One of the eternal dilemmas of small and medium investors when considering their investments is whether it is better to opt for dividends or on the contrary to choose those companies that generate value. It will be a very complicated decision that will depend substantially on the profile you present as a stock user. Because in effect, it is not the same strategy if you are an aggressive investor than if you opt for much more conservative options. In addition, depending on the choice, you will have to carry out the movements in equities from different perspectives in the approaches that you are going to make in the financial markets.
One of the biggest problems with going the dividend route is that they can trap you in companies that cannot justify such a high dividend. That is, companies that are not growing, with high indebtedness or even with meager returns. To the point that you can regret this decision for many years. In this sense, if you are going to choose the dividend alternative, you will have no choice but to select companies that have great stability in their business accounts.
In addition, another disadvantage of this investment strategy is that it will not allow you to seek new business opportunities in the financial markets. Because you will only look at the interest that this payment will offer to the shareholder. This income moves between margins that go from 3% to almost 8%. But taking into account that operations in the equity markets will limit you from then on. It has to be, therefore, a very thoughtful decision on your part. Because you can lose a lot from this investment strategy.
The main danger of dividends
What is the problem with opting for an investment based on this shareholder payment? Well, mainly because your profitability can be diluted over the years. With the serious risk that your margins may be significantly reduced or, what is worse, that it ends up disappearing. From this scenario, it is common for a brutal capital flight to be generated and therefore, the stock would plummet. As a consequence of this action in the financial markets, you run the risk that your savings will lose value in the coming years. Even to reach very dangerous levels for your personal interests.
A situation that you can get to with some frequency is that through this investment strategy you get a very dividend yield. close to 5%. But on the contrary, you get stuck in open positions in equities. To the point that you are losing the opportunity to be in front of other securities that are having higher returns. The main effect of this action of yours is that you will be losing money in your operations in the stock market.
Advantages of value generation
The other strategy you have at the moment within the investment sector is to look for the values that contribute or generate more value. That is, with which you can improve the interest rate of the invested capital. And that in the more aggressive models they can reach levels of up to double digits. What does that kind of investment bring you? Well, above all that you are more ambitious in terms of the result of the operations on the stock market. Not surprisingly, you take more risks, although in exchange for a much more satisfactory return from now on.
You cannot forget that there are a series of securities that have a more competitive revaluation potential and that can improve your account balance current with some ease. This should be one of the goals that you must pursue in the always complicated sector of equities. Above other technical considerations and even seen from the point of view of fundamental analysis. On the other hand, you cannot forget that you can even choose the duration of all your operations.
Opportunities in 2018
If you finally decide to create value through Spanish equities, of course, you will not be short of opportunities to make your savings profitable from these precise moments. Even from where you least expect it. Like the companies integrated in the mid and small capitalization securities, the denominated as small cups, which can develop a good performance in the equity markets from now on. With companies like PharmaMar or Duro Felguera that may be at the top of the revaluations this year.
This is one of the ways to deal with the strategy of dividends in the stock market. Because at the end of the year performance may be higher. Without the need for you to be pending of any fixed and guaranteed remuneration every year. No matter how high it is. Not surprisingly, it is a factor that can mislead you to achieve the objectives in your investments from now on. You must choose between one of two completely opposite options in terms of understanding what investment is. Although you will be the one who has the last word on what you have to do in these special moments.
More profitability than dividends
It is enough to give an example about the advantages of resorting to the values that generate value above the dividend payment. If the price of a barrel increases, if it is a good time to enter energy companies because the profitability will be much higher than through other investment strategies. Not in vain, through the payment of dividends the levels of interest will never be reached that will be obtained by seeking the profitability of the securities that are listed on the equity markets. It is a system that you can use to improve the actual status of your checking or savings account.
On the other hand, dividends have limited profitability margins since they never you will get beyond 8% or 9%. Something that if they give you the values that generate a value in the stock market. Where presumably they can easily exceed the important 10% level. Even under percentages much more satisfactory for your personal interests. It is a subtle difference that you should analyze from now on. Although it is true that everything will depend on the profile you present as a small and medium investor since it will incline you towards one or another strategy in the management of your wealth.
Advantages of value creation
The search for this strategy will undoubtedly bring a series of benefits from the beginning of the investment. Do you want to know some of the most relevant? Well, write them down because they can be of great use to you at some point in your life. To the point that they can make up a very important part of your investment portfolio for this year. These are some of his most relevant contributions.
- It's the best way for you to increase your earnings in equity markets. Under more powerful percentages and that may help to improve the capital at the end of the year.
- You will be the one to decide for how long you want to continue with the investments. You will only need to ask yourself some minimum objectives Regarding the profitability that you pursue in each of the operations carried out.
- You will depend on the conditions presented by financial markets and not of the decision of the companies to mark a remuneration to the shareholder. It is a factor that will give greater flexibility to generate large capital gains from any kind of investment approach.
- You can take advantage of the Uptrend equity markets. Where the prices of the shares will be able to revalue quickly, without any expiration in the operations carried out.
- It is true that the risks that you assume are higher. But in exchange for receiving a higher reward than through other investment strategies. You can even cut the operation if it does not develop as you expected from the beginning.
Benefits of going to dividends
This performance, on the contrary, gives you another series of advantages that you cannot be insensitive about. One of the strongest is that you will be guaranteed a fixed interest every month. Another one is that it will help you create a stable savings bag. As well as you will be the one who decides the company that will pay that charge on account. With a wide range of securities that present this characteristic and with different percentages in their remuneration.
On the other hand, you can't forget that fiscally it can be a more advantageous operation to defend your interests. As well as that it will be an instrument so that the liquidity in your checking account is always safe. Where you can face the most urgent payments in your domestic economy. Finally, it will be a resource for less favorable scenarios for financial markets. To the point that you can also make the savings profitable with the minimum risk. Regardless of the evolution of share prices.