Originally Posted by Buehler445:
You're mostly right, but a dividend strategy can work, especially for risk averse investors.
The dudes at r/dividends pimp SCHD that has performed evenly with SPY since it's inception if you DRIP (I haven't verified it, but that's what they say). I've started a dividend strategy in a taxable account (which is stupid - I should shelter it, but I have some other shit going on which I don't want to create problems for myself, so I'm leaving it out for now) to push dividends. The intention is by retirement I can have enough income to pay the property tax on the house or some other overhead expense.
I'm a little different in that I have pretty massive risk in the business, that makes me probably more averse to risk than I should be. And my retirement fund is still all growth (I think - most of it is target dated funds). But I'm sticking some in as a risk averse strategy. I may change my tune a bit when a bull market starts again, but the idea of building an income instrument for retirement at a lower risk rating is appealing to me.
I'm not going to disagree with you, but don't dismiss a dividend strategy whole cloth.
I'm not dismissing dividends on the whole but I am dismissing that solely focusing on high dividends gets people lost of simple math because it's not free money.
When you are young, high growth stocks are where you should be. Your best success to having a lot of money it to grow your capital. Most growth stocks DO NOT have a dividend and I prefer them that way. The extra capital should be put into the business, not paid out as a dividend. This will increase my compounding growth the most over time.
Let's talk about those close to retirement or in retirement. Dividends can be a part of the game but you're still missing the overall picture if you can't do simple math.
The goal at this stage is preservation of capital so let's say a portfolio 50/50 ratio stocks/bonds. Again, if a stock is paying a dividend but continues to lag this portfolio in gains over time, you're still losing over time. It makes no difference if your 3-4% drawdown in retirement comes from a regular portfolio or from dividends, all that matters is what preserves the most capital over time because dividends are NOT FREE MONEY! You are giving yourself higher risk at this stage owning a stock just because it pays a dividend if that stock + dividend still lags the 50/50 portfolio! So you in fact are not being risk averse because you aren't maintaining your capital as much as the 50/50 portfolio.
Just look at some of the bigger companies who are called dividend kings like I mentioned above. That 5-6% dividend is coming with a total return that is lagging the market big time! Total return or capital preservation is all that matters. [Reply]
Originally Posted by lewdog:
I'm not dismissing dividends on the whole but I am dismissing that solely focusing on high dividends gets people lost of simple math because it's not free money.
When you are young, high growth stocks are where you should be. Your best success to having a lot of money it to grow your capital. Most growth stocks DO NOT have a dividend and I prefer them that way. The extra capital should be put into the business, not paid out as a dividend. This will increase my compounding growth the most over time.
Let's talk about those close to retirement or in retirement. Dividends can be a part of the game but you're still missing the overall picture if you can't do simple math.
The goal at this stage is preservation of capital so let's say a portfolio 50/50 ratio stocks/bonds. Again, if a stock is paying a dividend but continues to lag this portfolio in gains over time, you're still losing over time. It makes no difference if your 3-4% drawdown in retirement comes from a regular portfolio or from dividends, all that matters is what preserves the most capital over time because dividends are NOT FREE MONEY! You are giving yourself higher risk at this stage owning a stock just because it pays a dividend if that stock + dividend still lags the 50/50 portfolio! So you in fact are not being risk averse because you aren't maintaining your capital as much as the 50/50 portfolio.
Just look at some of the bigger companies who are called dividend kings like I mentioned above. That 5-6% dividend is coming with a total return that is lagging the market big time! Total return or capital preservation is all that matters.
Eh kinda. You're cherry picking a bit. 3M isn't necessarily the best use case.
Take a look at this 5 year total return chart for Coca Cola (KO). For a substantial amount of time it has outperformed the S&P. Most notably during the cratering of the S&P - which would be appealing to older more risk averse folks.
The chart is far different, but the same can be said for SCHD, because hey funds are less risky than stocks. It was kicking the fuck out of the S&P until the banking troubles (it has a fair bit of bank stock).
And MAIN, the bank stock Hog was pushing (and credit to him - that was a hell of a buy for me - wish I'd have put far more in) was getting its ass kicked during the pandemic, but what do you know, over the course of the time has performed with the S&P.
Point is, it isn't a hard and fast rule that returns will lag S&P. And the simple truth is, it is a bit of a fool proof strategy to plow money in dividend stocks and funds with DRIP on, then when you think you can live off the dividends, turn off DRIP and keep your capital together. I'm getting old enough I don't want to focus on GROWTH GROWTH GROWTH, so I don't really know what to compare it to.
I think we're arguing over not a lot of margin. But I just don't necessarily agree that if it takes dividends that it will without a doubt be a drag on your portfolio.
I will however say that yield chasing over the long term is a fools errand, but sound stocks can keep pace with the S&P. [Reply]
Originally Posted by Buehler445:
Eh kinda. You're cherry picking a bit. 3M isn't necessarily the best use case.
Take a look at this 5 year total return chart for Coca Cola (KO). For a substantial amount of time it has outperformed the S&P. Most notably during the cratering of the S&P - which would be appealing to older more risk averse folks.
The chart is far different, but the same can be said for SCHD, because hey funds are less risky than stocks. It was kicking the fuck out of the S&P until the banking troubles (it has a fair bit of bank stock).
And MAIN, the bank stock Hog was pushing (and credit to him - that was a hell of a buy for me - wish I'd have put far more in) was getting its ass kicked during the pandemic, but what do you know, over the course of the time has performed with the S&P.
Point is, it isn't a hard and fast rule that returns will lag S&P. And the simple truth is, it is a bit of a fool proof strategy to plow money in dividend stocks and funds with DRIP on, then when you think you can live off the dividends, turn off DRIP and keep your capital together. I'm getting old enough I don't want to focus on GROWTH GROWTH GROWTH, so I don't really know what to compare it to.
I think we're arguing over not a lot of margin. But I just don't necessarily agree that if it takes dividends that it will without a doubt be a drag on your portfolio.
I will however say that yield chasing over the long term is a fools errand, but sound stocks can keep pace with the S&P.
What I am simply trying to state is to look at the entire picture when purchasing a dividend paying stock, which is total return when factoring in dividends not just the % the dividend is paid.
There are some that can come close to the index in return or beat it, which is great and what you should try to accomplish. But to simply say "Wow this stock pays me 6%+ dividend" while ignoring it has had a negative return like T or MMM stock is a trap too many investors fall into because a dividend comes off the stock price (I don't get why so many ignore this). Those two turds have not been worth owning for anything but I am sure there's some dividend investor out there telling you otherwise (they're wrong) because all they look at is the dividend.
The MAIN example has proven that dividend stocks CAN be worthwhile but you took into account the entire picture of the dividend AND stock price (which is how it should be). A hefty dividend is meaningless if the draw down on the stock is making your capital dry up.
Just don't want people getting lost in this discussion. The dividend itself cannot be your entire evaluation of a stock. [Reply]
Originally Posted by lewdog:
What I am simply trying to state is to look at the entire picture when purchasing a dividend paying stock, which is total return when factoring in dividends not just the % the dividend is paid.
There are some that can come close to the index in return or beat it, which is great and what you should try to accomplish. But to simply say "Wow this stock pays me 6%+ dividend" while ignoring it has had a negative return like T or MMM stock is a trap too many investors fall into because a dividend comes off the stock price (I don't get why so many ignore this). Those two turds have not been worth owning for anything but I am sure there's some dividend investor out there telling you otherwise (they're wrong) because all they look at is the dividend.
The MAIN example has proven that dividend stocks CAN be worthwhile but you took into account the entire picture of the dividend AND stock price (which is how it should be). A hefty dividend is meaningless if the draw down on the stock is making your capital dry up.
Just don't want people getting lost in this discussion. The dividend itself cannot be your entire evaluation of a stock.
I asked chatgpt just for shits and giggles. BTW, I agree with you LewDog, but like Buehler as well as Rainman say, it depends on what you're after. Ideally in a perfect world a 20% yield stock continually increases in stock price also, but those are few. It will be interesting to watch the Yieldmax ETF's paying those high yields. If AAPL and TESLA follow their history of price appreciation they could make major returns. Anyway here's ChatGpt's response. Keep in mind ChatGpt doesn't belive in bigfoot so take it with a grain of salt.
Are high dividend stocks good investments:
ChatGpt:
High dividend stocks can be attractive to certain investors, but whether they are good investments depends on various factors and individual circumstances. Here are some key considerations to keep in mind:
Income Generation: High dividend stocks can provide a steady stream of income, making them appealing for investors seeking regular cash flow. If you rely on dividends to supplement your income or prefer immediate returns, high dividend stocks might align with your investment goals.
Dividend Stability: It's essential to assess the stability and consistency of a company's dividends. Look for a track record of regular dividend payments and consider factors such as the company's financial health, earnings stability, and dividend payout ratio. Companies with a long history of increasing dividends might be particularly appealing.
Sector and Industry: The sector and industry of a high dividend stock can significantly impact its attractiveness as an investment. Some sectors, such as utilities and consumer staples, are traditionally known for their stable dividends. On the other hand, high dividend stocks in sectors prone to volatility or undergoing significant changes may carry higher risks.
Total Return Perspective: While dividends can be appealing, it's important to consider total returns, which encompass both capital appreciation and dividend income. High dividend stocks may not experience significant price growth if the company's financial prospects are not favorable. Therefore, assessing the overall potential return, including both dividends and capital gains, is crucial.
Risk Considerations: Investing in high dividend stocks involves certain risks. High dividend yields might be a sign of a company facing challenges or potential financial difficulties. It's important to conduct thorough research, analyze the company's fundamentals, and evaluate the sustainability of its dividend payments.
Tax Implications: Dividend income is subject to taxation in many jurisdictions. Depending on your tax situation and the applicable tax laws, the tax treatment of dividends can impact the net returns you receive. Consult with a tax professional to understand the tax implications of investing in high dividend stocks in your specific situation.
Ultimately, the suitability of high dividend stocks as investments depends on your investment goals, risk tolerance, and overall portfolio diversification strategy. It's crucial to conduct thorough research and consider a holistic view of the investment before making any decisions. Consulting with LewDog, Buehler and Rainman on Chiefsplanet.com can provide valuable insights tailored to your individual circumstances. Hog Farmer, not so much, he has the opinion Bigfoot is real! [Reply]
Total Return Perspective: While dividends can be appealing, it's important to consider total returns, which encompass both capital appreciation and dividend income. High dividend stocks may not experience significant price growth if the company's financial prospects are not favorable. Therefore, assessing the overall potential return, including both dividends and capital gains, is crucial.
This is basically my argument summed up nicely.
Thanks, Hog, good way to put it. I'm not against them but please evaluate the entire picture.
I'm out of settled cash in my Webull account until tomorrow but was practicing looking for breakouts this morning. Found WETG at 12.It had resistence at 11.85 so figured if it crossed that it would run. It went to 22. [Reply]