Dividends are Not the Perfect Solution for Yield

This article is not going to be another of those “dividends are wonderful” pieces. In fact, I’d like to share a dividend investing horror stories with you so that you understand the down side to this popular trend. Keep in mind, I have invested through the late 1990’s and into the dot com bubble of the early 2000’s when dividends were slammed and capital gains were king. Any one talking about “yield” was considered a fool when stocks were growing 15-30% annually!

Nokia was over taken by the higher margin smart phones. Those phones grew rapidly in popularity and Nokia was slow to adopt. Now, the company is playing catch up and partnering with Microsoft to gain a presence in the smart phone landscape. Meanwhile, they continue to lose market share. It is uncertain whether Nokia will ever regain its market dominance. As this story illustrates, there’s more to investing than finding a great yield. You must research the growth drivers of the company, the competitive landscape, and be vigilant in monitoring your shares. A great dividend is no reward if the share prices tank. This was definitely a net loss situation.

Source: Free Money Finance

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