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Yep. The investing forums are full of dividend lovers who have the same basic misconceptions about how dividend investments work. Then when you try to explain things to them, they either 1) argue with you until they're blue in the face, 2) accuse you of hating dividend stocks when you're just trying to educate, 3) act as if you just insulted their mother, or 4) all of the above.
So which is it? Low Expectations said if we got the math and still thought our strategy was better it would be different. But Mathjak seems to indicate he will destroy every thread on dividend investing, like he destroyed this one, simply because we are wrong.
I DON'T DESTROY THE THREAD. I DISPUTE CONSTANT MIS-INFORMED THINKING
They don't understand the concept that a dividend is just a wash with what you already had.
In the mechanics of it you selling a piece of your portfolio off or the company selling off a piece of your share price amount to the same thing.
Dividends used to be a show of financial health in growing companies so they tended to out perform because of the bold statement and the fact they were great companies helped them grow big time. they were the prom queens for decades.
today we still have some good growers that pay dividends but the old guard are quite long in the tooth..
There was no real financial gain from the mechanics of dividends . they were just a proud display of the fact not only are we growing but we have money we don't even need.
Today dividends have become the least efficiant way to compound investor returns.
Even buying back ones stock has proved far more profitable.
After all if the company i am investing in has to hand me back my profits because they can't invest it and compound it what the heck chance do i have on my own of doing it.
Today the non dividend payers in the midcaps and small caps have been compounding investor money at far greater rates. As much as 5 to 6% a year greater over the last few years.
There is nothing a dividend payer can do for you that a non dividend payer with the same total return can't.
Last edited by mathjak107; 08-06-2014 at 11:31 AM..
not at all. I own funds that specialize in dividend paying stocks. there is nothing wrong with them.
until the words "I don't care what the share price is doing because I am getting a dividend gets spoken"
then that is dangerous thinking because the concept of the math going on can't possibly be understood
as well as the fact there is nothing special going on here that can not be duplicated by drawing from a portfolio of non dividend payers.
.
Nothing wrong with dividend stocks. My MIL has lived on them for years and doesn't give a rats patoot about the math involved. She's very well off, comfortable and stress free. Her knowing the math wouldn't change a thing. Could she have done better? Sure, but she could have done worse.
I've learned a lot here. But sometimes it seems like people want to jump on the least little thing and pick it apart. Smart people here, but I can see why they get defensive. If I buy a new mustang, it's like I'm going to hear that I should have bought a Camaro because it's .03 seconds quicker. Sure, but I'm still headed down the road.
After all if the company i am investing in has to hand me back my profits because they can't invest it and compound it what the heck chance do i have on my own of doing it.
Careful here, math. It only means they can't reinvest it in their existing businesses due to diminishing marginal returns of scale. (Payout ratios aren't 100% either).
You are not bound by the same restraints. You have many more options to reinvest and compound. So in fact you have a much better chance than they do.
In a perfect world, all companies would prefer buybacks to dividends, but the buyback authorizations are at the discretion of the BODs, and buying back stock when the stock is overpriced is value-destructive.
Everything you say about the mechanics of dividends and capital gains is true. But I think you take the demonizing a tad too far. There is a time and place, and for most large-cap companies above $50B with powerful FCF, it is better for them to pay some out than hoard the cash or pursue lower-ROC projects given BOD limits on buybacks.
As you like to say, very often it is the best house in a bad neighborhood.
So... to be clear..... I can't have a thread promoting Dividend Investing. Because you don't approve of it.
No. You can't have a topic that can't be argued about.
I like dividend stocks just fine. Many of my stocks either stopped their dividends or reduced them in the downturn of 2007-2009. All of my stocks lost value. People are just arguing that it's the same thing.
The posters are just discussing the mechanism of the dividend payment, but I haven't seen any posts saying that depending on dividends was stupid or "unapproved." They have just been saying that in the long run, the outcome is the same. I like dividends because companies that pay them are declaring their financial health by making regular payments that increase over time.
Over the last 100 years, more profits have been derived from dividends than capital gains.
What people are saying is that if no dividends had been paid over the last 100 years, the capital gains would have been more.
If you're going to post here, you're going to have to put up with people with apposing viewpoints.
It's like posting about gold. Almost no one says "It's OK, but it's not my thing." It either sux or it is a good thing to own.
actually dividends only accounted for 1/3 the gains of the s&p 500 and dow. capital gains are 2/3's
but you are correct in what you said. it isn't they are good or bad .they are just another means to a total return that grows your money
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