Dividend q&a. Before we close off the dividend portfolio management portion, let's look into some of the good questions asked by other dividend investors and how I would attempt to answer them. So let's start with this question. This person asked whether it would be better for him to engage in index investing than dividend investing and whether the latter can better reward investors. My answer would be as follows. It depends very much on what you are comparing with the time period used for comparison and the level of risks taken on by each investment style.

Some dividend funds like Morningstar dividend ETF consistently beat the market, whereas some other dividend growth funds do not other than dividend funds most of the individual dividend portfolios I've personally seen have beaten the market quite consistent. But this is to be expected. Since an individual dividend portfolio is less diversified than the index is portfolio, so higher risk higher expected return applies. Moreover, some investors prefer to receive dividends to fund their lifestyle or their needs and forming a dividend portfolio allows them to control what they do with the dividends. Whereas for index investing, the reinvestment rate depends heavily on future performance of the index and their buy in price. In light of these observations, it's then not fair to say or assert that index fund performs better and that all investors should be better off investing in an index because of lower cost or better overall performance.

Question two, this student asks what to do with his dividend holdings? If you expect an imminent market correction? My answer would be dividend investors should not concern themselves too much with the share price of a stock after they have bought it. That is not always easy to do though, it is very hard sometimes not to take a quick peek in the papers or on your phone stock tracking app to get some affirmation that you have picked the right stocks. Doing so will make you panic and sell at the wrong price. The point is that the daily fluctuations of share prices are more often about market sentiment and fundamentals.

Your concerns should be on the business, the industry and how the downturn affects each of them and in what way? In fact it would it be wise to invest more during a downturn on a good dividend stock or reads, although doing so would take a large dose of courage on your part. Of course, very naturally, the next question would be when would be a good time to sell, which is question three. Here is a list of qualified reasons to justify selling your dividend holdings. When to sell, the sustainability aspect of the dividend company is deteriorating. how to tell if the sustainability is deteriorating, the numbers will tell you.

For example, dividends quarter to quarter have been reduced drastically. free cash flow starts drying up growing interest costs due to huge borrowings. Other reasons for selling include rebalancing purposes, or when you realize you don't really understand the business or the industry, or when there is Skepticism on corporate governance such as an indication of fraud, or simply there are other better dividend opportunities that arises. On to question four, this question came from Reddit. She asks, Why is it so difficult to find companies that are able to grow and pay their shareholder dividends consistently. She goes on to lament about the dividend Company she pids have not increased their dividend payout for many years despite good returns.

The answer is this. Remember that the payment of dividends by a company represents a serious commitment by management. Let us not forget that a company does not have to pay us anything and if the company should have surplus cash, they could quite easily buy back its shares instead of paying the return out as dividends. But the moment a company embarks on increasing dividends, it becomes a huge future obligation for the management to maintain that level of dividend growth or with signaling to investors something negative. Having companies to increase their payouts can be both a blessing and curse for investors. It can be a blessing because income investors are rewarded with greater passive income so to speak, but it could also mean that doing so would put unnecessary strain on the company's balance sheets by continuing to pay dividends even Then they should not coming to question five.

This question came from Adele, California, USA. She asks, What are the other things to take note of when screening for dividend growth and dividend sustainability companies, I shall list the other important matters not mentioned in the lecture previously. So when screening for Digi and d s companies, one reported revenue that contain a high proportion of non recurring items such as one off litigation settlement, one off asset sales are less likely to be sustainable and you should take this into account or discount it when looking at a company's ability to sustain its revenue to dividend investors who love growth companies should be extra careful of dividend growth companies that consistently report earnings that exactly meet or only narrowly beat forecasts. Let that sink in Form moments, such growth companies may just be managing reported earnings. Three. As for cash flow, be wary of companies that boost operating cash flow by selling receivables to a third party, boosting cash flow by delaying repayments of payables and misclassifying cash flows whereby the management may try to shift inflows of cash from investing or financing activities into the all important operating section of the cash flow.

For take note of the asset impairment charges under statement of impairment charges for items like inventory, plant property equipment or other assets results in overstated profits and overstated asset. Five, be careful of companies that reports substantial amounts of goodwill especially applicable to services, medical research and technological related firms. Whoa company reports large amounts of goodwill, but its market capitalization is less than its book value of shareholders equity. It may suggest that goodwill is impaired but the impairment has yet to be recognized. So don't be fooled by its low price to book ratio. Six.

Lastly, dg NDS companies that hold substantial portion of its assets in investments with no observable market data for reference, meaning to say the value of these investments must be based solely on the management's estimates or management's hire third party, valuer, avoid them. commodity trading companies and some property developers tend to have this problem. So take note. Last but not least, question number six relating to filtering for Digi companies. This person asks, Why don't you use increasing of goodwill and increasing of cash flow from investing activities to spot for these types of dividend growth counts? Companies for DIA's companies.

Why did you not take into account balance sheet? accruals? My answer would be this. Although it is true that both increasing of goodwill and cashflow other investing activities will indicate that a company is expanding to be investments and acquisitions and other non current assets. The act of expanding alone doesn't ensure growth in dividends or net income. What is important is that we want companies that expand responsibly without compromising on its balance sheet by taking on too much debt.

A company might be expanding fast, but if it compromises too much on its margins take on too much debt resulting in a bigger company with a weaker balance sheet and lower payouts. This is not a company we want either in our side or core dividend holding. As for balance sheet accruals these concerns are alleviated by The company's cash position, a strong operating cash flow will suffice, which is taken into account under the dg mandate. I leave you with this course summary