Key Takeaways
- Dividend investing can be complicated and intimidating for new and beginner investors.
- Investing in individual stocks carries a risk of dividend cuts, which can impact the share price and take years to recover.
- Investors should be disciplined and invest in a well-diversified portfolio to avoid going all-in on a single stock.
Explanation of Barista Fire
Barista Fire is a term used to describe a financial situation where an individual is no longer working a traditional nine-to-five job but is still working part-time to supplement their income. This term was coined by Jake, a YouTuber who created a channel to help new and beginner investors learn about dividend investing. Jake and his wife reached Barista Fire at the age of 37 by living off the income from their dividend portfolio while working part-time on the side to supplement the gap in income.
Investing in individual stocks carries risks, and one of the risks is the possibility of a company cutting its dividend. Many dividend investors don’t understand that when a dividend gets cut, it usually takes a couple of years for it to recover. For example, companies like Wells Fargo, Kraft Heinz, and Lumen Technologies have cut their dividends in the last few years, and their share prices have not yet recovered. On the other hand, Intel cut its dividend in February 2021, and its share price has gone up since then.
When a company cuts its dividend, it usually means that the share price will go down, and the dividend will not recover overnight. Therefore, it’s important for dividend investors to be disciplined and invest in a well-diversified portfolio, rather than going all-in on a single stock.
Common Factor Among Different Companies
In recent years, several big companies such as Medical Property Trust (MPW), Intel, Lumen Technologies, Kraft Heinz Company, and Wells Fargo have all cut their dividends. This trend shows that dividend cuts can happen to any company, regardless of size or industry.
When a company cuts its dividend, it usually takes a while for the share price to recover. For example, Kraft Heinz Company cut its dividend in 2019, and its stock price has remained flat ever since. Lumen Technologies cut its dividend by more than half and suspended it entirely, causing its stock price to fall by 86%. In contrast, Intel cut its dividend by 65% in February 2023, but its share price has risen by 53% since then.
Dividend investors should understand that a dividend cut does not necessarily mean the end of the world for a company. However, it is crucial to remember that investing in individual stocks comes with risks, and it is essential to maintain a well-diversified portfolio.
Impact of Dividend Cuts
Several big companies, including Medical Property Trust (MPW), Intel, Lumen Technologies, Craft Hines Company, and Wells Fargo, have cut their dividends in recent years. While some companies have recovered after the cut, others have not. For instance, Craft Hines Company and Lumen Technologies have not recovered since their dividend cuts in 2019.
When a company cuts its dividend, it usually leads to a drop in the share price, and the dividend may not recover overnight. For instance, Wells Fargo has cut its dividend multiple times since the financial crisis, and its share price has been flat for the last four years.
However, there are exceptions to this trend. For example, Intel cut its dividend by 65% in February 2023, but its share price has gone up by 53% since then. The recovery of such companies remains to be seen.
The main point to note is that when a company cuts its dividend, it does not always mean that there is no hope for recovery. However, it is essential to invest in a well-diversified portfolio and avoid going all-in on a single stock to minimize the risks associated with investing in individual stocks.
Risk of Investing in Individual Stocks
Investing in individual stocks can be risky, as recent examples have shown. Companies like Medical Property Trust, Intel, Lumen Technologies, Craft Hines, and Wells Fargo have all cut their dividends in the last few years, causing their share prices to drop. While some companies, like Intel, have seen their share prices recover after a dividend cut, others, like Lumen Technologies, have not.
When a company cuts its dividend, it often takes a while for the share price to recover. For example, Craft Hines cut its dividend in 2019, and its share price has remained flat ever since. Lumen Technologies cut its dividend by more than half in 2019, and its share price has dropped by 86%. Wells Fargo has cut its dividend multiple times since the financial crisis, and its share price has not recovered.
Investing in a well-diversified portfolio can help mitigate the risk of investing in individual stocks. It is important not to go all-in on a single stock, as even popular stocks like Medical Property Trust can experience unexpected drops in their share price. When investing in individual stocks, it is important to be disciplined and to avoid getting caught up in the hype.
Effects of Dividend Cuts on Different Companies
Several big companies, including Medical Property Trust (MPW), Intel, Lumen Technologies, Craft Hines, and Wells Fargo, have cut their dividends in recent years. This can have a significant impact on the share price of these companies. For example, when MPW cut its dividend, its share price went down by 8%. Similarly, Craft Hines’ share price has been flat for almost four years since it cut its dividend. Lumen Technologies’ share price has gone down by 86% since it cut its dividend in March 2019.
