What Is a Dividend Thesis?
When selecting investment options, some people simply guess. A dividend or investment thesis requires you to research and carefully consider before buying or selling stock. By writing down your reasons for investing in a company, you'll be sure about your decision. You can also periodically review your dividend thesis to ensure you're on the right track.
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Definition
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A dividend or investment thesis consists of a written document that outlines the thinking process behind a stock purchase or sell. It lists the reasons for buying stock and the investment goals. It also helps investors decide when to take action and why they should buy, sell or hold a stock.
Content
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It isn't necessary to follow a specific outline for your dividend thesis but you should cover the basics. You'll want to consider why you want to invest in the company at this time and if the company will remain strong in the future. An overview of the company, its strengths and weaknesses and its position in the marketplace among its competitors will help you make the right decision. You should also research what macroeconomic factors will affect the company now and in the future, an appropriate value for the stock and how dividends are paid.
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Buying
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By writing an investment thesis, you'll discover if you have good reasons to buy the stock. Investment thesis can also be used to help you make a logical decision instead of an emotional one. You can also track the goals you set for the investment and see if you are on track.
Selling
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If the market turns or your stock is not performing well, a dividend thesis can be used to analyze your decision and decide how to proceed. In a fluctuating market, you may be tempted to sell, but upon reviewing your investment thesis, you see that you had logical reasons for buying and holding the stock. You may also determine that your original plan doesn't make sense anymore and you need to sell. Either way, you have information to help you decide.
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References
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