So you just buy the next best stock with the highest dividend? Unfortunately, it is not quite that simple. Unlike interest payments on bonds, dividend payments on shares are not fixed - companies can reduce or cancel them. The supposedly favourable valuation due to the high dividend then turns out to be a trap. Professionals refer to this as a "dividend trap" or "dividend value trap".
Advanced dividend strategies therefore take additional factors into account. These include long-term continuity and the growth of distributions. These are joined by other key figures from fundamental analysis, such as the price-earnings ratio (P/E ratio) or the company's debt ratio. The goal: to find shares that not only currently pay a high dividend, but are also likely to do so in the future. Ultimately, the success of this investment approach in exness client area stands and falls with the stock selection. But especially with a globally oriented strategy, this involves an effort that should not be underestimated.
The solution: Investment funds with a global dividend strategy
Would you like to make things easier for yourself? Then an investment fund that pursues a global dividend strategy is a possibility. Such funds also offer the advantage that they allow broad diversification even with smaller investment amounts.
One of these funds, for example, is our current top fund of the month for November, which is available until 30 November 2021 without an issue fee: the J.P. Morgan Investment Funds - Global Dividend Fund A (dist) - USD (WKN A0M6Z2).
The fund invests globally in companies with high and rising dividend yields. A broad diversification across 40 to 70 stocks reduces the risk. In the past, the management has proven its quality by clearly outperforming the benchmark index: With a Morningstar rating of five stars, the investment fund is among the top ten percent in its sector. Further details as well as an overview of the performance to date can be found here.
Conclusion
Dividend strategies can deliver higher long-term returns with lower risk.
A global approach allows to select the best stocks worldwide.
To avoid falling into "dividend traps", it is advisable not to focus solely on the amount of the payouts.
A convenient alternative to selecting stocks on your own is to invest in an appropriate fund.
