''In volatile markets the most guaranteed part of your total return is not capital gains - it is dividend income,'' says the director of research at Bell Potter Securities, Peter Quinton. ''So we are seeing [it] become a lot more important than is normally the case.''The editor of Sound Money, Sound Investments, Greg Canavan, says in this environment ''income investing should become more popular because the market is not rewarding companies that are reinvesting for growth''.
While sustainability of dividends is important, it is not always easy to ascertain. ''You have to do a little homework into each company,'' says the research manager at F.W. Holst, David Spry. ''You have to look at the relevant industry and consider how cyclical is that industry. Because during good times, yes, a company might pay a very good dividend. But during bad times it might drastically cut it.''
Source: smh.com.au
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