Are dividends mainly horsepoop?

[murray t turtle]

Dividends are deceiving for most people. Eg a friend told me recently she is going to get some stock because it pays 4.95% dividend. I looked at the chart, company lost 25% YTD, so dividend could not possibly a reason to buy it, and yet, that argument is often presented. For the same type of people who are looking for dividends the best thing to do is find stable profitable companies that made it thru few market downturns and held up better than the most in the previous recessions, with price appreciating better than the market.

%%
I've noticed most of the ETFs i've made money on, over the years pay a low dividend or no dividend.
But I'm in a tax free Roth, so tax policy has no bearing for me.Paying some taxes is better than a loss\LOL
Every now + then you may see a Brazil miner or steel stock that has a good pattern+ pays a 17% yield.
But most that pay much of a dividend like REITs\ are underperformers to the max+ bigger the dividend the bigger the loss, as a general rule

 

[Cabin111]

Two kinds of people are good/ideal for dividend stocks.

First example, an older single, widow/widower...Say 75-80 years old. Just an example...Say they own their own home. They have a small pension and get SSI...They have $50-100,000. to invest. They want to preserve capital and gain income...This is blood money they CAN NOT LOOSE!! Yeah, they should probably put some into SP 500 type of ETF. They might want to consider a good quality dividend paying company.

The next would be a trust or uniform gift to minors act (UGMA)...Each state is different. Say it was for your niece/nephew...They are 10-12 years old. If you did any options (besides covered calls), you may be finding yourself before a judge explaining why you didn't make wise decisions with their money!! If you invested in stocks like; ADM, McDonald's, Target, Microsoft, the kid would not have a leg to stand on in court. I've heard of people taking the trust money and investing it into business (that failed). A ton of liability ...You need to use due diligence in your investments with those.

Both of the above examples pay no income tax...To low a bracket.

Later...The last one that comes to mind is pension funds. You can shoot for the moon with some of your trades. But, you better have a backstop of good quality stocks, to show you are also using your due diligence with your investments...

Someone may not be getting a bonus this year...

ONTARIO TEACHERS’ PENSION PLAN
Stake in FTX: 0.4%
Est. amount invested: $75 million
Value at January 2022 peak: $125 million

No soup for you!!

 

[murray t turtle]

Over the past say year or so I've tended to buy mostly dividend paying stocks (and funds). But I read they drop the stock price by the amount of the dividends. I guess that makes perfect sense..... but if a company has $1000 and 100 shares, each share would be worth $10, but then if it paid a $100 dividend and thus has $900 left, each share logically should only be worth $9. So if you owned the whole company ..... That seems like slippage .....
So, for taxable accounts, should one trying to be buying stock and funds that pay NO dividends?
I think I've been doing the exact wrong thing in the last year or so LOL.
Thanks.

%%
I asked my neighbor one time ''you want me[free work ] to clean out your horse barn a bit ,[well aged horse cr*p].'' He was surprised+ said with a smile, like sure
I was happy he did not charge me for the privilege, many dude ranches charge for that horse privilege;
WMT charges big time for 50pound bag of aged cow cr*p fertilizer privilege.
[2]I dont pay taxes on anything in a Roth Account, nor do others in a back door Roth
[3]DOW/DIA pays better dividends than SPY,QQQ+ tends to underperform about 95% 0f the time
[4]Muni bonds+ insured mb pay no federal tax; any color privilege,
[5]SCHW brokerage calls dividends both '' income ,+ yield'' . IBD founding father says ''never buy the stock[or ETF] for the dividend.''
[6,7] Say you make 2%, or 10% this week on a non dividend payer, or any;
dont worry about taxes, pay them if you owe. Pay yourself every now + then /SCHW mails a check in about 5-7 days, say1% or 5% in this real life example.
Tony Oz took out a check every week from his taxable brokerage account. Payday some day

 

[newwurldmn]

Divs are a way to monetize the earnings of a company.
The only other way to monetize the earnings of a company is to sell it.

In the short term you can't arbitrage this. But in the long term, there are lots of studies that have shown how well dividend paying stocks perform (and lots of theories as to why).

 

[murray t turtle]

Divs are a way to monetize the earnings of a company.
The only other way to monetize the earnings of a company is to sell it.

In the short term you can't arbitrage this. But in the long term, there are lots of studies that have shown how well dividend paying stocks perform (and lots of theories as to why).

