PP vs Dividend Growth Investing

Discussion of the Stock portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 9:36 am

Xan wrote:
Mon Feb 17, 2020 9:33 am
And those stock assets have value because of their projected future dividend.
No , those assets are worth more because of fear , greed ,and perception of future growth and share appreciation no matter what that appreciation comes from whether stock buy backs , mergers ,acquisitions, increasing market share , better profitability and increased sales

Dividends that can be paid if the company wants are the result of that growth or you have zero roi.

Paying a dollar in dividends without a dollar growth in appreciation in share price is a zero return for investors and no dollars gained
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: PP vs Dividend Growth Investing

Post by Xan » Mon Feb 17, 2020 9:45 am

mathjak107 wrote:
Mon Feb 17, 2020 9:36 am
Paying a dollar in dividends without a dollar growth in appreciation in share price is a zero return for investors and no dollars gained
I think we've boiled it down here.

I've proven that paying a dividend is the only way that investors as a whole realize dollars from owning a company, which at the end of the day is the entire point of owning a company.

I think the disagreement is that you don't see that as the point of owning a company.

Also, the only reason the company has any value is its theoretical future dividend, as has also been proven.


I'd also like to point out that in your rental business (which is a business, is it not?) you take the profits (that is, the monthly rent minus expenses) and pay it out to yourself as a dividend, right? You don't keep it in the "company".
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 10:35 am

Rent is different One dollar paid in rent is not subtracted off the values of my property like a dividend then it is a wash In the dividend case I have to decide if it is worth getting taxed rather than keep those dollars in the stock compounding on the full dollar. If anyhthing total dollars I had decreased because of taxes compared to leaving that dollar invested
Last edited by mathjak107 on Mon Feb 17, 2020 10:37 am, edited 1 time in total.
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: PP vs Dividend Growth Investing

Post by Kbg » Mon Feb 17, 2020 10:36 am

Xan,

The biggest problem with your argument is that less than half of all publicly traded stocks on an exchange in the US pay dividends. If you throw in OTC stocks then it’s around 10%. So clearly it’s not about the dividend. Facts are facts and particularly when those facts are numbers. Owning shares mean you are a partial owner of the company. And while you may not like what MJ is saying, for healthy companies in the US that could pay dividends, most do not because their owners realize it is not advantageous to do so under current US tax law. Globally you will see a relationship between dividends paid and tax law...most companies are economically rational and factor in tax law when developing their policies for dividends.

As an investor, taxes aside, dividends are nice in that they do represent an actual income stream from the business and there are methods specifically designed for this style of investing. There is a major spin off style called shareholder yield that captures dividends and stock buybacks which is also a form of direct payback of business profits to owners.

Ultimately I think both sides are arguing over personal preference...if dividends and capital gains were taxed the same in the US then this would be a pretty pointless argument assuming payouts were needed at the same time. However, just like a 401k, being able to defer taxes (and in theory compounding growth of the business), is almost always a good thing.
User avatar
InsuranceGuy
Executive Member
Executive Member
Posts: 425
Joined: Sun Mar 29, 2015 1:44 pm

Re: PP vs Dividend Growth Investing

Post by InsuranceGuy » Mon Feb 17, 2020 10:37 am

[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 5:44 pm, edited 6 times in total.
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: PP vs Dividend Growth Investing

Post by Kbg » Mon Feb 17, 2020 10:45 am

Also, the only reason the company has any value is its theoretical future dividend, as has also been proven.

This is incorrect and is not proven. All you have to do to realize this statement is incorrect is do a Charlie Munger “invert, always invert.” Let’s try it. The only reason there is a dividend is because a company has value...categorically false. Companies do not have to pay dividends and most do not and very unprofitable businesses can pay dividends right up to the point they go bankrupt.

If you changed dividends to profits, then it works. You seem unwilling to recognize several things can be done with profits.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 11:05 am

Taxes are very unfavorable for dividends ...like the rent example xan used .

If rent worked like a dividend then every dollar I got in rent would be subtracted off the value of my property ...in reality I would have been better off keeping the dollar in property value growing tax deferred ....so if I reinvest that dollar dividend even back in to the same stock I have less than a dollar going back in ...now I have less dollars in total than had I not gotten that dividend invested Because of taxes being subtracted


But it gets worse ...that dividend is taxed on a corporate level when paid to me and there is no offsetting write off so now there is a corporate tax on a dollar paid and I am taxed on that dollar paid .....

