Much ado about dividends

Now we have our Betas down pat.

Lets summarize:

1. High beta stocks' movement are exaggerated by the market index, in the same direction.
2. Low beta stocks' movement are not as affected by the market index, gains are not as strong, as well as losses.
3. A beta of 1 means the stock moves pretty much in tune with the market.  example:  if BAT has a beta of 1, if the market is up one percent, BAT will likely be up one percent as well.

We'll move on to the subject of dividends.  Betas are nice and all, but is too little information on its own to make an investment decision.  High dividends are what makes high beta stocks' movements bearable.

Earnings are key of course, but earnings don't do much when the market is falling and you have nothing to show for it with little cash return or record of whether the board of the company will return money to the investor.  After all, we all invest to get money back from the investment.  Nothing is more pure of a return than in the form of dividends.

If a stock pays high dividends, holding the stock is definitely bearable and keeps the investor in high spirits by not having to realize the loss.

So, if you are an investor who would rather buy and hold than realize a loss, dividend stocks are best suited for this task.  Digest this information, I'll talk more about a tactically strong investment plan with dividends and betas next post.