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The Motley Fool

Ask the Fool

Ticker Symbols

Q: Can you explain stocks’ ticker symbols? — P.D., Santa Rosa, California

A: A ticker symbol is a unique identifier for a company’s stock. On the New York Stock Exchange (NYSE), tickers generally used to have three or fewer letters, while stocks trading on the Nasdaq Stock Market usually had four or five letters. That made it easy to see where companies such as Nike (NYSE: NKE), Visa (NYSE: V), Home Depot (NYSE: HD), Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT) and Amazon.com (Nasdaq: AMZN) were traded.

Today, though, NYSE stocks frequently sport four letters, while Nasdaq stocks might have three or fewer. Examples include Levi Strauss (NYSE: LEVI), Charles Schwab (NYSE: SCHW), Facebook (Nasdaq: FB), Hasbro (Nasdaq: HAS) and PepsiCo (Nasdaq: PEP).

Companies with several classes of shares often have multiple ticker symbols, and some tickers have meaningful suffixes attached. An F or a Y following a Nasdaq ticker, for example, indicates a foreign company. Other exchanges may use a Q to indicate that a company is in bankruptcy. Mutual fund tickers are four letters plus an X.

To find a company’s ticker symbol online, visit a website such as Fool.com and type the company name in the search box. Newspaper stock listings also usually include ticker symbols.

Q: What’s a “closing tick”? — M.B., Kansas City, Missouri

A: It reflects the overall market sentiment at the end of the trading day. An “uptick” means a stock’s last trade occurred at a price higher than the previous one, and a “downtick” is the opposite.

The closing tick is the difference between the number of stocks that closed on an uptick and the number that closed on a downtick. It’s not very useful for us long-term investors, and you needn’t pay it much attention.

Fool’s School

Dividend Basics

Conventional wisdom used to suggest that dividends and the stocks that paid them were for retirees. Not so — they can serve all investors well, even young ones.

Indeed, researchers Eugene Fama and Kenneth French studied market data from 1927 to 2014 and found that dividend payers outperformed nonpayers, averaging 10.4% annual growth versus 8.5%. That may not seem like a huge difference, but if you invest a single $10,000 sum for 25 years, it will grow to $76,868 at 8.5% annually and $118,639 at 10.4% annually — a big difference.

Better still, dividend-paying stocks tend to lose less value during market downturns. Here are some things to know about dividend investing:

≤ Don’t assume that the highest dividend yields you can find are always the best bets. Some extremely high yields indicate companies in trouble — because when a stock price falls, its dividend yield rises — while others are merely due to a healthy company having a lot of excess cash.

≤ Favor dividends that are growing at a good clip. Growing companies tend to increase their payouts over time, and a 2% dividend yield from a dividend that’s been growing by around 10% annually can be a better buy than, say, a 3.5% yield that’s been unchanged for years.

≤ Assess the payout ratio, which is the amount of the annual dividend payments divided by earnings per share over the year. It tells you how much of earnings is being paid out in dividends. A high number, such as 90% or more, means there isn’t much room for growth; it might even mean the dividend isn’t sustainable and might be reduced.

≤ Look a company’s big picture beyond the dividend, too. Favor high-quality businesses with little debt, ample cash and growing sales, earnings and profit margins.

It’s also promising if a company has been paying an uninterrupted dividend for many years. McDonald’s has been paying dividends since 1976, Coca-Cola began in 1920 and York Water hasn’t missed a dividend payment in over 200 years!

My Dumbest Investment

Didn’t Invest

My dumbest investment over the past decade is not having invested at all. I just let time go by without learning or gaining anything. — Eric, online

The Fool responds: That’s definitely regrettable, but you’re not alone. A Gallup poll last year found that only about 55% of Americans are invested in stocks.

Each year that you put off investing will cost you: Imagine, for example, that you are 40 and hope to retire in 25 years, at age 65. If you invest, say, $6,000 annually and earn an average annual return of 8%, you’ll end up with about $473,726. If you start a year later, investing $6,000 less, in total, and only having your money grow for 24 years, you’ll end up with $432,636 — about $41,000 less! That money would make a big difference in retirement; along with Social Security, it might help support you for two whole years.

Fortunately, all is not lost. You can start saving and investing right away. A simple, low-fee, broad-market index fund, such as one that tracks the S&P 500, is a great way to start. Over time, increase the amounts you invest by as much as you can afford. Be sure to only invest money you won’t need for at least five to 10 years in stocks, as the stock market is volatile. An introductory book on investing can help, too — try one by John Bogle or Peter Lynch.

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