Invest your money

Morgan Stanley, tumbled 9 percent after posting a wider-than-estimated loss. Morgan Stanley fell $2.21 to $22.44. The bank reported a loss of 57 cents a share, wider than the 8-cent deficit estimated by analysts as real-estate and debt-related writedowns overwhelmed trading gains. The company also cut its dividend to 5 cents a share from 27 cents.

Preferred stock has higher priority than common stock. Preferred stock provides a specific dividend that is paid before any dividends are paid to common stock holders. Prefer stock pays a fix dividend, but the company does not have to pay this if it doesn’t have the money to do so. Preferred stock also has higher priority in the event of liquidation. Preferred stock holders are paid first than common stock holder in the event of bankrupt. However, preferred stock does not have any voting rights like common stock holder.
Preferred stock are usually cumulative, the dividend will accrue even if they are not actually paid. Once the company has the ability to pay dividend again, shareholders must be paid for their accrued dividends.

Statement cash flow indicates how the cash position of the firm has changed during the period covered by the income statement. Understanding the statement cash flow can help you in stock investing. The statement of cash flows breaks down the sources and uses of cash into three components: operating, investing, and financing activities. From this, you can know how the company uses and gets its money, like:

• Are they using their money for expanding the business (investing activities) or not.
• How much money do they get from their operation (net income).
• How much money do they pay for their debt.
• How much money do they pay dividend.

By answering to those questions, we should know how the company is doing. Are they going to the right direction or not. If you think they are heading to the right direction, you might consider buying their stock.

Dividend Reinvestment Plans (DRIPs) is a program run by public companies, which allow to reinvest dividend and/or make cash purchases directly from the company. A DRIP does not require a lot sum of money, so almost anyone can invest in it. Typically a shareholder only needs one share to participate in a company’s DRIP plan, mostly the company will not charge fee or commission for the dividend reinvestment.

Company will benefit from DRIP because it provide stable base of shareholder who are likely long-term investment strategy (buy and hold). This makes the companies stock price stable, low fluctuation. The nature of DRIP makes it difficult to liquidate shares, making it more as an instrument for long-term investing. By doing DRIP, the company keeps the capital inside thus raising additional capital.

For investor, DRIP enables them to participate into it with as little money as $10. Buying stocks from the company and bypassing the broker, will lower the cost of investing because there is no fees or commission for the broker. DRIP also helps investor by with cost averaging, because they will invest in a fix dollar amount on regular basis. Sometimes they will buy at high price, and sometimes at low price, thus averaging the price and saving investor from buying stock at high price.

Because company in this case gives dividend, it is also a form of income and therefore stills a subject for tax.

DRIP is suitable for long-term investing. You can start with a solid company with good management, and financial performance.

Income investing pick companies which provide steady stream of income. Stock can provide steady income by paying a solid dividend. Established company which has reached certain size and growth is limited, will use its earning as dividend.
How?
Income investing is done by picking stock with high and steady dividend or established company.
How’s the performance?
Income investing will give steady income and the price wouldn’t raise much. A thing to remember, that in most countries dividend is taxed at the higher than capital gain.
For who?
Income investing is for people who want steady income like coupon in bond.