When dividends can be a bad thing for an ASX share

Most ASX investors think of dividends as a wonderful thing, almost mana from heaven. What’s not to like?

‘Free’ money just for owning something. Passive income. Cash flow. All of those things are true. But nothing in life is free. Or perhaps more pertinently, nothing in life comes without a cost.

So let’s look at what a dividend truly is. And why it may not be as good as you’d think.

So, as we probably all know, a dividend is a cash payment from a company to its owners, aka shareholders. It’s a ‘thank you for owning our company’s shares’ of sorts from management.

Normally, dividends are paid out of a company’s after-tax profits. If they are not, you might have a serious problem with your company. Some companies…