Dividend traps, bear markets and recessions.

If you search for the term “dividend trap” you will get many hits. In some articles you will note that it is warned about companies paying above 5 % in dividends. A red flag is raised if a company pays above 5 % dividend. In a static world, with the current price and dividend / share, that may be a good rule of thumb.

Oslo Stock Exchange is by some named “Europe’s Green Stock Exchange”

https://www.multifinanceit.com/forum/viewforum.php?f=8&sid=fd40a4fc24de4fc3ca2f302ca0b05089

even if the exchange is also an fossile fule related exchange. In addition Oslo Stock Exchange is an exchange with a lot of shipping companies. Do you know that a lot of these companies pays out a good dividend. Some of these companies have been a better investment during the Covid-19 lockdown and the following inflation / interest increasing cycle than fossile fuel (energy) related stocks.

If you are hunting for dividend paying stocke you shoul of course know what a dividend trap is. Read and read again about dividend traps. A company can not pay out more than it earns in dividends. Be careful with comapnies that pays a too high dividend to attract new investors, that has a negative and / or decreasing free cash flow, a too high payout rate, is in a decreasing business and a falling trend.

Solide companies that are beaten down by the market, (there are many in a bear market) or temporary bad news can, be a dividend bargain. If a person buys a stock at USD 200 while the compayn pays USD 10 / share in dividends (s)he gets 5 % dividend on her/his investment. A person that invested when the stock price was USD 100 has 10 % dividend on her/his investment.

Conclusion:
Some of your most profitabel investments can be made if you invest in dividend paying stocks during a bear market or when a solid company that pays divideds are hit by transient bad news.