The Shocking Truth Investors Should Know About Interest Rates

The Shocking Truth Investors Should Know About Interest Rates

Posted On January 23, 2020 12:48 pm

The truth about interest rates is far different than most investors think and has potentially enormous ramifications for your portfolio in the coming years and decades.

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Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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  1. charles wayne miller January 23, 2020 at 3:06 pm

    How can you actually have a retirement income in dividends ,when dividends is a return of your own money?

    • Dividend Sensei January 23, 2020 at 3:15 pm

      There are two kinds of dividends. Sustainable ones are a cut of a company’s growing cash flow and don’t reduce intrinsic value over time. Destructive returns of capital is when cash flow doesn’t cover the dividend and so must be paid out of cash, debt or funded with stock.

      Such destructive ROC reduces intrinsic value and stock prices over time. On ex-div date stock price adjusts down the dividend amount. If a company generates $2 per year in FCF and pays out $1 in dividends, then the intrinsic value of the company goes up $1 per year. If a company generates $1 in FCF and pays $2 in dividends then value falls $1 per year.

      Destructive ROC companies are called yield traps and to be avoided like the plague. Safe dividend growth stocks are the best performing asset class in history and the stuff comfortable retirements are made of.

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