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Of course the price is reduced to reflect the payout.
But that reduction is not permanent.
The reduction in share price not permanent IF there's appreciation in the share price to make up for it. You are counting on the very share price appreciation that you say is a negative with growth stocks:
Quote:
Originally Posted by HappyTexan
The market fluctuates and you can never be guaranteed appreciation in your stock price
See? You can't have it both ways.
Whether a dividend stock or a growth stock, both depend upon share price appreciation for total return. If you had a dividend stock with no share price appreciation, you would be gaining absolutely nothing as the share price gradually dwindles down...and down...and down.
So the argument that a dividend stock is "cash in hand" while a growth stock is based upon the "hope" of a capital gain due to share price appreciation is yet another misguided one. Both depend on appreciation in the end.
The reduction in share price not permanent IF there's appreciation in the share price to make up for it. You are counting on the very share price appreciation that you say is a negative with growth stocks:
See? You can't have it both ways.
Whether a dividend stock or a growth stock, both depend upon share price appreciation for total return. If you had a dividend stock with no share price appreciation, you would be gaining absolutely nothing as the share price gradually dwindles down...and down...and down.
So the argument that a dividend stock is "cash in hand" while a growth stock is based upon the "hope" of a capital gain due to share price appreciation is yet another misguided one. Both depend on appreciation in the end.
Total return is not appreciation on paper.
Interest, dividends, distributions that you receive or cap gains from selling is what counts as total return.
Paper profits don't count and have never counted.
What company that pays dividends has had their share price dwindle down to nothing ?
Some companies have been paying dividends for over 50 years or more.
Total return is not appreciation on paper.
Interest, dividends, distributions that you receive or cap gains from selling is what counts as total return.
Paper profits don't count and have never counted.
What company that pays dividends has had their share price dwindle down to nothing ?
Some companies have been paying dividends for over 50 years or more.
Your definition of total return isn't the actual definition. At least the problem here has been identified
that dividend is the distribution of that capital gain you say isn't important.
all quarter the stock prices advances as the company earns profits ,investment income and shareholders bidding up the shares. the capital gain is distributed , the share price gets the price set back by the same amount and the process starts off the next quarter.
no capital gain that year then the dividend is paid from your share price anyway and you have a loss.
now do you understand a dividend is only the distribution of some of or may be all the capital gains in the share price . you can not have one without the other as no company can keep paying a dividend unless eventually capital gains bring the share price back up.
Total return is not appreciation on paper.
Interest, dividends, distributions that you receive or cap gains from selling is what counts as total return.
Paper profits don't count and have never counted.
What company that pays dividends has had their share price dwindle down to nothing ?
Some companies have been paying dividends for over 50 years or more.
you couldn't be more incorrect about paper profits. that is your net worth at any point in time.
don't confuse realized gains or losses which are tax events with your portfolio value.
so by your thinking i have to sell my investment daily and close it out and buy a new investment the next day to have it count. but if i let it ride in the same investment overnight it doesn't count?
you do know that is some pretty flawed logic...
Last edited by mathjak107; 08-09-2014 at 04:11 PM..
A capital gain is when you sell assets, such as stocks, at a higher price than what you paid to buy them. The rise in price creates the capital gain, not the other way around. Above you said that the capital gain creates the dividend. BUNK.
Dividends are the distribution of earnings from a company's business activities. Some earnings are retained for investment by the company; some earnings are paid out as dividends.
sorry but wikapedia is mistaken . they are refering to a realized capital gain which is for tax purposes. they are refering to capital gains taxes being long or short term.
capital gains are either relized or unrealized , that tells you off the bat the definition above is realized capital gains.
WHEN THEY SAY PAPER PROFITS ARE NOT REAL THEY DON'T MEAN THEY DON'T COUNT BECAUSE YOU DIDN'T SELL ,OF COURSE THEY DO , IT ONLY MEANS FOR TAX PURPOSES THEY ARE NOT "REALIZED GAINS "
VANGUARD:
More about realized and unrealized gains and losses
A fund's realized and unrealized capital gains and losses can provide helpful information about the tax implications of holding a particular fund in a taxable account. (These tax implications do not apply to investors holding a fund in a tax-favored account such as an IRA or an employer-sponsored retirement plan.)
A realized capital gain/loss is an increase (or decrease) in the value of a security that is "real" because the security has been sold by the portfolio manager. The capital gains/losses are "realized" by the fund, and any distributions to the shareholder as a result of realized gains (adjusted for any realized losses) are taxable during the tax year in which the security was sold. Realized losses can be used to offset realized gains in an attempt to reduce taxable gains. If realized losses are higher than realized gains, a fund can "carry forward" these excess losses to offset future gains.
An unrealized capital gain/loss (also called a "paper profit or loss") is an increase (or decrease) in the value of a security that isn't "real" because the security hasn't been sold. When a portfolio manager sells a security, however, the capital gains/losses become "realized" by the fund, and any realized gains (net of any losses) are taxable during the tax year in which the security was sold. Funds with low turnover rates, such as index funds, tend to have more unrealized gains than actively managed funds and are less likely to pass taxable gains on to investors.
A fund's unrealized appreciation or depreciation figures are valuable because they can give an idea of whether a fund would need to distribute any gains if all of its securities were sold. Such information may help you determine your potential exposure to taxable distributions.
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the point is realized or not your portfolio value is what it is at any point in time and it counts whether realized or not. in fact your RMD'S will be based on that value if if they are not realized gains.
Last edited by mathjak107; 08-10-2014 at 03:16 AM..
your definition of dividends is correct . but once those earnings are paid out they are subtracted off the share price.
so let me bang my head on the wall and say it again.
without there being a capital gain in the share price to retrace the payout you would have a capital loss after each payment. a stock in a downward or flat slide would be worth less and less with each payment . until the share price recovers and shows CAPITAL GAIN APPRCECIATION you stay at a loss.
this has nothing to do with a stocks book value , but it has everything to do with its share price value to you.
in theory a stocks earnings should be increasing the share price all quarter until the end of the quarter when it is payed out. sometimes the earnings are not enough to overcome investor sentiment and the stock is down for the quarter regardless of those earnings being included .. those dividends are payed out from earnings anyway but the share price is reduced and now you have a loss reflecting that payout.
all you did is take money from one pocket and put it in another. without capital appreciation on the share price you portfolio value stays the same before and after that payment.
there is nothing there disputable.
Last edited by mathjak107; 08-10-2014 at 03:32 AM..
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