However, it is important to note that a dividend cut does not always mean doom and gloom for a company. For instance, Intel’s share price has gone up by 53% since it cut its dividend by 65% in February 2023.
When a company cuts its dividend, it usually takes a couple of years for the share price to recover. This is why it is crucial for investors to be disciplined and not invest all their money in a single stock. A well-diversified portfolio can help mitigate the risks associated with investing in individual stocks.
Overall, dividend cuts can have a significant impact on a company’s share price, but it is not always a death sentence. Investors must be aware of the risks associated with investing in individual stocks and should maintain a well-diversified portfolio to minimize those risks.
Reality of Dividend Cuts
Several large companies, including Medical Property Trust (MPW), Intel, Lumen Technologies, Craft Hines Company, and Wells Fargo, have all recently cut their dividends. This can be a major blow to dividend investors, as it often results in a decrease in share price and a slow recovery period.
For example, Craft Hines Company cut their dividend in 2019 and their stock price has remained flat since then. Lumen Technologies cut their dividend in 2019 and their stock price has plummeted by 86%. Wells Fargo has cut their dividend multiple times since the financial crisis and has not yet recovered.
However, there are exceptions to this trend. Intel cut their dividend by 65% in February 2023, but their stock price has since increased by 53%.
The main point that dividend investors often overlook is that when a company cuts its dividend, it does not always mean that the company is doomed. While the share price may decrease and the recovery period may be slow, there is still a chance for the company to recover. It is important for investors to remain disciplined and avoid going all-in on a single stock. A well-diversified portfolio can help mitigate the risks associated with individual stock investments.
Implications of Dividend Cuts for Investors
When a company cuts its dividend, it usually indicates that there are financial problems or uncertainties within the company. As a result, the share price of the company is likely to go down, and the dividend is unlikely to recover overnight. Most of the time, it takes a couple of years for the dividend to recover.
For instance, Craft Hines cut its dividend in 2019, and the dividend has not recovered since then. Lumen Technologies cut its dividend by more than half and then suspended it entirely, which is the worst-case scenario for dividend investors. On the other hand, Intel cut its dividend in February of 2023, and since then, the share price has gone up by 53%. However, it is too early to say how Intel will recover from the dividend cut.
Investing in individual stocks comes with risks, and it is crucial to be disciplined when investing in a diversified portfolio. Dividend investors should avoid going all-in on a single stock and should not be swayed by the noise in the market. It is essential to understand that when a company cuts its dividend, it does not always mean that there is doom and gloom. However, in most cases, the share price is likely to go down, and the dividend is unlikely to recover overnight.
Personal Experience with MPW
Jake, the speaker, has been investing in dividend stocks for a few years and has made mistakes along the way. He created his YouTube channel to help new and beginner investors learn about dividend investing in a simple and non-intimidating way. Jake and his wife reached Barista fire at the age of 37, meaning they are no longer working their nine-to-five jobs but living off of their dividend portfolio while working part-time on the side to supplement the income gap.
Jake mentions that several big companies, including MPW, have cut their dividends in the last couple of years. MPW had been paying a consistent and growing dividend since the financial crisis of 2008-2009, and Jake would have never guessed that they would cut their dividend. However, investing in individual stocks comes with risks, and it’s essential to be disciplined and invest in a well-diversified portfolio.
Jake shows examples of companies that have cut their dividends and have not yet recovered, such as Craft Hines and Lumen Technologies. However, he also mentions that there are exceptions, such as Intel, which has gone up 53% since cutting its dividend in February 2023.
The main point that Jake wants to make is that when a company cuts its dividend, it usually takes a couple of years to recover, and dividend investors need to understand this. Before MPW cut its dividend, it had been paying a consistent dividend for years, and investors may have expected it to continue. However, when a company cuts its dividend, it usually means that the share price will go down, and the dividend will not recover overnight. Therefore, it’s crucial to invest in a well-diversified portfolio and not put all your money into a single stock.
Conclusion
In summary, dividend investors should understand that when a company cuts its dividend, it usually means that the share price will go down and the dividend may not recover for a couple of years. This is a risk that comes with investing in individual stocks, and it is important to be disciplined and not go all in on a single stock. As shown by the examples of companies such as Wells Fargo, Craft Hines, Lumen Technologies, and Medical Property Trust, dividend cuts can have a significant impact on a company’s stock price and dividend payouts. However, there are exceptions such as Intel, which has seen a 53% increase in share price since cutting its dividend earlier this year. Overall, investors should be aware of the risks and potential consequences of dividend cuts and maintain a well-diversified portfolio to mitigate these risks.
