During times when you are building for retirement, reinvesting the dividends in the stock will allow you to take advantage of a principal known as cost averaging. This is where you are consistently investing in the stock over the course of time. The idea is: as the stock falls, those purchases at the lower prices will reduce the average price that you own the company. Over the long-term, this could help to reduce the price that an investor would own the stock substantially, helping contribute to their long-term appreciation. ("Dollar Cost Averaging," 2010) if someone is retired, the dividends that are received can be sent directly to the shareholder or they can be invested in money market. This is important, because the consistency of the company's ability to pay and raise their dividends, means that retirement assets will receive a higher return.
However, there are high amounts of volatility in the stock; this means that this would be a good long-term investment for retirement assets. This can be seen by looking at the beta factor. Simply put, this will tell you how volatile the stock is in relation to market averages. When you see a reading below 1.0, this would indicate that the price of the stock is less volatile than the markets. (McClure, 2010) While anything higher, would show increased amounts of volatility compared to the major market averages. In the case of Pep Boys, the stock currently has a beta factor of 1.66. As a result, the price of the stock has seen a gain of 1.25% over the last year, in comparison with the S&P 500, which saw an increase of 21.21%. ("Pep Boys," 2010) This is significant, because it shows how an investment in the common stock of Pep Boys, could increase volatility over the short-term. Yet, if a retirement investor took a long-term focus, they could overcome these underlying amounts of volatility. Therefore, the company is an attractive area to invest a large portion of retirement assets with. As the consistent dividends and strong financial position of the company; are all showing, how investing in it for this purpose would be financially prudent over the long-term.
Would you work for this company? Why or Why Not?
Yes. The reason why is because Pep Boys offers a competitive benefits package in comparison with the majority of employers. Some of the different benefits that employees currently enjoy would include: competitive wages / salaries, tuition reimbursement, flexible hours, 20% employee discounts, outstanding...
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