Are Penny Stocks A Good Pursuit For A Novice Investor? - My Thoughts About Penny Stocks

I’ve received a mail on my Facebook page from one of my readers. Here is his question:

“What are Penny Stocks? Would they be a good pursuit for a novice investor like me? Thank you for your advice”

Penny stocks are shares of small public companies that trade at low prices per share. Most of them have a damaged business model. In the United States, the Securities Exchange Commission (SEC) defines a penny stock as a security that trades below $5 per share, is not listed on a national exchange, and fails to meet other specific criteria.

Some investors make money with penny stocks by buying and promoting them. Because of the low trading volume, a few new purchasers are enough to boost the stock price. That’s a very unfair and illegal method. The SEC discovers and punishes such activities.

A second possibility to make money with penny stocks is reasonable to the low stock price. You can easily buy 10k or 50k of the stock capital. If your stock moves 1 cent up, you have a gain of $500.

For me is this no argument. Today we have real great leveraged alternatives like ETFs, CFDs, derivatives or options. With these tools, you can build your own leverage with the right underlying. It’s in my view safer and better way to leverage your return.

Finally, the third way to make money is to tell people how to make money with penny stocks. It’s a classical way to sell newsletters, research products, stock tips and so on. For me is this real trash. The biggest player in selling that bullshit is Timothy Sykes. He sells his life story and the dream to get rich with penny stocks. But his real money he made was with selling penny stock alerts, DVDs, etc. – In total a value close to a six-figure amount per month!

I would not recommend you to trade penny stocks or even to buy such newsletters or products that show you how you can make money with stock trading. It’s very dangerous and in the end you are alone responsible for your return – nobody else.

Keep in mind that some investors want to make money with you. It’s like playing online poker. The better informed and longer playing guys make money by fleecing the new ones and unknown investors.

If you have any further questions, to not hesitate to contact me. If you like my answer, please give me a Facebook Like. You can also subscribe to my free e-mail list or follow me on Facebook or Twitter.

Happy Investing!

Tom

Dividends and Stock Buybacks: Pros and Cons

The following article was written by our guest blogger Angie Picardo. She's a staff writer for NerdWallet and likes to inform my readers about share buybacks and the sense behind.

There are, of course, a number of ways for shareholders to benefit from the stocks they own of any given company. Generally speaking, companies want to keep investors happy because they want their stock to be perceived as valuable (and to actually be valuable!) and so they can make a profit themselves. Most investors are familiar with dividends and the benefits they impart to the shareholder. Whether it is from dividend growth or dividend yields, shareholders do expect to make some money over stocks that they hold over time. Most companies respect that and try to keep their profits growing so that dividends can increase, but sometimes, the market becomes diluted with the shares of a particular company, and that’s where share buybacks come in.

Share repurchases, sometimes known as share buyback programs, can be a bit of a divisive issue for investors: some people have strong feelings about them. Share repurchases are essentially what they sound like; they happen when a company decides to repurchase some of its shares from its stockholders. Companies conduct share repurchases primarily because they have concluded that they have too many shares on the open market. When they decided to repurchase the shares, they can either make offers directly to the shareholders or buy them on the open market. Once the company reacquires the shares, they are cancelled or kept as treasury shares. This limits the amount of shares available to the public.

Value Raising

One way that share repurchases are good is that they raise the value for the remaining stock holders. By buying up its shares, a company ensures that whatever shares remain are worth more. For example, if the company is valued at $100 million and has a million shares, each share is worth $100. But, if the company buys up half of the shares, each share still on the market has doubled in value to $200 each. If a company you hold shares in begins offering share repurchases, it may be worthwhile to wait out the process because your stocks may go up. However, a stock buyback is essentially an admission by the company that the stock is undervalued, which would make it an optimal time to sell. 

When it comes to comparing dividends and repurchases, there are a number of factors to consider. First of all, dividends are never guaranteed. Even if the company has been offering a consistently growing dividend year after year, it could stop at any time, this is just part of the inherent uncertainty to the stock market. Choosing to stay with a dividend also depends on the type of dividend you receive and how predictable it is. If you’ve been receiving a high dividend yield, it may be a good time to cash out and take the repurchase while things are good. If you have a dividend growth that is dependable and has been for some time, it may be more beneficial to stick with the stock and let the dividends keep rolling in.

Re-Purchasing Power!

Another way to think about whether to stick with dividends or accept a repurchase offer is to consider whether or not you were going reinvest your dividends back into the company. Allowing the company to repurchase your shares is essentially reinvesting in the company because the value of the rest of your shares will increase. Accepting your regularly scheduled dividends, rather than a share repurchase, is a way for you—the investor—to maintain a certain level of control and flexibility over your money and investments. Trusting a company to buy your shares back is granting them autonomy to do what they think is best for the company. If you prefer being in total control, keeping your shares and accepting dividends may be for you.

