Dividends, Tariffs, Panic and Opportunity...

Why Falling Dividend Stocks Can Offer Rising Returns

When the price of a dividend-paying stock drops, most investors panic. But savvy income investors often see a hidden opportunity: the chance to lock in a higher dividend yield—the return you earn in dividends relative to the stock price.

Let’s break it down with a simple example:

Imagine This:

• You’re watching a stock trading at $10 per share.

• It pays a $0.50 annual dividend.

• That’s a 5% dividend yield ($0.50 ÷ $10 = 0.05, or 5%).

Now let’s say the stock price falls to $5, but the company keeps paying that same $0.50 annual dividend.

Now what’s the yield?

• $0.50 ÷ $5 = 10%

What Just Happened?

The stock dropped, but the dividend payout stayed the same—which means if you buy now, you’re locking in double the return on your investment in terms of income.

You’re essentially getting more “dividend for your dollar.”

But Why Would the Stock Drop?

Plenty of reasons: market fear, temporary earnings dip, sector rotation, or overall macroeconomic pressure. The key question becomes: Is the dividend still safe?

If the company has solid cash flow and a sustainable payout ratio, the lower price could be a gift, not a red flag.

Bottom Line

When a quality dividend stock drops in price but keeps paying its dividend, your potential return goes up—not down. That’s yield math, not market hype.

Next time a dividend stock drops, ask not just “what did I lose?” but also “what can I now earn?”

Example: I like PDI, the Pimco Dynamic Income Fund as one example. I had an average price of $24 on my shares purchased over time (this doesn’t include dividends), which are paid monthly.

I like to buy things on sale, so I had LIMIT order at $18.25, $17.16, $16.17, and $15.49. As you can see on the chart, I got fills at all three areas except $15.49.

Now my average price is $21.08, but here’s the fun part… I’m building shares for retirement, and in this example, my dividend was .221 per month, on $24 a share I was receiving .221 X 12 or $2.652 annually, therefore I was earning 11.05% on that investment.

Today, I’m still receiving .221 a month, or $2.652 annually, but my average cost is now $21.08, so if you divided $2.652 / $21.08 that is .1258, I’m now earning 12.58% annually on that investment. The stock price going down is scary, BUT it allows me to increase my income for the rest of my life. See my last post on why I feel this is important for loan officers, Realtors and commissioned employees.

You understand interest and math, and the rule of 72 right? 72 / 12.58 = 5.72. My investment in PDI should double every 5.72 years…

a BORROW SMART CONCEPT
Why Care About Tariffs?

Understanding Tariffs: Why They're Back and What They Mean for You

Recently, global markets were shaken by the announcement of massive new U.S. tariffs. But what's really going on, and why should you care as a lender?

What are Tariffs?

Tariffs are taxes that a government imposes on imported goods. They make foreign products more expensive, aiming to protect domestic businesses and jobs by encouraging consumers to buy locally-produced items. I’ll point out the word, tax. The tax is most often a tax on the consumers as companies can’t absorb higher prices and still maintain profit.

Why Did the U.S. Impose New Tariffs?

There are three main theories:

1. Negotiation Strategy: Some experts argue the tariffs are temporary, simply a negotiating tactic to pressure other countries into better trade deals. If true, this could cause short-term market volatility and higher prices.

2. Economic Restructuring: Others believe the U.S. is genuinely trying to revive domestic manufacturing and become more economically self-sufficient. Critics argue this is unrealistic because automation—not tariffs—will define the future of manufacturing jobs.

3. Intentional Economic Disruption ("Disaster Capitalism"): A more cynical view suggests tariffs might intentionally trigger an economic slowdown. Historically, recessions create opportunities for wealthy investors to acquire assets cheaply, ultimately consolidating their power and wealth.

What Does This Mean for You?

• Higher Prices: Everyday goods, from clothing to electronics, AND housing itself will cost more. This inflation will also make it harder for interest rates to come down, making it harder for housing to stabilize.

• Investment Uncertainty: Markets may remain volatile. If you're close to retirement or heavily invested in U.S. stocks, now could be the time to reassess your financial risk. Diversify if appropriate and focus on high-yield good value dividend stocks to provide additional income. (see last week’s post)

• Budget and Emergency Funds: Personal finance experts suggest preparing for uncertainty by reviewing budgets, reducing expenses, and increasing emergency savings. Now may be a good time to try a financial diet, but if everyone diets we move closer to a likely recession.

The Big Picture

Whether these tariffs represent short-term posturing, a sincere attempt to re-establish U.S. manufacturing dominance, or even a strategic disruption of the economy, they highlight deeper issues in American capitalism and global trade. Tariffs can protect some jobs, but they also risk higher costs and economic instability. We live in a global economy.

Ultimately, navigating this uncertainty involves thoughtful financial preparation, cautious investing, and keeping informed about policy changes.

LIABILITIES
What’s Happening?

REAL ESTATE
What’s Happening?

You can see stock market volatility but it is also reflected in real estate and lending, this sentiment algo keeps flipping back and from across positive to negative. Confidence to act is tied to stability…

ASSETS
What’s Happening?

ON BEING HUMAN
What’s Worth Sharing?

A baby bird must learn that opening their mouth is important, but it is not the only component of being fed. If you were a loan officer, and you learned the business in the refinance market, that is what it felt like. This is the time where you hone your craft, and learn to make your own markets!

DOPAMEMES
And Other Happy Moments…

AI
and The Future of Work…

Borrow Smart University || National Institute of Financial Education