Imagine a scenario where you won a lottery or you inherited a quite load of money or you sold a property. You already know pretty much about investing in dividend stocks and your actual question is: "

What if I invest all money at once. Is it better than investing periodically?

Firstly, let`s take a look at well-known terms, that you should know in this kind of situation.

The lump sum investment is a commonly used term that indicates a payment of a large amount at once. You can find this type of payment mostly in cases like buying a property where you need a mortgage (and a bank requires a portion of the money upfront) or when you win a lottery as I mentioned before.

What is the correct form of these words? Based on the 

, it should be a "lump sum". But you can find many versions, especially with the dash between these words.

The exact opposite of a lump sum is a periodic payment. In terms of investing it`s called dollar-cost averaging. What does it mean?

Imagine a situation - you have 2000$ and you buy an 

 with a lump-sum approach at the end of October 2021.



(Note: Keep in mind that this is an example on a very short timeframe which is used only for a demonstration.)

(source: One of our friends is developing a great tool 

 with a Share of Search metric and other marketing-related info)

You bought 9 shares of NVDA stock for 210$ -> so now you have 1890$ in your portfolio. NVDA stock skyrockets from 210$ to 330$. Everything looks great. Your portfolio is sparkling with 2970$ at the begging of December. 

Then the dark time kicks in and you end up with 1530$ (170$ per share). You lost 360$.

Dollar-cost averaging looks like this:

You buy shares only for 400$ each month (5 months of investment).



October share loss: 40$
November share loss: 160$
December share loss: 150$
January share loss: 110$
February share loss: 70$

Summarized loss with dollar-cost averaging is: 530$

It depends. In our scenario, we invested in a bull race. The cost of each share was mainly at its peak which resulted in a catastrophic situation.

Take your 2000$ and go to the market. You buy 6 shares for 310$ per share, which is 1860$ (140$ left). Now the market goes down and you end up with 1020$ ... 

It really depends on when you buy shares.

 You can hit the perfect period and get rich and you can also do your worst decision ever and end up broke.

I think that all of us have this hidden urge to invest more in the bear period. Yes, you can`t predict future performance on historical data, but you can definitely tell that some stocks are going to hell because of their bad historical performance (basically investors lost their interest and credibility in this type of company). Also what you can do - you can analyze stocks more deeply and see their approach and how they perform, what is their strategy.

Based on your best common sense you can diversify as much as you can and pray for the best and sometimes try to risk more and add more money, maybe 

 could help you get a better return in the long run.

What are the main dollar-cost averaging benefits?

The main benefit is that you lower overall risk in the long run. 

 As you can already tell, with dollar-cost averaging you can sometimes make less money than with lump sum. But it`s always good to be aware of the risk you want to accept.

https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf

Out of the 1,021 rolling 12-month investment periods we analyzed for the U.S. markets, LSI investors would have seen their portfolios decline in value during 229 periods (22.4%), while DCA investors would have seen such declines during only 180 periods (17.6%). Furthermore, the average loss during those 229 LSI periods was $84,001, versus only $56,947 in the 180 DCA periods. The allocation to cash during the DCA investment period decreases the risk level of the portfolio, helping to insulate it from a declining market.

Clearly, if markets are trending upward, it’s logical to implement a strategic asset allocation as soon as possible because it should offer a higher long-run expected return than cash. Historically, a long-term upward trend has persisted for both equities and bonds, probably attributable to positive risk premia in the markets. In other words, positive returns have compensated investors for taking risks, hence the upward trend in those markets and the resulting probabilities of success for LSI. So, to the extent that an investor believes the positive risk premia are likely to exist in the future, LSI would remain the preferred method for investing an immediately available large sum of money. But if the investor is primarily concerned with reducing short-term downside risk and the potential for regret, then DCA may be a better alternative. 

To be comfortable with either strategy, an investor must be fully aware of the fact that historical averages are only a guide—it is still possible for LSI or DCA to underperform or even lose money in any given period. If an investor is uncomfortable with the risks associated with a given market entry strategy, it may imply a low willingness to take risk in general, and if so, we recommend revisiting the target asset allocation to ensure that it appropriately addresses risk tolerance levels and investing goals.

What is the right dollar-cost averaging frequency?

Daily, weekly, monthly? Which way should you go?

Firstly, you have to consider broker fees. With no fees (and in an ideal world), you should go for weekly investments. Based on more "data input", you have a better chance to lower risk even more, because everything is averaging.

But the market behaves differently, you pay broker fees, and you also may have a different currency in your country (like us in Czechia) ... Based on all these thoughts, many of us end up on monthly basis.

As described before, pick an amount of money that you are able to invest periodically and be consistent with this type of strategy.

What if I choose dollar-cost averaging but inflation takes the cream?

This is a whole different story. Let`s say you are in between two millstones. On one side you take risk of losing money because of the bear market and on the other side, you take risk of almost 15% inflation burning your money before your eyes (a small example from Czechia).

https://www.cnb.cz/en/monetary-policy/forecast/

Still, if we take the same example with NVDA stock - in all cases the performance is bad, but in the case of a total sum of money that you lose, DCA (dollar-cost averaging) performs better. The power in beating inflation is in the right choice of stock that performs at least 15% in a year.

Lump-sum vs dollar-cost averaging

Specialization and focus are words that we hear more and more in recent years. Large conglomerates lack the necessary focus and decision-making speed as the world is changing so fast. Already this year there have been several interesting split announcements. Dividend investors were perhaps most interested (and maybe shocked) by AT&T split.