To sum up, while there is no guarantee that you will always receive dividends on your shares, many companies pride themselves on offering them consistently, and will likely continue to do so. If you feel optimistic about your dividend situation and like maintaining full control of your shares, going with dividends is probably the right choice for you. A share repurchase is a good idea if you were planning on reinvesting your dividends back into the company anyway or if you are concerned that your shares are becoming undervalued.

Angie Picardo is a staff writer for NerdWallet. Her mission is to help investors stay financially savvy and save money with Nerdwallet's best rewards credit cards.

Smart Ways To Invest In High Dividend Stocks - A Guide With 4 Simple Advices

How to invest in high yielding dividend stocks? - A few simple advices by guest blogger Alicia Avory. Most of the people who want to invest usually target at high dividends. At first glance it looks really difficult to entrust such a huge amount, but who doesn’t want to own a stock that is capable of yielding 12 to 15 per cent. However, the highest yielding stocks possess equal size of risks where the dividend may be unsafe. Is it really possible to differentiate between the legitimate and virtual one? Yes, it is possible by researching for organisations that possess solid history for paying sensible dividends.

One can take a look at the hike in price of yellow metal and silver that has gained huge profits for the investors. This influenced many individuals to head towards the strategy that can multiply their cash in order to overcome the global financial crisis attack. Many people who are hit with this hassle found it difficult to face any circumstances related to finance and only way available is to multiply income sources where investment plays a vital role. If you are one of them then, here are some smart ways to invest in high dividend stocks that can be executed for safe results.

Research on various options: There are multiple options available on the stock market for people who want to focus on higher entrusting amount. Firstly, you need to understand all the terms that are associated like price of individual stocks, payment dates and related data from various companies. Pick the best one that suits your plan. However, it is common to face few difficulties in this strategy where you can consult a financial expert for better planning.

Shift focus on plans for funding: Choosing stocks that are capable of providing sustainable and high returns is a wise decision; however, the real difficulty arises when funding the amount. People wander in search of sources that can help to get them the required amount that includes providing regular and relatively high source of income to the investors along with taxes. The solutions may include securing payday loans, selling liquid assets, doing part time job that offers the extra income that you have fallen short of.

Period of investment: The question that arises is, Are you planning for short term or long term investment plan? Depending upon the answer the plan will change. So, it is necessary to be alert in predicting the future consequences through which providing the answer would be really easy. Make sure that the time period is focussed while transactions are made.

Dividend capture theory: The main idea behind this strategy is to avoid the fluctuations that are common in long term investments. In between the consecutive dividend payment dates, the amount is secure where it is utilised to accumulate additional amount to the principle cash. In brief, this theory should allow the shareholder to gain at least 10 per cent of the total cash. However, the major costs are secured for taxes and stockbroker commissions on the earned returns.

Additional to these ways, you also need to focus on risks and pave the right path that will easily turn the pain into gain.

Author Bio: I am Alicia Avory from Manchester UK. I'm into Finance who had experience in writing quality guest posts. Catch me @financeport

What is a Dividend? – A Summary of Definitions about Dividend

What is a Dividend? – Definition of Dividend By Dividend Yield - Stock, Capital, Investment. What is a dividend? A dividend is a payment by the company to its shareholders. Normally, a stock pays 4 times a year a quarter dividend in order to let investors participate at the company’s success. The amount of dividends in relation to the earnings of a company is called payout ratio. This figure measures the part of the earned money which is paid to the shareholders. A value of 50 percent (half of its earnings) is a good figure. Sometimes it could be possible that companies can pay 90 percent of its net income due to its business model. Such businesses are those which don’t need much money for growing.

What is a Dividend By Wealthpilgrim - A dividend is a cash payment to people who own shares in companies. The cash is usually paid out of the profits the company makes and they are usually paid quarterly.

In most cases, preferred shares pay the highest dividends. Master Limited Partnerships often pay quite a bit.  But not every company pays dividends. But that doesn’t necessarily mean that owning shares in companies that do pay dividends is a better investment. Basically, every profitable company has a decision to make. They can either take those profits and re-invest in the company or they can pay the profits out to the people who own shares.  People who want to retire now often like getting those dividends but it might be short-sighted.

What are dividends by Wikipedia - Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.[1] When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

A definition of diviends by Ask.com - Some stocks, especially blue chips, pay dividends. This means that for every share you own, you are paid a portion of the company's earnings. For example, for every share of AT&T you own, you will get sent $0.15 every year. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of $0.15 for each share you own.

Dividend definition by wiseGEEK - A dividend is money paid directly to an investor in a company's stock. Some publicly owned companies offer a dividend with their stock, while others do not. The choice of buying and owning a stock that pays a dividend is up to the individual investor, as there are both positive and negative aspects to consider. A company that offers a dividend with its stock is often a larger, more stable business in a field with little growth or a slow, steady growth potential.

Finally a video from Investopedia: