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With the market going down people imminently retiring are using a Dividend strategy to think they are safe. I don't quite see how this is even possible as withdrawal by dividends or by capital is essentially the same exact thing.
"Dividends" aren't going to somehow save you from a falling market. This is an illusion. Feel free to correct me if I am missing something.
Example is this video: These folks claim they are still on track to retire next year because their dividends are strong.
Bonds give a known return for a known amount of time. As long as the underlying company doesn't file BK - you will get your money back.
Do your research and buy quality companies that have cash.
Dividends on the other hand can be cut at any time or eliminated.
Last edited by BeerGeek40; 11-01-2023 at 09:10 AM..
Take a gander at r/dividends to get an idea how widespread this mentality is. There are countless young investors there putting all their savings into high yielding equities with the dream of retiring on the dividend income. Growth stocks are seen as inferior choices even for 20-something investors. Most of the posters are unhappy at the moment with multiple threads asking "should I sell JEPI and SCHD before I lose more?".
During the 2008 housing collapse, I told a friend to sell all of her Bank of America stock. They had just doubled her dividends, so she refused. She loved her Big dividends.
even the aristocrats are only the aristocrats until they aren’t anymore .
not only that but look at at&t , general motors , ge , ibm , performance has sucked despite withdrawing your invested dollars and handing them back to you forever
The so called dividend aristocrats are only on the list until they aren’t .
I did some looking in to them many years ago .
you keep seeing just invest in this group and call it a day .
however 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.
when i took a look at them back 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.
some had awful performance as well .
GE, Exxon-Mobil, and Pfizer were even dropped from the dow
GE took a terrible tumble from its dividend aristocrat throne in November 2017, when it chain-sawed its dividend in half: from 24 to 12 cents ...
Last edited by mathjak107; 11-01-2023 at 09:27 AM..
When companies decide to return capital to shareholders, I prefer they do so in the form of stock buybacks rather than dividends because of the better tax treatment.
But I mostly prefer that companies not return any capital to shareholders - the Berkshire Hathaway model. This works when an extraordinarily disciplined investor such as Warren Buffett is at the helm. The run-of-the-mill CEO, when he sees a bank account with a lot of cash, is tempted to use it for acquisitions or other questionable capital improvements. Warren, of course, does not fall to such temptations. He buys companies (or not) based on intrinsic value; the run-of-the-mill garden-variety CEO may succumb to the temptation. I've seen it happen far too many times in tech companies. Sometimes it works out well, but mostly, in my experience, it turns out to be a waste of shareholder money.
When companies decide to return capital to shareholders, I prefer they do so in the form of stock buybacks rather than dividends because of the better tax treatment.
But I mostly prefer that companies not return any capital to shareholders - the Berkshire Hathaway model. This works when an extraordinarily disciplined investor such as Warren Buffett is at the helm. The run-of-the-mill CEO, when he sees a bank account with a lot of cash, is tempted to use it for acquisitions or other questionable capital improvements. Warren, of course, does not fall to such temptations. He buys companies (or not) based on intrinsic value; the run-of-the-mill garden-variety CEO may succumb to the temptation. I've seen it happen far too many times in tech companies. Sometimes it works out well, but mostly, in my experience, it turns out to be a waste of shareholder money.
paying dividends or not has nothing to do with corporate stupidly and wasting money .
many of those dividend payers have made the stupidest mistakes
AT&T paid $100 billion to enter the cable business
AT&T thought it would be a good idea to diversify by paying $100 billion to take on cable company TCI. It was wrong! AT&T broke itself up a few years later and sold off the cable assets.
AT&T tried to elbow its way into the personal computer business with a hostile $7 billion takeover of NCR. It didn't work, and AT&T later spun the company back out at a $4 billion valuation.
Microsoft paid an estimated $500 million for mobile phone company Danger. It was supposed to be working on new phones for Microsoft, but most of the key employees left the company. The end result of the acquisition was the Kin, a social smartphone from Microsoft that totally bombed.
Cisco probably bought Pure Digital, the company that makes the Flip, right at the peak of its value in 2009. Since then high definition video cameras have been built into just about every smartphone making the Flip pretty much worthless in the long run. Which is probably why Cisco killed the $590 million acquisition .
After Google bought DoubleClick, Microsoft tried to keep up by buying ad company aQuantive for $6 billion. The acquisition never really worked out. The aQuantive executives left two years after the deal closed and the technology was discarded.
..
AOL-Time Warner is obviously the worst
i can go on and on
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