SIEGY - Why I Bought Shares in This International Stock
Sometimes a startling piece of news can act as a catalyst to buying a stock. In this case, it was the news that German industrial giant Siemens (OTC: SIEGY) was issuing corporate bonds with a negative yield . In other words, bond investors were happy to pay in order to lend the company money while the stock was trading with 4%-plus dividend yield. That startling fact piqued my interest, and I bought some stock in the U.S. listing and continue to hold. Here's why.
The key arguments behind buying the stock also largely apply today too. Okay, the dividend yield is now 3.3% because the stock has appreciated. In addition, the near-term earnings prospects have been diminished by the COVID-19 pandemic. However, the overarching case for buying the stock remains in place:
By buying Siemens debt with a negative yield, bond investors aren't necessarily being stupid. Pension funds and insurance companies need to balance long-term liabilities and need to invest in low-risk bonds in order to offset the risk in their other bond holdings. Moreover, by buying Siemens debt they are also hoping that the price of the bond will go up further.
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Why I Bought Shares in This International Stock