%%
Good privileged points. Amazing how anybody in USA can be privileged.
It helps if one can read stock + fund data, WSJ, IBD Newspaper.
i dont use the word privilege as a travel agent giving free guilt trips, like many do.
Thanks.
Dave [ ''redneck'' ] ramsey says, never take a free guilt trip from a travel agent.
I dont use redneck in an insulting sense like some, Dave calls himself a redneck LOL

 

[KGTrader4]

if You are a long-term investor with a 20 year time Horizon, there is no better way to create a stream of income in retirement then to buy stocks that pay dividends with a reasonable payout ratio of dividend to cash flow, and a long history of increasing dividends as part of their philosophy of giving back to shareholders, reinvest the dividends, and let it compound. In 20 years you will be golden. Obviously this has nothing to do with trading.

 

[cesfx]

most investors don't pay taxes too.

Between investing, day trading, and swing trading, I'd recommend day trading.

Anyway, my usual advice is not to be an investor or trader.
Be a hitman, surgeon, doctor, lawyer, gardener, worker .... but not an investor or trader.

hitman has a terrible risk/reward

 

[murray t turtle]

Two kinds of people are good/ideal for dividend stocks.

First example, an older single, widow/widower...Say 75-80 years old. Just an example...Say they own their own home. They have a small pension and get SSI...They have $50-100,000. to invest. They want to preserve capital and gain income...This is blood money they CAN NOT LOOSE!! Yeah, they should probably put some into SP 500 type of ETF. They might want to consider a good quality dividend paying company.

The next would be a trust or uniform gift to minors act (UGMA)...Each state is different. Say it was for your niece/nephew...They are 10-12 years old. If you did any options (besides covered calls), you may be finding yourself before a judge explaining why you didn't make wise decisions with their money!! If you invested in stocks like; ADM, McDonald's...... Microsoft, the kid would not have a leg to stand on in court. I've heard of people taking the trust money and investing it into business (that failed). A ton of liability ...You need to use due diligence in your investments with those.

Both of the above examples pay no income tax...To low a bracket.

Later...The last one that comes to mind is pension funds. You can shoot for the moon with some of your trades. But, you better have a backstop of good quality stocks, to show you are also using your due diligence with your investments...

Someone may not be getting a bonus this year...

ONTARIO TEACHERS’ PENSION PLAN
Stake in FTX: 0.4%
Est. amount invested: $75 million
Value at January 2022 peak: $125 million

No soup for you!!

%%
Good points.
Bad news + good news. The good news is they[OTPP] admit the FTX loss+''write off all $95 million.'' More good news , only 00.05 % of assets.
More good news , my banker dad, when i was a kid, paid for us watching the movie "The Sting'' a careful con movie ; but those movie tickets were not anywhere oo.05% of my bankers dads assets/LOL.
Another good thing about dividends, is the basic idea;
someone pulls some regular money out monthly, or quarterly., or yearly.
So on stuff that pays no dividends, a selling plan is a wise idea.
Same principal, as dividends;
on my semi -private contract businesses, i wrote in to the contract , mutual agreement, on fair weekly progress payments.
[NOT to be confused with a con job, where the con man tried to get a 66.6% or 100% deposit=another obvious con job. ]
See a CPA if you have taxable income; many states in USa have no state income tax. And i get an estimate[ or per page estimate] from a CPA before i sit down with the CPA.

 

[Specterx]

Over the past say year or so I've tended to buy mostly dividend paying stocks (and funds). But I read the other day how they drop the stock price by the amount of the dividends. I guess that makes perfect sense - simplifying here, but if a company has $1000 and 100 shares, each share would be worth $10, but then if it paid a $100 dividend and thus has $900 left, each share logically should only be worth $9. So if you owned the whole company and got to keep the dividend, you might be indifferent in the company paying the dividend or not. But you don't get to keep all of the dividend, you have to pay tax on it (if its in a taxable account). That seems like slippage to me - that tax would not have been paid (by you or the company) if the company had just kept the money.

So, for taxable accounts, should one trying to be buying stock and funds that pay NO dividends?

I think I've been doing the exact wrong thing in the last year or so LOL.

Thanks.

This reasoning is why many companies these days return capital via stock buybacks rather than dividends. Both are just methods of returning capital when management doesn't have any projects to invest like, which they believe will return in excess of the CoC.

With a lot of caveats, the preference for dividends vs buybacks is a mental handicap or bias which is likely to reduce one's returns as an investor. Underlying cashflows will accrue to you one way or the other (unless squandered by management) and dividends are tax-inefficient.