That is now a pretty steep reduction.


So if you get that dividend you need to reinvest it at a pretty high growth rate somewhere else because of taxes or you will reinvest it and get stuck with a tax bill and have less money in total than had you not gotten that dividend..you could spend it but then you have less dollars compounding ...no where in the equation is anyone a head in more dollars because of a payout
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 11:17 am

Kbg wrote:
Mon Feb 17, 2020 10:45 am
Also, the only reason the company has any value is its theoretical future dividend, as has also been proven.

This is incorrect and is not proven. All you have to do to realize this statement is incorrect is do a Charlie Munger “invert, always invert.” Let’s try it. The only reason there is a dividend is because a company has value...categorically false. Companies do not have to pay dividends and most do not and very unprofitable businesses can pay dividends right up to the point they go bankrupt.

If you changed dividends to profits, then it works. You seem unwilling to recognize several things can be done with profits.
Spot on ..when you have profits and share appreciation in a company you have choices ..you can pay out or not ......either way if the gains are there investors will come,

No appreciation in share price and a payout leaves you with zero return ...not one dollar increase anywhere for your invested dollars ....so all value starts with share appreciation or you got no gains no matter what they pay out
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: PP vs Dividend Growth Investing

Post by Kbg » Mon Feb 17, 2020 11:21 am

I agree.

However, I do wish US tax law was more neutral on this and it should be. It would give shareholders more power in forcing dividends for companies that probably should be paying dividends vs retaining earnings.

The downside of not having a neutral tax code is it leaves effective business valuation almost completely to the whims of speculative forces which as we all know are manic.
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: PP vs Dividend Growth Investing

Post by Xan » Mon Feb 17, 2020 11:30 am

My position isn't based on how many companies do pay dividends. It's just that fundamentally, that is the only (effectively, barring buybacks) mechanism for investors as a whole to realize gains.

InsuranceGuy, I'm not sure what you're saying on how swapping around cash and shares for the same shares is not a zero-sum game. Are you considering realized gains, or just theoretical gains?

Okay, so many companies could but don't issue dividends, largely because of tax implications. Doesn't mean that the backstop on their value isn't that they have money that they could pay out.

I don't think business going under while paying dividends disproves my point at all. If a business is going under, that may be the time I MOST want them to pay dividends, rather than putting the money back into a sinking business.

Mathjak, I certainly understand the tax differences between rent and true dividends makes taking your "dividends" from rental properties much more palatable than stock dividends. But we're talking about fundamentals, not tax details. I believe that the dollar in rent you get out DOES reduce your value in the "company", just as a dividend does. Because you could instead put that dollar back into the property in the form of improvements. This is exactly analogous to a public company. You don't do that, because you don't think you'd be increasing the rent you could get in the future as much by doing so (you're following Buffet's advice on when to issue a dividend). You're weighing the future rent increase (dividend) that would be possible by keeping the rent in the "company" and deciding to take the dividend now instead.

That also happens to be the point that you said you'd find some other investment: when more money isn't useful to it for improving itself. Will you be divesting your rentals? :-)
User avatar
InsuranceGuy
Executive Member
Executive Member
Posts: 425
Joined: Sun Mar 29, 2015 1:44 pm

Re: PP vs Dividend Growth Investing

Post by InsuranceGuy » Mon Feb 17, 2020 11:42 am

[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 5:44 pm, edited 1 time in total.
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: PP vs Dividend Growth Investing

Post by Xan » Mon Feb 17, 2020 11:44 am

InsuranceGuy wrote:
Mon Feb 17, 2020 11:42 am
Xan wrote:
Mon Feb 17, 2020 11:30 am
InsuranceGuy, I'm not sure what you're saying on how swapping around cash and shares for the same shares is not a zero-sum game. Are you considering realized gains, or just theoretical gains?
I'm not saying anything about gains, only that earnings for investors are created regardless of distribution and that when earnings are retained they can be cashed out any time by selling some (or all) of their shares.
Not as a whole, though, right? Any "earnings" an investor gets from selling is just the amount another investor is down.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: PP vs Dividend Growth Investing

Post by vnatale » Mon Feb 17, 2020 12:29 pm

Xan wrote:
Mon Feb 17, 2020 11:44 am
InsuranceGuy wrote:
Mon Feb 17, 2020 11:42 am
Xan wrote:
Mon Feb 17, 2020 11:30 am
InsuranceGuy, I'm not sure what you're saying on how swapping around cash and shares for the same shares is not a zero-sum game. Are you considering realized gains, or just theoretical gains?
I'm not saying anything about gains, only that earnings for investors are created regardless of distribution and that when earnings are retained they can be cashed out any time by selling some (or all) of their shares.
Not as a whole, though, right? Any "earnings" an investor gets from selling is just the amount another investor is down.
I think you've said this a few times and I'm still not understanding it.

