web analytics
September 3, 2014 / 8 Elul, 5774
At a Glance
Blogs
Sponsored Post
Jerusalem Mayor Nir Barkat (L) visits the JewishPress.com booth at The Event. And the Winners of the JewishPress.com Raffle Are…

Congratulations to all the winners of the JewishPress.com raffle at The Event



Risks You Need to Know Before Buying Dividend-Paying Stocks

Doug Goldstein

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 firm located in Jerusalem. He specializes in working with clients in New York, Florida, and Israel and is a licensed financial professional both in the U.S. and Israel. Securities are offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, SIFMA. 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. Doug’s newest book The Expatriates’ Guide to Handling Money and Taxes is available at www.expatguidetomoney.com. He hosts a weekly finance show, Goldstein on Gelt, on internet radio. Listen live or download podcasts. Toll-free from U.S. 1-888-327-6179, Jerusalem: (02) 624-2788. Follow on Twitter: @DougGoldstein or contact at doug@profile-financial.com.


If you don't see your comment after publishing it, refresh the page.

Our comments section is intended for meaningful responses and debates in a civilized manner. We ask that you respect the fact that we are a religious Jewish website and avoid inappropriate language at all cost.

If you promote any foreign religions, gods or messiahs, lies about Israel, anti-Semitism, or advocate violence (except against terrorists), your permission to comment may be revoked.

No Responses to “Risks You Need to Know Before Buying Dividend-Paying Stocks”

Comments are closed.

SocialTwist Tell-a-Friend

Douglas Goldstein
Current Top Story
Hamas's leader in Gaza, Ismail Haniyeh (in blue shirt, center), benefitted politically - and in a dramatic fashion - from this summer's war.  Photo from Hamas victory rally, Aug. 27, 2014.
Gazan Deaths and Destruction Dramatically Drives Popularity for Hamas
Latest Blogs Stories
Doug Goldstein

Learn about Monte Carlo-not the place but simulator forbuilding a financial plan.

paramedikit-3

“I knew that being there would allow me to protect other soldiers.”

Kerry Repeats

JoeSettler asks what could still possibly be on the negotiating table with the PA after a summer like we just had…

Kurdistan Crisis

You did not want to listen because you could not blame my Israel.

Now everyone has easy access to the culture and all of its vices, both social and intellectual.

Connect the dots, please: All of these Muslim Arab terror organizations are connected.

“…while Hamas has been weakened it has not been destroyed…”

Jewish donors bought and donated the greenhouses to the Palestinians.

This week’s podcast discusses the need for transparency in international business dealings.

The new “Begin Plan” is an impending nightmare, it rewards the Bedouins for brazen land-grabbing.

There is absolutely nothing for Israel’s security in this American document.

Is it because of corrupt values and lack of meeting opportunities that we have a shidduch crisis?

Israel is fighting the war that none of the Western world has the ability or courage to fight.

Finish the job! Sayyem et a missima!סיים את המסימה!

Life after 50? You better believe it! Tips on how to prepare and enjoy life after retirement.

While I am no fan of the two-state solution, I think I have a solution for the Gaza strip. Let me make it perfectly clear that in no way do I believe a Palestinian people, nation or Arab State ever existed in the history of the world and certainly was not occupied by Israel. If […]

More Articles from Doug Goldstein, CFP®
Doug Goldstein

Learn about Monte Carlo-not the place but simulator forbuilding a financial plan.

Goldstein 485x300

This week’s podcast discusses the need for transparency in international business dealings.

Life after 50? You better believe it! Tips on how to prepare and enjoy life after retirement.

Marriage is not just about emotional fidelity but about financial fidelity as well.

Discussion on recent changes to Social Security benefits and how it will effect you.

Doug speaks with World Chess Cahmpion Magnus Carlsen.

Do Keynesian theories about government spending still apply today?

How can you prevent emotional baggage from holding you back?

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: