Dividends4Life: Could Dividend Stocks Destroy You?

Could Dividend Stocks Destroy You?

Posted by D4L | Monday, September 13, 2010 | | 0 comments »

Dividend stocks are all the rage among investors. Yet while their unique combination of potential future growth and attractive current income justifies investors' interest in them, they're not bulletproof -- and using risky investing strategies to try to take advantage of high dividend yields can come back to bite you.

Right now, dividend-seeking investors find themselves in a situation many have never faced before. Interest rates on bonds and other fixed-income investments are at historic lows. In fact, the disparity is so wide that I've started to see a new strategy thrown around. It's a variation on what's known as a carry trade, where you borrow money at low rates in order to buy investments that are paying a higher rate. In a nutshell, here's how it works: Go to your broker and take out a margin loan. Use the money to invest in high-yield dividend stocks. With some brokers offering margin loan rates below 2%, you can pocket some nice profits just based on the dividend income you receive every quarter.

Source: Motley Fool

Related Articles:

Click here to have future posts delivered to you for free!



Post a Comment

Note: Only a member of this blog may post a comment.


Popular Posts Last 30 Days