Two things to look for when investing in dividend stocks

by , 11 October 2018
Two things to look for when investing in dividend stocks
Dividends can make you massive returns.

If for instance you bought Adapt IT in 2009, you'd have paid 44c per share. Since then the company has paid out 81.84cps in dividends - a return of 186% from dividends alone.

Based on the latest dividend of 17.1cps, you'd make 38.8% on your original investment THIS YEAR ALONE.
 

Just how powerful can dividends be?


Here’s an example of a powerful dividend payer They’re what I callperpetual income penny stocks.

MMO10%20Oct.png

In this chart you’ll see the cumulative dividends you’d have received from this company starting 2010 – had you invested R100,000 into it.

By 2018 you will have received R144,982 in dividends. That’s a 144% return on your investment – from dividends alone!

Most impressively – in the 2018 year your return on initial investment is 26% for the year – from dividends alone!

Imagine that – making 26% a year from an investment without even needing any capital growth!

And, these big dividend payments haven’t been at the cost of capital growth either – the share actually returned investors around 300% in capital growth over the same period as well!

 

So how can you invest in perpetual income shares like these?
 

Well, it comes down to the track record of the company, and their future prospects.

I did a quick search of the JSE’s best dividend payers. And at the moment there are 26 companies on the JSE paying more than a 5% dividend per year – with a dividend cover ratio of more than 1.

 

Name

Dividend yield

Dividend cover

 

Name

Dividend yield

Dividend cover

CAXTON

5.11%

1.64

 

SYGNIA

6.22%

1.16

VODACOM

5.13%

1.16

 

ASTRAL

6.36%

1.85

TELKOM

5.43%

1.7

 

PERGRIN

6.68%

1.4

CLIENTELE

5.48%

1.17

 

CORONAT

7.03%

1

ASSORE

5.56%

2.26

 

ATLEAF

7.08%

1.12

CMH

5.63%

1.88

 

EPP

7.36%

1.84

METROFILE

5.79%

1.48

 

KUMBA

7.65%

1.25

RDI REIT PLC

5.86%

1.38

 

BALWIN

8.00%

3.37

ABSAGROUP

5.93%

1.61

 

ISA

8.63%

1

PHUMELELA

6.03%

1.48

 

MERAFE

8.81%

3.03

ARM

6.15%

2.39

 

GAIA

8.91%

1.17

NUWORLD

6.16%

2.66

 

VERIMARK

12.64%

2.13

QUANTUM

6.17%

1.65

 

NIVEUS

17.75%

1.29


I wouldn’t buy all of these. But there are certainly a couple of good opportunities in the list…

 


 

 



Two things to look for when investing in dividend stocks
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