Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I kind of think this got all confused from my origonal premise. I dont think i explained it well at all in retrospect.
I picked those from the money magazine article just for the reason they paid no to very low dividends.
They had a great history of raising their dividends all along the decade. most had great jumps in dividend increases this past decade .
The illustration i was trying to show the newbees is dont just watch the dividend. These companies raised their dividends beautifully . The problem was the share price was falling along the way . So much so that i think if i remember only 1 or 2 produced positive total returns on the decade.
The summary to the whole thing is watch that total return . Even though dividends may be rising and dividend yields may be rising you may be loosing money.
watching my total return this decade would have had me dumping the above group and investing in the likes of kmp or a kraft even though that group above was increasing their dividends nicely their overall total return was dismal.
Last edited by mathjak107; 07-19-2011 at 01:58 PM..
A good example of yield vs. total return is ADVDX, Alpine Dynamic Dividend Fund. Its yields are very high, over 10%, but its total return is negative for three and five years. Look at the DOW today and 100 years ago, most of the old companies are gone. In their time, they paid good dividends yet now they are nothing. A well balanced portfolio is needed for a safe yield and total return.
Yea. I think the bottom line here is what first and foremost, you have to own companies that are profitable. The next question that comes is: what does the company do with the profit. They have three options: return to shareholders (dividend/share buyback), reinvest in the company (acquisitions, expansion, research etc.) or save it for the future.
As the OP stated its all about total return. If the company issues dividend then it could potentially slow down future growth of the company. However, if the company doesn't issue dividend and instead reinvests it and their investments turn out to be bad deals then you would have been better off with the dividend.
You have to judge each company on its own merits. Some companies ought to pay dividends and others ought to reinvest. No right or wrong answer.
i agree, i buy what i think will go up. doesnt matter if its a dividend, share price or both. if i was buying individual issues for my portfolio i think i would go heavier on dividend payers because of their history of out performing overall.
i can create my own dividend out of any stock if i want income and that stock doesnt pay one. whether the company sells off a percentage of itself as a dividend or i sell off equal dollars on my own its the same effect financially assuming same total return..
of course you may pay a small commission each time you sell on your own and you may not get a qualifying dividend depending on if you owned the stock less then a year amount but in dollars and cents you could if you wanted do the same exact thing.
as long as both achieve the same total return one will be no better off than the other ,the effect is the same on both.
people get confused because they think your selling off shares of your non dividend payer while their dividend payer has all its shares. but while the non dividend payer takes a share hit ,the dividend payer takes a price hit assuming same total return on both.
for the non believers out there i played around with the numbers and tried to see what would happen under the extreme rediculious chance that there was no appreciation for 30 years but you still got a dividend or tried to make a dividend from your non payer.
its strictley to show the math is the same in either case.
assuming you started out with 10 shares at 10 bucks each and a 3% dividend
the dividend payer would have had 30 pointer resets back by 3% a year each time a dividend was paid so you would have your origonal 10 shares but now at a remaining value of about 1.00 each for a total worth of 10 bucks 30 years later.
the non dividend payer would have the same 3 dollars siphoned out by selling off shares for 30 years leaving about 1 share but because no pointer resets took place the stock is still 10 bucks. total value 10 bucks left
in either case both will end up at just about zero eventually.
of course thats not real world but the point is that you can create your own dividend for income if you wanted to and there is no difference in the numbers except for a slight commission on your own. applying it to the real world if the total returns on both are the same the results will be the same .
even re-investing the dividends produce the same results in either case. re-investing the dividends from the dividend payer is no different than the non dividend payer taking the 3.00 bucks he sold and re-buying more shares. it still math wise works out the same.
Last edited by mathjak107; 07-20-2011 at 03:49 AM..
A dividend is profit earned by a company.This money[dividend] has been taxed already by the Govt.You recieve dividend and your thanks from the Govt is to tax your dividend one more time.Put it in a bank the govt will tax it again tax it again
actually no the dividend isnt taxed 2x either.. the income the corporation makes is taxed on a corporate level not the dividend then the dividend is taxed to you on a personal level.
the non dividend payer has the exact same corporate tax on income as the dividend payer. there is no difference..
the individual will pay the "defered tax on the gains when he sells a non dividend payer ,in contrast some of that gain on the dividend payer is taxed along the way as a dividend.
same end results....
Last edited by mathjak107; 07-20-2011 at 07:19 AM..
107 Corporate or personal the money is being taxed 2x you are now contradicting yourself first you say it is then you say no???
Do you know why the CEO of Capitol One makes 64 million a year and why the Govt says going by its rules he is allowed screw the stock holder?
im not sure of your point. at first i thought you were saying there was a disadvantage to dividends because they were taxed 2x as opposed to a better tax situation from non dividend payers. im taking it as your saying there is an advantage to one over the other.
the fact is the income is always taxed at a corporate level whether the company pays a dividend or not so im not sure where you are going with this..
with a dividend payer the corporate income is taxed , and you are taxed on a dividend and a capital gain when you sell at a profit.
a non dividend payer always gets taxed the same on a corporate income level and you a capital gain when you sell at a profit.
assuming holding longer than a year and the same total return the taxes are the same .
107
What I'm saying is the dividend is money that has been taxed once why is it being taxed again?The more money a company spends the less tax it pays.DO YOU KNOW THE PERCENTAGE OF EVERY DOLLAR A COMPANY MAKES THAT THEY MUST BY LAW give to shareholders and the rest they can spend on big salarys raises, bonuses,stock options,private jets the list goes on and on.You seem to be happy with a 3% dividend on which you pay taxes on while the CEOS pay NOTHING.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
