on any shares bought at that price. In short, by staying in for a while and holding the dividend in payments in your account instead of reinvesting you are reducing your original cost by $ 3.76 a year and getting paid back. I'm not saying it's right for everyone, but to me it's been a no-brainer.
