Trade24 makes sure to follow all the rules according to Halacha of which one can invest and lend money.
In my last blog, “Three Reasons to Buy Dividend-Paying Stocks,” I described the benefits of buying dividend-paying stocks and why people may think that they are a worthwhile investment. But before you rush to buy dividend-paying stocks for your portfolio, take a few minutes to read about some of the pitfalls involved with this kind of stock.
1. Sometimes, a company will either reduce or suspend its dividend payments. If this happens, it may be prudent to reconsider staying invested in the company, as most companies will only cut dividends as a final resort. The cut/elimination of dividends may be a wake-up call to a company’s demise. Shareholders won’t generally rejoice at getting smaller than anticipated payments, so why would the company risk their negative reactions, unless it is in some sort of trouble?
2. Benjamin Franklin said, “In this world nothing can be said to be certain, except death and taxes,” and this definitely applies to dividend-paying stocks. With dividend-paying stocks, you are going to be hit for taxes twice. First of all, the IRS levies the usual corporation taxes from the company itself on its profits, before shareholders are even compensated. Then, the company transfers whatever profits are left to the shareholders (i.e., you), and you have to pay another tax on the dividends that you receive! (If you have dual citizenship or are living in Israel, the Israeli government may also levy a tax on dividends. Check with your accountant to confirm that you won’t be double-taxed.)
3. Although it’s great that companies may reward their shareholders by paying dividends to them, there is no such thing as a free lunch. Consider the possibility that the reason why the company is paying its investors (as opposed to reinvesting in its own growth and development), is because it can’t find any better investment options right now. Indeed, many large companies tend to pay out dividends when their growth has started to slow. Perhaps this is not what you want, as you would prefer to invest your money into something that is a little more dynamic.
Are you still thinking about buying dividend-paying stocks? If so, I suggest that you reread my last blog, “Three Reasons to Buying Dividend-Paying Stocks,” and then read this article again as well. If you have the full picture, it will be easier for you to see if dividend-paying stocks are really for you.
About the Author: Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd, a financial planning and investment services firm located in Jerusalem. He specializes in working with clients who live outside of the United States and want to maintain a U.S. brokerage account. Doug’s newest book, co-authored with Susan Polgar, about how using chess strategies to improve your finances, Rich As A King can be purchased at www.richasaking.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts held at Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. Neither Profile nor PRG gives tax or legal advice. Before immigrating to Israel, it is advisable to consult with a tax attorney who is knowledgeable about Israeli law. Contact at email@example.comThe author's opinion does not necessarily reflect the opinion of The Jewish Press.
If you don't see your comment after publishing it, refresh the page.
Comments are closed.
Why won’t the gov’t finally annex YESHA & Jordan Valley formalizing their status in State of Israel?
Both “Half-Shabbat” & R’ Yosef’s opinion champion an extreme. There most certainly is a happy medium
Trump’s slogan and story gives American restores hope to dream to: “Make America Great Again”
In their attack on Ban Ki Moon, Hamas admitted to committing a different war crime.
The ideal of Modern Orthodoxy should be not be viewed as a compromise the way most Charedim view it.
Israel shouldn’t rely on US; It has an awful record in protecting allies.
The Halacha of shmirat einayim (guarding one’s eyes) is incumbent on the MAN; it’s his obligation
Dem. presidential candidate Doug Shreffler talks about his campaign & its motto “as good as it gets”
I’ve decided to move away from my safety net-and I wouldn’t change that decision for anything.
Was “Jerusalem” the song Matisyahu planned to perform? It was the PERFECT response to BDS campaign
If the world’s winds of hatred bring Jews to Israel we are ready, joyfully offering them a home here
At what age should the realization start setting in for kids that we live in an uncertain society?
Spain’s SeaWorld canceled Zionist-spy dolphin’s performance unless it supports a Palestinian state
Is GDP outdated an measure of prosperity? Are there any alternative methods of assessing $ growth?
How does the Iranian deal affect anti-terrorist legislation adopted by a number of US states?
Why are wealthy people less likely to gossip? So if you get rich you’ll cut down on Lashon Hora!
What has made Israeli innovative startups world leaders in high tech?
Author Gail Reynolds offers great advice for Mom’s wanting to build a business around their families
How can you remove anxiety and worry from retirement planning?
Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/risks-you-need-to-know-before-buying-dividend-paying-stocks/2012/07/22/
Scan this QR code to visit this page online: