Do Dividends matter?

Dividends are popular among investors. In their eyes, it is a regular source of income from their investments.

But what exactly are dividends? Dividends are the portions of earnings returned to shareholders by a company or fund. Bond coupons or bank interest are guaranteed, but dividends are not.

Nevertheless, some funds and companies can consistently raise dividend payouts and pay out dividends on a regular basis. A lot of this has to do with the industry they operate in or the assets they own.

“Old economy” companies, such as those in real estate, consumer goods, and pharmaceuticals, are dividend aristocrats. They usually have a well-established brand name, familiar competition, consistent revenues, and stable profit margins. In a mature phase of their lives, they are called “cash cows.” Typically, these companies don’t need to retain earnings on their balance sheet because it would decrease their return on assets.

A new economy organization, such as a technology-driven company with a disruptive business model, tends to retain most or all of its earnings to invest in its new ventures. High-growth companies typically fall into this category.

In contrast to the above scenario, Berkshire Hathaway is a rare exception

Dividends may make sense for some types of investors, but most investors are better off simply reinvesting dividends so that they can benefit from compound growth. Alternatively, investors can sell a small portion of their investments whenever they need cash to generate dividends.

The fact that dividends are not guaranteed means that they cannot be relied upon solely for retirement income. Dividends should be treated as a bonus that can help you fund your next vacation, new gadget, etc. If you want to grow your money and hedge against inflation, you should reinvest it.

Getting clarity on where you stand in your investments and retirement planning is key! Contact me today!

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Pauline Wong Wai Yee

My father purchased a savings plan for himself and for my mother when I was a child. I was impressed by the well-dressed banker from 大华银行 who visited my father. A few years later, my dad lost his business and used the payout from the policy to help the family get through those difficult times. That’s when I learned the importance of saving for rainy days. At the age of 21, I bought myself a savings plan from my 2nd month’s paycheck.

Having started my career in the financial industry in 1996, I believe that individuals should be empowered to take charge of their own financial planning. This will enable them to achieve their desired lifestyle.

More than ever before, clients are looking for trusted advisers. I believe in developing and leveraging knowledge and technology to offer the best service to them. The goal is to take them on a financial transformation journey. Having said that, a  career in the financial advisory industry is more than just a job, With a passion for helping others make sound financial decisions
Over the course of my 26 years in the financial industry, I have advised more than 500 clients about their financial plans according to their life stages. I have personally handled five death claims ( Very heartbroken episode)  and helped more than 50 clients draft Wills.

Over the course of my career, I have faced betrayals, departures, and disappointments. In spite of this, I still believe that life is beautiful because of its tenderness. Therefore, I will try to look at things positively.  I am a firm believer we need to be constantly learning new things, during Covid period in 2019, I took an NLP coaching course, I am also a certified life coach now. I love to go beyond other than finance matters.  

As far as client relationships are concerned, my career philosophy is:
It is imperative to maintain integrity, be transparent, have accurate information, and give wise advice. If you can’t convince yourself, don’t try to convince anyone else.

Please reach out to me for an informal session to discuss how I can help you in your financial fitness !


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