So, no answer. Mmm hmmm
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The Reason Why Stock Dividend Is Bad And Meaningless
- Thread starter fiftium
- Start date
So, no answer. Mmm hmmm
dividend payment is proof that the company has positive cash flow.......
LOL. No.
Dividends are almost always a negative, based on taxes. Dividends are taxed. So if you own two companies that are identical in all respects, other than one pays dividends and the other does not, and you reinvest the dividends in the one that pays dividends in the company that pays it, over time you will be ahead with the company that doesn't pay dividends.
You are better off just buying the company that doesn't pay dividends, then after a year just selling small pieces of it as needed to get whatever cash you need. You will pay LTCG rates (like qualified dividends), but if you don't need the cash you can not sell and allow that money to compound tax-free. People like dividends because it feels like "income" in that you are not decreasing your "principle", but you are because dividends are payouts by the company reducing their assets.
You are better off just buying the company that doesn't pay dividends, then after a year just selling small pieces of it as needed to get whatever cash you need. You will pay LTCG rates (like qualified dividends), but if you don't need the cash you can not sell and allow that money to compound tax-free. People like dividends because it feels like "income" in that you are not decreasing your "principle", but you are because dividends are payouts by the company reducing their assets.
So, no answer. Mmm hmmm
Yes I do have an answer for you: You have no idea what you're doing. You are conflating dividend paying stocks with capital appreciation.
The company can buy back the shares to use their money, which can increase the share price.dividend payment is proof that the company has positive cash flow.......
Thank you for the info. I don't want beginners more confused by introducing stock dividend vs cash dividend, and ex-date vs payment date.So much fail in this thread on terminology - especially you Fiftium. Shame.
Stock dividends are not paid in cash - they are paid IN STOCK. It's basically a tiny stock split. It has no impact on the company's finances at all, and just dilutes shareholdings.
Cash dividends are paid in cash. The paid date is irrelevant. It's the ex-date that matters. Ever heard of accrucal accounting?
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very trueThe company can buy back the shares to use their money, which can increase the share price.
if they do not give dividend and buy back shares that will, not 'can', increase share price.
i remember i tendered my shares for buy back in Hindustan LEVER , a subsidiary of Unilever, which was returned due to some technical reason.
i sold it 4 years later for 400% higher.
a buy back is as good as dividend, often, better.
never tender shares in a buy back
Thank you for the info. I don't want beginners more confused by introducing stock dividend vs cash dividend, and ex-date vs payment date.
You're the one confusing them. You're even saying that the stock price shuld change on the payment date, but that's really not the way it works (hint: it's the ex-date).
You have no idea how it works. Stop trying to tell other people how it works, because you really don't know.
The main thesis of this thread, vz., "Dividends is [sic] bad and meaningless" is of course hopelessly defective. It assumes markets are rational. They aren't. They are irrational most of the time with prices either irrationally too high or too low. Although it is true that when stocks go ex-div they tend to drop in price by approximately the amount of their dividend, this effect is short lived once human emotion steps into the market.
Even the crazy argument given based on taxing of dividends is defective as it depends, among other things, on whether the dividend is "qualified " or not. In general "qualified" dividends are taxed at the capital gains rate. If you tried to do the crazy thing that was suggested here, viz., sell off some stock instead of receiving a dividend, you're very likely going to end up losing in comparison to just owning a dividend paying stock once you've taken tax, commission and your ending stock position into account.
Even the crazy argument given based on taxing of dividends is defective as it depends, among other things, on whether the dividend is "qualified " or not. In general "qualified" dividends are taxed at the capital gains rate. If you tried to do the crazy thing that was suggested here, viz., sell off some stock instead of receiving a dividend, you're very likely going to end up losing in comparison to just owning a dividend paying stock once you've taken tax, commission and your ending stock position into account.
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