06-24-2016, 07:44 AM
Irrational short term drops like these are the best time for buying.
For example, if you were considering purchasing $2,000 of a great company that was a tad expensive such as:
Orig Price: $100
EPS: $5
Div: $3
P/E of 20
Div yield of 3%
Payout ratio of 60%
But the market drops and gives you an opportunity:
New Price: $80
EPS: $5
Div: $3
P/E of 16
Div yield of 3.75%
Payout ratio of 60%
Temporary market craziness gifted you cheaper dividend producing shares you would be buying anyway. Instead of buying 20 shares for a total of $60 in yearly dividends, you could buy 25 shares for a total of $75 in dividends.
For example, if you were considering purchasing $2,000 of a great company that was a tad expensive such as:
Orig Price: $100
EPS: $5
Div: $3
P/E of 20
Div yield of 3%
Payout ratio of 60%
But the market drops and gives you an opportunity:
New Price: $80
EPS: $5
Div: $3
P/E of 16
Div yield of 3.75%
Payout ratio of 60%
Temporary market craziness gifted you cheaper dividend producing shares you would be buying anyway. Instead of buying 20 shares for a total of $60 in yearly dividends, you could buy 25 shares for a total of $75 in dividends.