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Investing based on the emperors new clothes because one does not understand how things actually work or what they mean is never a good idea if it gives you a false sense of security
Interesting, it appears then, I misunderstood the overall point your were attempting to make. I thought you were attempting to convey the idea that in theory, and reality, a stock dividend is essentially reflected in a corresponding reduction in share price so you are in effect harvesting what would otherwise be an increase in stock appreciation.
But now in reading what you wrote, even with the caveat you give of "false sense of security" seems to imply you strongly disapprove of dividend strategies rather than just saying it doesn't rally matter in the large scheme of things. If so, interesting. I will have to reread and see if I can absorb why you have such a sentiment, clearly you are rational and a thinker.
That aside, I am sure you realize that if we held people to the standard of having to understand how things actually work most people would not invest, nor would they vote, marry, or likely drink, do drugs, have casual sex, or eat 3/4 of the American diet. : )
what i was saying is exactly what you said ... the div is a wash and is like a draw from a portfolio .
the false sense of security part is because over and over people make the mistake of thinking the dividend is "additional money " like interest instead of thinking of it as a withdrawal from an existing portfolio value . so you hear them say they don't care what the stock is doing because they get a dividend ...
you can not have a stagnant stock price and see a gain ... in beer geeks example ,if the price of the stock was 100 dollars and ex div it is reduced to 90 dollars , well 90 dollars is the price . from that point on a stagnant price means you are stuck at 90 dollars and have zero return .. so you need to see at least enough appreciation to get you back to 100 again just to see the amount of the payout as a return .
but remember even if you exceed the 90 dollars , like a portfolio withdrawal that gain is on less invested dollars since you withdrew the dividend which is a return of capital . .
so if i withdraw 4% from my portfolio , i need to gain at least 4% back in appreciation to see a 4% gain on my portfolio , however even if i do , that 4% is on less dollars invested . if i renivest the money i took , well then i have my original amount back and the 4% gain is on the same dollars i had before the withdrawal , the div works the same way .
Last edited by mathjak107; 03-06-2019 at 03:22 AM..
Very true mathjak, perhaps one should look at dividend growers or aristocrats. over time, share price has a tendency to rise offsetting dividend withdrawals. what are your thoughts on building a true income portfolio including interest and distributions via real estate, MLPs, brokered CDs, closed end funds, etc?
as far as those so called dividend aristocrats go .
what constitutes this group changes all the time so get ready for lots of selling trying to keep up as they get bumped and replaced AFTER THE FACT THEY DID NOT LIVE UP TO EXPECTATIONS . you could be behind the curve here very easily .
these dividend aristocrats are not somehow immune to all the things that effect company's and stocks . Just like other companies, their outcomes change.
in 2009 there were 52 stocks that met the group’s strict criteria.
As of 2012, there were 51.
But of those 51, 13 were different than the original set. So over the course of just 3 years, there was a 27% change in the group’s composition.
in fact going back to 1989's list :
Of those 26, seven are still on the list today, ten were removed because they either cut or froze their dividend, four were removed for an unknown reason, and the remainder were aquired at some point. So at least ten of the 26 had an outcome that is different from the assumption of dividend growth every year through thick and thin.
since the 1990's only 8 stocks of the 49 at the time on the list ended up being even high quality investments today , forget about being the aristocrats
High dividends are generally bad for growth investing. For income, they can be a sign of a heavily-indebted company. I can't really think of a scenario where high dividend would be seen of as "good"...
Well there is one. A special dividend. Given on rare occasions to return cash to stockholders. But that isn't permanent, it's a one-time thing.
High dividends are generally bad for growth investing. For income, they can be a sign of a heavily-indebted company. I can't really think of a scenario where high dividend would be seen of as "good"...
Well there is one. A special dividend. Given on rare occasions to return cash to stockholders. But that isn't permanent, it's a one-time thing.
or a sign the company is having trouble and a falling share price is causing a higher yield . if a bond fund and it is interest , you are gettng something for your money .. but if a dividend , all you do is getter a bigger reset for a bigger payout , it is a wash.
High dividends are generally bad for growth investing. For income, they can be a sign of a heavily-indebted company. I can't really think of a scenario where high dividend would be seen of as "good"...
Well there is one. A special dividend. Given on rare occasions to return cash to stockholders. But that isn't permanent, it's a one-time thing.
There's value in a company that can reliably generate enough excess cash to pay a consistent dividend, even during a prolonged, deep recession.
You call it excess cash but that is not what a dividend is. It is only an amount the board decides to distribute whether the company is profitable or not. The failed blue chip graveyard is full of failed stocks that paid dividends while the company lost money year after year Ever hear of ge? Gm,citi ,Kodak ,Polaroid,Sears , jc penny , I can go on and on ....
Last edited by mathjak107; 03-10-2019 at 12:20 PM..
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