If you bought your shares at the accounting net book value of the company three years ago and now sell me those shares at their current accounting net book value (which produced a gain for you) how am I now down in any way? In theory I could turn right around and sell it in the next minute for exactly what I paid for it.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 12:40 pm

Xan wrote:
Mon Feb 17, 2020 11:44 am
InsuranceGuy wrote:
Mon Feb 17, 2020 11:42 am
Xan wrote:
Mon Feb 17, 2020 11:30 am
InsuranceGuy, I'm not sure what you're saying on how swapping around cash and shares for the same shares is not a zero-sum game. Are you considering realized gains, or just theoretical gains?
I'm not saying anything about gains, only that earnings for investors are created regardless of distribution and that when earnings are retained they can be cashed out any time by selling some (or all) of their shares.
Not as a whole, though, right? Any "earnings" an investor gets from selling is just the amount another investor is down.
Silly reasoning. 362k in gains last year says this is absolutely ridiculous logic in investing
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: PP vs Dividend Growth Investing

Post by Xan » Mon Feb 17, 2020 1:07 pm

May I just say that I really appreciate Vinny asking for clarification on a point, as opposed to Mathjak just saying it's silly and then going off on yet another non-sequitur.

Vinny, I tried to illustrate this point in an earlier post.
viewtopic.php?f=2&t=10382&start=72#p185948
I'll put a brief excerpt here.

In 1950, a company that Investor A founded goes public, and A divests himself. B and C buy the shares. In 1960, B "makes his own dividend" and sells half of his interest to C.

The point is that the bottom-right cell, the all-time total gain for all investors, never budges. Investors swapping shares between each other is a complete non-event from the perspective of realized dollars. It's zero-sum. B got some cash, only because that cash came from D, not from the company.

That bottom-right cell only changes when the company pays a dividend. That's when investors as a whole, or maybe I should say as a group or as a class, get any reward at all from holding the company.

1950. Company valued at $100,000. Company has $0 in retained earnings/savings.
Investor Shares owned Amount spent on stock Amount earned from stock All-time total gain
A 0 $50,000 $100,000 $50,000
B 5,000 $50,000 $0 $-50,000
C 5,000 $50,000 $0 $-50,000
Totals 10,000 $150,000 $100,000 $-50,000


1960. Company valued at $350,000. Company has $250,000 in retained earnings/savings.
Investor Shares owned Amount spent on stock Amount earned from stock All-time total gain
A 0 $50,000 $100,000 $50,000
B 2,500 $50,000 $87,500 $37,500
C 5,000 $50,000 $0 $-50,000
D 2,500 $87,500 $0 $-87,500
Totals 10,000 $237,500 $187,500 $-50,000


The bottom right cell is always the total amount the company has distributed in dividends, minus the initial startup cost. Which makes sense. That's exactly how a sole proprietorship would clearly work, and it makes sense that swapping shares around between people wouldn't change that, no matter what their value at the time of the swap.

Any individual investor, like our resident hotshot investor, may be up. But if he is, it's because someone else is down.

Every investor is either hoping for a dividend, or is hoping to sell to someone who's hoping for a dividend. Or hoping to sell to someone who's hoping to sell to someone who's hoping for a dividend. Etc. At the bottom is always the dividend.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 1:39 pm

it is simple math ... if your net worth is up a dollar regardless how , than you have a gain .

if you get a forced withdrawal of a dollar by the company and a matching dollar off your balance there are no additional dollars added and no gain without the same or greater appreciation in share price which already took place pre ex div

there is nothing else to look at..

you can spin it any way you like ...just look at your starting balance and ending balance on the investment plus the payouts .. it tells all
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 1:48 pm

