Isn't buying dividend paying stocks for chumps?

[Jack1960]

If interest rates rise, it will not be good for div stocks.

 

[Saltynuts]

You want me to put a ribbon on it for you. Took me years to develop a consistent trading methodology and i'm to give it away in summary. You most likely wouldn't get anyway. According to the op, i'm a chump...

Haha I can totally understand you not wanting to disclose a winning system! But, you said:

"Using options i trade range bound blue chips and indexes around ex-dividend dates. Return around 25% annually with minimal risk."

So if you are "using options", does that mean you are not actually holding the stock? That would automatically make you not a chump. Unless you just meant you use options as part of actually trading and holding the stocks/indexes, in which case you would only be a chump if your strategy didn't work.

I've often wondered if you could buy stock pull backs a few days before an ex-divvy date, then sell into strength a few days after the date, and make money that way.

 

[Saltynuts]

If interest rates rise, it will not be good for div stocks.

Or any stocks, no?

 

[treeman]

I think you’re thinking about it too much. You can alaways take a look at the chart: http://schrts.co/gk28Nv

What this tells me is that dividend stocks do better in risk off environments. If you hawk the risk on/risk off charts, you can tell when people are getting defensive. If you look at this chart, it’s making hh and hl. No one is searching for the exits. I’d suggest to continue seeking growth right now. But that wasn’t the case in 2015, when people were getting defensive.

 

[Saltynuts]

treeman, thanks for that link! Very interesting. But isn't that showing that the dividend ETF is outperforming the growth ETF in market turbulence, and likewise when there is no turbulence? Maybe that is what you are saying.

But also, wouldn't that seem to suggest buying for dividends over growth currently, giving that, just looking at that chart, the cost of growth versus the cost of dividends is very close to its high historically?

I mean, if one believes in dividend stocks.

 

[treeman]

I am saying the first part.

As for the second part, far be it from me to tell you how and where to put your money, but that is a very bullish chart. It also illustrates money rotation. In this case, out of dividend paying stocks and into growth oriented ones.. on a relative basis anyhow. Until you get a lh, that trend is still in play. Until a chart tells you otherwise, nothing’s changed. Don’t extrapolate. Directional moves go on for years, sometimes decades

 

[Saltynuts]

treeman, understood. Much appreciated!

 

[777]

Bonds are taxed as interest, so are preferred shares and t Bill's. Are those for chumps? Dividend stocks give you the source of income as well as capital gain potential. As a group they dont fall as much as the general market in hard times. Sure in the long run much more growth potential in non paying dividend stocks but if your retired and need a source of income when the market is down 30%, IBM is looking much better than AMZN. Also with dividend stocks you can get access to shares at a discount if you re-invest the dividends. Some people have built their entire wealth with dividend stocks. DEFINITLY not for chumps. Time and a place

Dividend stocks can be extra-good in a tax efficient account like an IRA.

Buffett has quite a portfolio of dividend paying stocks but he is also a master of tax efficiency

 

[DTB2]

1) "they're safer" - generally true but thats because stable div paying companies are usually mature companies. No real value for being high div imo. and high beta can be managed by small sizing.
2) "you keep the stock, AND gets cash back" - obviously flawed illusion because as you said, div is net out by drop in stock price. it's surprising how many people can't see that dividends are a zero-sum (or negative because tax) action.
3) "these companies generate great revenue" - but i see this on the negative side. That the companies don't have enough investments opportunities hence extra cash leading to divs. again no real value for being high div.

i think if all else equal, a company that pays div is worse than one that doesnt.

1) They are safer. Period. (sure one can move in and out of other stocks and mitigate risk by sizing, but why bother?)

2) Gee my last 2 dividend payouts. CAH .42 opened up .19 and O .226 opened up .09. Even if the dropped, I would be reinvesting at the lower price. More shares to draw dividends against. WIN-WIN.

3) i think if all else equal, a company that pays div is worse than one that doesnt. I think NOT.

 

[sle]

Even if the dropped, I would be reinvesting at the lower price. More shares to draw dividends against. WIN-WIN.

You are taking a tax hit, so you are losing every time you rebalance, no? I.e. if you get a div, first you pay regular income tax on it and only then re-invest. On the other hand, if you sell a stock after holding it for a while, it's taxed as capital gains, so you get better reinvestment rebalancing/treatment. Not sure, TBH.