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Swing Trading Dividend Stocks
In December I launched an investing experiment.
The thesis I’m testing is simple: Track down high-quality, dividend-paying, profitable companies that are trading at low earnings multiples (P/E ratios) relative to their industry. Then, ride the growth of these companies back to their industry average costs.
The point of this strategy isn’t the dividend. I’m counting on the dividend for risk mitigation and as a lure to attract other investors. In other words, it’s a way to reduce the likelihood that beaten-down companies remain beaten down for long.
The easy title for this strategy is Swing Trading Dividends. But you can just call them STDs. (Sorry.)
Mitigated risk with the opportunity for outperformance
The lower the P/E ratio, the higher the percentage dividend the company pays. It’s not uncommon to find companies that have been beaten down. They’re trading at low multiples. But they haven’t reduced their dividend.
Due to the beat-down, these companies might trade so low that they’re paying a 5.5% — 8% dividend ratio per year. This situation has a few things going for it:
Less downside: The dividend, combined with the low multiple, makes (presumably good, if I’ve done your research) companies less risky.