However, last week was unique as there were three big announcements – GE, Toshiba, and Johnson & Johnson. All of them are going to split up. With the respect to GE and Toshiba. Johnson & Johnson is the most popular of these three for a dividend investor. Let's have closer look at J&J split in this blog post and what I'm going to do with my shares.

 is a dividend king with an incredible 59-year dividend growth streak

. It is the largest healthcare company in the world, with a more than 70% higher market capitalization than its closest competitor – Eli Lily. J&J revenue is ever three times higher than Eli Lily.

Apart from its size, J&J is also unique in that it has 3 different segments:

 – focus on research and development of prescription drugs in areas such as immunology, infectious diseases, oncology and more

 - provides surgical, orthopedic, electrophysiological and vision care products such as disposable contact lenses

 - offers childcare products, Listerine mouthwash, sanitary pads and tampons (Stayfree, o.b.) or over-the-counter medicines (e.g. Zyrtec)

Most companies focus on only one of these segments. High diversification and stability were something that made J&J stand out.

Looking at the long-term revenue development, we can see a clear thing – 

J&J's growth is driven by the Pharmaceuticals segment.

 The Medical Devices segment was significantly affected by pandemics and postponement of procedures. However, it is back in 2021 and growing +23% year-to-date.

Consumer Health has been stable for a long time. However, this segment caused many problems recently, especially due to the discovery of asbestos in talc powder. The company is facing thousands of lawsuits which expenditures have already reached billions of dollars. J&J is even preparing an interesting solution on how to separate those court costs from the company.

The company intends to separate these costs into a separate company, which should subsequently declare bankruptcy. If this goes well, it'll set an interesting precedent for how to deal with debt. 😊

This information is several weeks old, but the new split of the company which was announced on Friday is far more important than accounting tricks.

The company announced that will spin-off the Consumer Health segment into a separate entity. Johnson & Johnson will continue to have 2 segments (Pharmaceutical and Medical Devices) and still be the largest healthcare powerhouse.

$77 Billion (84%) remains as the original J&J

$15 Billion (16%) will be transferred into new company

The name of the new company has not been announced yet. In any case, it will be a leader in many segments of consumer medicines. Separation is due to take place within the next 18-24 months.

The key message is that dividend should remain the same

 as these two companies will split the current payout as was confirmed in press release. 

The official reason for the breakup is a better focus of management and investment allocation. The new consumer division requires a different approach and focus, given new trends like eCommerce.

“Our board and executive team have regularly evaluated Johnson & Johnson’s portfolio of business over the years, asking whether a broad-based approach best meets the needs of our stakeholders. And while this approach has historically served us well, addressing the complexity of today’s global healthcare and consumer environments now demands unprecedented innovation, focus and agility."

Unofficially, it's obvious the consumer segment is the troublemaker with all the lawsuits and lack of growth.

It's fair to say that this is nothing new in this field. The healthcare segment is full of acquisitions and spin-offs. Currently, for example, GSK also works in the consumer segment separation.

This split is a bit reminiscent of Abbott's split in 2013, when it split the medical device segments (

). This may be the next step for J&J, but the company has denied any further split so far. Abbvie, which was considered a "rotten" division in 2013, has brought in a 250% increase in dividends since 2013. If J&J's consumer division had a similar performance, no one would be angry 😊

Honestly, nothing special is going on. Both companies will be industry leaders, dividends should be kept, and there has been no fundamental change in Johnson & Johnson stock prices in the market either. It will be interesting how debt and dividends will split. By the way, remaining J&J divisions could cover the entire dividend by themselves. The above-mentioned example of Abbvie, shows that this type of spin-off can create value. There are also other different scenarios that could take place, like that a new company might be acquired (e.g. by Procter & Gamble).

As usual in these situations, I'm not going to do anything

 and will wait for more information. The consumer segment has very strong brands and is stable, so if management can resolve litigations and find the a way how to grow (revenue, earnings and mainly dividends), it might be good investment case.

I;ll give the new consumer company a try and see more after few quarters.

To see if Johnson & Johnson will fit your portfolio, let's try our

.
You can Find great opportunities, calculate your perfect portfolio and keep track of your dividend stocks investments.

I am long at JNJ. This article is only for educational purpose. Don't buy or sell stock based solely on above mentioned information. Investment in securities carries risks.

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The pharmaceutical giants Pfizer and Moderna, which were the first to develop vaccines against covid-19, will collect over $ 32 billion next year. That's according to estimates by investment banks Morgan Stanley and Goldman Sachs.

According to Wall Street analysts, both winners of the vaccine race will have record sales next year. Investment bank Morgan Stanley estimates that Pfizer will collect $ 19 billion next year, which it will share with German BioNTech.

Pfizer should collect about $ 9.3 billion in 2022 and 2023, Morgan Stanley analysts estimate. However, these changes don’t have much effect on the share prices of the pharmaceutical giant Pfizer with more than a 170-year tradition which only confirms the stability of this company.

 pays quarterly dividends consecutively from the year 1980 making an impressive 40 dividend years track record. Pfizer also has a relatively stable debt level and a very positive CASH payout ratio just under 45% which can result in dividend yield growth or better dividend coverage by company expected income. 

As a dividend investor, you should always look ahead of just current trends. The bottom line should be that Pfizer is a stable company with an interesting dividend yield and the Covid-19 vaccine is just a nice boost for a few years ahead for anyone considering to buy PFE shares.

 to simulate your potential investment in Pfizer. 

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