In normal times, investment in shares give a dividend yield of around 3%. In a crisis, when the share price dropped by 50%, the dividend yield increase to 6%. It is likely that the company will suffer lower profits, so the dividend will be reduced. After reduction, the yield is likely to be still quite attractive.
If business conditions are bad, the company has the choice to reduce their cost by downsizing their operations. When their profit stabilizes, their share price will also stop dropping. When the profit increases with the return of economic growth, the share price will show a good gain.
It may take a few years or longer, but it will eventually happen. In the meantime, the dividend yield will continue to be quite attractive. To avoid the risk of selecting the wrong shares (i.e. of a company that may go bust), it is important th diversify the investment into a fund (e.g. an exchange traded fund).
My view: Invest when the share price is deflated, due to the pessimistic situation. Invest for the long term.
- ► 2013 (348)
- ► 2012 (1270)
- ► 2011 (1873)
- ► 2010 (2369)
01/11 - 01/18
- SCMP:Singapore ruling on minibonds bring HK hope
- Difficulties faced by migrant workers
- Blog will hit 1 million visitors by 23 Feb 2009
- Complaint on mis-selling of CLN
- Queen's Counsel opinion
- Full refund of $100,000
- Thought for the day - who will speak the words tha...
- MAS statement: Compensation for credit linked note...
- Mis-selling of structured products
- Learn about insurance
- Investor wants to sue the relationship manager
- "Pinnacle Action Group" formed to work on a possib...
- Going to extremes to find a job
- Value and character
- How to identity a bubble
- A new way to do business - by conference call
- Thought for the day - Injustice
- Invest in assets at deflated prices
- Beware of bubbles
- Insurance that worsen crunch
- SCMP:Regulators' reports raise more questions than...
- Part Time Work
- TABS - Taxi Automated Booking Service (8202 8866)
- Hilarious sayings of George W Bush
- SCMP:Two women sue bank over minibond losses
- Yield during the Great Depression of the 1930s
- ▼ 01/11 - 01/18 (26)
- ► 2008 (2105)
- ► 2007 (1803)
- ► 2006 (696)
- ► 2005 (159)