The Reason Why Stock Dividend Is Bad And Meaningless
- Thread starter fiftium
- Start date
Thanks for sharing this video. I wateched it just now and it was interesting. If you are an investors with a buy and hold strategy, maybe you can consider dividend paying stocks, as the dividend will add to your returns. But I do agree with the video that you can sell a percentage of your holding to make the same money as being paid in dividend and you can invest this in any other asset class.
Some comment here says dividend means company is cash flow positive. Why do you need this indication? Companies release reports and also share buyback is much better way. When a company is not paying dividend, it means the company is reinvesting its profits to grow. This is great for anyone holding or trading stocks.
I don’t bother at all with dividend or even the stock. I trade stock cfd, which lets me trade price action without buying the stock. You can also choose broker who offers bonus. I joined Axiory and received a 50% bonus. It gave me more flexibility to try different strategies. Also, your video mentions tax on dividends. That is another reason I chose cfd, as it is more tax efficient than trading stocks.
Some comment here says dividend means company is cash flow positive. Why do you need this indication? Companies release reports and also share buyback is much better way. When a company is not paying dividend, it means the company is reinvesting its profits to grow. This is great for anyone holding or trading stocks.
I don’t bother at all with dividend or even the stock. I trade stock cfd, which lets me trade price action without buying the stock. You can also choose broker who offers bonus. I joined Axiory and received a 50% bonus. It gave me more flexibility to try different strategies. Also, your video mentions tax on dividends. That is another reason I chose cfd, as it is more tax efficient than trading stocks.
There are a few times when the dividend can be a plus. In a Roth IRA, tax free it can work fine for tax purposes. I will also post a thread I wrote back in December. This situation made financial sense and I will pay less tax because of it. You always have to look at the full benefit from the dividend (tax wise), or you may miss out on the total profit you would glean from the situation.
https://www.elitetrader.com/et/threads/my-fat-finger-almost-cost-me-1-000-in-taxes.353869/
https://www.elitetrader.com/et/threads/my-fat-finger-almost-cost-me-1-000-in-taxes.353869/
Let us know when you find two companies identical in all respects except one pays dividends and the other doesn't.
And even then, the one that doesn't pay a dividend is not necessarily the better investment. Now back to the real world. Generally speaking a lot has to do with what a company does with the dividends they don't pay! I'm fine, for now at least, with Amazon and Google not paying a dividend, I'm not fine with Goldman, Proctor & Gamble, or Diageo not paying a dividend.
Comparing companies based solely on whether or not they pay a dividend is complete nonsense! But preferring for particular reasons, and in general with some exceptions, companies that do pay dividends is smart, IF you are an investor, and not a trader.
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Let us know when you find two companies identical in all respects except one pays dividends and the other doesn't.
Now back to the real world. Generally speaking a lot has to do with what a company does with the dividends they don't pay! I'm fine, for now at least, with Amazon and Google not paying a dividend, I'm not fine with Goldman, Proctor & Gamble, or Diageo not paying a dividend.
Comparing companies based solely on whether or not they pay a dividend is complete nonsense! But preferring for particular reasons, and in general with some exceptions, companies that do pay dividends is smart, IF you are an investor, and not a trader.
"Let us know when you find two companies identical in all respects except one pays dividends and the other doesn't.
"Dude, its a thought experiment. You know, like how Einstein did though experiments in coming up with his theories of relativity? The point is that all else equal paying dividends is BAD because of TAX SLIPPAGE.
"And even then, the one that doesn't pay a dividend is not necessarily the better investment."
To a taxpaying stockholder, who can get a no better return on the after-tax amount dividended out than the company paying it, the dividend paying stock ABSOLUTELY IS a worse investment than the non-dividend paying one, all else equal.
I use dividends to buy puts and hedge tail risk, or pay a monthly bill or two or three depending.
Dividends above a certain amount are taxed at taxed at capital gains rate, unless they are earned in a Roth Account, aren't they?? Is there some reason to think that if you don't receive a dividend you will receive a capital gain later at least equal to the dividend. Or is a bird in the hand not really equal to two in the bush?"Let us know when you find two companies identical in all respects except one pays dividends and the other doesn't.
Dude, its a thought experiment. You know, like how Einstein did though experiments in coming up with his theories of relativity? The point is that all else equal paying dividends is BAD because of TAX SLIPPAGE.
"And even then, the one that doesn't pay a dividend is not necessarily the better investment."
To a taxpaying stockholder, who can get a no better return on the after-tax amount dividended out than the company paying it, the dividend paying stock ABSOLUTELY IS a worse investment than the non-dividend paying one, all else equal.
i think the market fundamentally undervalues dividend paying stocks. Someone who graduated in three years with a BS in finance would know of the dividend discount model. If the market were efficient, all the high paying dividend stocks would be much lower than they were several years ago.
Its not "above a certain amount" that get capital gains rates, its ALL dividends (from normal common stocks at least) that qualify for capital gains rates as long as you meet the holding period (which is like 61 days out of the 121 day period beginning 61 days before the ex-dividend date or something like that, but don't quote me on that as its been awhile, and I mean you destrina you trolling dweeb).
Dividends are not taxable in roth or regular IRA (or 401(k), among other things). I am talking about a taxable account there.
Its as simple as this:
Company A earns $10 and pays it out as a dividend. Company B earns $10 and reinvests it in operations. Assume that Company A and Company B can both earn 10% on their money, and you can too.
The $10 that Company A pays out to you will be taxed at a 23.8% rate, leaving $7.62 to compound over time (in your hands) at a 10% rate. In contrast, the $10 that Company B retains and reinvests will compound at a 10% rate over time. And that happens each and every years that Company A pays a dividend but Company B does not.
I can get more complex than that, but that is the gist of it.