The high dividend stock strategy is like many other strategies in that it appears to be straightforward but contains some hidden risks. If one is to adopt this strategy, then it must be selected with an understanding and a plan. Otherwise, it just becomes just another shiny object one reaches for but never seems to catch. This article offers an understanding of the inherent problems with the strategy and seeks to find ways to overcome them.
If you are from Canada then you are familiar with this large company. If you are not from Canada then you will become familiar with seeing it in the list of Dividend Champions. Simply looking at this company’s numbers can be deceiving as to whether or not it should be included in your portfolio, so we will investigate the aspect of those numbers that normally remove Enbridge’s ability to pass many screens for safe dividend companies.
Risk and reward are intertwined. Risk is acceptable if paired with an appropriate reward, and understanding how alpha and beta fit into the calculation is essential for the proper determination of risk.