London Office (Head Office)

70 Pall Mall, St James's

London SW1Y 5ES

United Kingdom

Melbourne Office

Level 27, 35 Collins Street

Melbourne, Victoria

Australia 3000

Sydney Office

Level 36, 1 Macquarie Place

Sydney, New South Wales

Australia 2000

AU: + 61 (3) 9001 0243

UK: + 44 (0) 207 965 4701

enquiries@mayfair101.com

Send us a message
Subscribe to our newsletter
Keep up with the latest updates
  • LinkedIn - White Circle
  • YouTube - White Circle

Disclaimer

Online Investments Pty Ltd t/a Mayfair 101 (ABN 981 34 785 890) provides investment and corporate advisory services including funds management, asset management, capital raising, corporate advisory, M&A (merger & acquisition) advisory, and direct investment either directly or via its wholly owned subsidiaries.

 

Mayfair 101 is a Corporate Authorised Representative (CAR # 001274568) of Quattro Capital Group Pty Ltd (AFSL # 334653). Mayfair 101's authority under its Corporate Authorised Representative Agreement with Quattro Capital Group Pty Ltd is limited to the provision of financial services to Wholesale clients only pursuant to the Corporations Act (Cth), including advice relating to deposit products, foreign exchange contracts, derivatives, interests in management investment schemes, and securities.  Mayfair 101 and its wholly owned subsidiaries are not deposit-taking institutions in Australia or the United Kingdom and are not authorised to conduct retail banking activities as specified in the Banking Act 1959 (Cth). 

Mayfair 101 Limited is an Appointed Representative of Sapia Partners LLP, a firm regulated and authorised by the Financial Conduct Authority in the United Kingdom.  Mayfair 101 Limited’s activities in the United Kingdom and the activities of Mayfair 101 in Australia, should be considered as separate activities.

© 2019 Mayfair 101. All rights reserved.

Dividend Investing: Great Cash Flow but What about the Volatility?

If you love the idea of generating a passive income with a few wise decisions, dividend investing sounds very enticing. However, it’s no insider secret that volatile markets can make dividend investing far less attractive than when the stock market is steady. In the absence of economist-level financial acumen, it’s also difficult to determine when that volatility will hit.

If you’re not interested in avoiding dividend stocks on the basis you may lose money, it’s likely that you want to maximise your chances of reaping financial rewards instead. For the sake of reassurance, it’s worth learning more about what happens when the markets become volatile and how you can mitigate the risks.

Dividend stocks are the safe high ground

There’s no point in claiming that dividend stocks are completely immune from volatile markets. However, when the financial world does start to look shaky, they act as the high ground where investments are safest. This is because they don’t rely on capital gains as much as other stocks. In contrast, growth stocks rely on capital gains entirely, so while they have excellent potential they also carry worrying risks. Because of this, if investing in stocks is a firm part of your financial future, prioritising dividends could act as your safe bet.

The reliability of dividend-paying companies is difficult to question

It’s worth acknowledging that dividend investing does mean relying on capital gains to a small degree. However, as these types of stocks are usually issued by companies with a strong history of paying dividends and excellent financial backing, there’s less of a descent when volatility hits. Ideally, if you are going to invest in dividend stocks you’ll prioritise the businesses with the strongest records and the most reliable plans.

Dividends can act as a shield against highly volatile markets

There has been plenty of periods where stock market volatility has made the investing waters more than tumultuous. One of the best examples from recent memory is the recession of 2008. Although the markets have improved significantly since then, there are fluctuating periods of volatility featuring 500-point up and 500-point down moves that often feel unnerving. To traders, these moves aren’t as terrifying. But as an investor, you might want to remain in the market while shielding yourself from losses. When this is the case, investing in dividends means you’re likely investing in companies that can remain profitable or recover quickly during these volatile periods.

If you’re confident that dividend investments are right for you, it’s worth taking further steps to protect yourself against volatility. Don’t make the mistake of assuming that dividend yield is enough. Turn to those companies that have a strong history of stable and rising dividend periods when the market is volatile. If it looks as though the company’s dividend payments are erratic, back away slowly. You should also try to anticipate future financial challenges, such as mergers and acquisitions. When they’re on the horizon, strong dividend payments are less likely for you as an investor.

Overall, see dividend stocks as a wiser choice when the markets are volatile. But always remain wary of the fact that they’re not entirely risk-free.

Mayfair 101 established IPO Wealth to specifically cater for High Net Worth investors seeking income-producing investments.  For more information visit www.ipowealth.com.au

Disclaimer

This website contains general information only and is not intended to provide any person with financial advice. It does not take into account any person's (or class of persons) investment objectives, financial situation or particular needs, and should not be used as the basis for making investments.

In the Media