Xan wrote:
Mon Feb 17, 2020 11:44 am
InsuranceGuy wrote:
Mon Feb 17, 2020 11:42 am
Xan wrote:
Mon Feb 17, 2020 11:30 am
InsuranceGuy, I'm not sure what you're saying on how swapping around cash and shares for the same shares is not a zero-sum game. Are you considering realized gains, or just theoretical gains?
I'm not saying anything about gains, only that earnings for investors are created regardless of distribution and that when earnings are retained they can be cashed out any time by selling some (or all) of their shares.
Not as a whole, though, right? Any "earnings" an investor gets from selling is just the amount another investor is down.
nope ... everyone can be a winner when selling or everyone can be a loser or a winner and a loser ...

we buy an investment -we sell an investment ..the difference is my gain ... my buyer invests his money and buys it from me and he sells the investment later on to someone else , that is his gain ... if he does not sell , then his gain or loss is where that investment stands at any given time ...just like my portfolio when i calculate each years draw

that is the real world
User avatar
InsuranceGuy
Executive Member
Executive Member
Posts: 425
Joined: Sun Mar 29, 2015 1:44 pm

Re: PP vs Dividend Growth Investing

Post by InsuranceGuy » Mon Feb 17, 2020 1:55 pm

[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 5:43 pm, edited 1 time in total.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: PP vs Dividend Growth Investing

Post by vnatale » Mon Feb 17, 2020 2:14 pm

Xan wrote:
Mon Feb 17, 2020 1:07 pm
May I just say that I really appreciate Vinny asking for clarification on a point, as opposed to Mathjak just saying it's silly and then going off on yet another non-sequitur.

Vinny, I tried to illustrate this point in an earlier post.
viewtopic.php?f=2&t=10382&start=72#p185948
I'll put a brief excerpt here.

In 1950, a company that Investor A founded goes public, and A divests himself. B and C buy the shares. In 1960, B "makes his own dividend" and sells half of his interest to C.

The point is that the bottom-right cell, the all-time total gain for all investors, never budges. Investors swapping shares between each other is a complete non-event from the perspective of realized dollars. It's zero-sum. B got some cash, only because that cash came from D, not from the company.

That bottom-right cell only changes when the company pays a dividend. That's when investors as a whole, or maybe I should say as a group or as a class, get any reward at all from holding the company.

1950. Company valued at $100,000. Company has $0 in retained earnings/savings.
Investor Shares owned Amount spent on stock Amount earned from stock All-time total gain
A 0 $50,000 $100,000 $50,000
B 5,000 $50,000 $0 $-50,000
C 5,000 $50,000 $0 $-50,000
Totals 10,000 $150,000 $100,000 $-50,000


1960. Company valued at $350,000. Company has $250,000 in retained earnings/savings.
Investor Shares owned Amount spent on stock Amount earned from stock All-time total gain
A 0 $50,000 $100,000 $50,000
B 2,500 $50,000 $87,500 $37,500
C 5,000 $50,000 $0 $-50,000
D 2,500 $87,500 $0 $-87,500
Totals 10,000 $237,500 $187,500 $-50,000


The bottom right cell is always the total amount the company has distributed in dividends, minus the initial startup cost. Which makes sense. That's exactly how a sole proprietorship would clearly work, and it makes sense that swapping shares around between people wouldn't change that, no matter what their value at the time of the swap.

Any individual investor, like our resident hotshot investor, may be up. But if he is, it's because someone else is down.

Every investor is either hoping for a dividend, or is hoping to sell to someone who's hoping for a dividend. Or hoping to sell to someone who's hoping to sell to someone who's hoping for a dividend. Etc. At the bottom is always the dividend.
This one took much less time to analyze. Did not put the time in to properly analyze the much longer one you originally created.

However, shouldn't your column entitled "Amount Spent on Stock" be more properly labeled "Net Amount Spent on Stock" and reflect the amount from the column "Amount Earned from Stock"? And, that column should be really split into two columns - "Return of original basis" and "Gain (loss) from original basis".

Then the "New Amount Spent on Stock" (for the 1950 transaction) would be reduced by $50,000, retaining the original $100,000 investment.

Continuing to just focus on the 1950 example (as it's always amazing to me how complicated the analysis can get for even the most simplest of transactions) I'm seeing the following personal financial statements for all involved from strictly the one transaction you have here.

1) A - Cash of $100,000 and Equity of $100,000. The Cash came from his original $50,000 plus the $50,000 appreciation of the stock. The Equity came from having an initial $50,000 Equity to make the investment which then gets increased by the $50,000 gain on the sale.

2) B & C - Before the sale they each had $50,000 of Cash and $50,000 of Equity. They now jointly give up $100,000 in Cash to transform that $100,000 of Cash into another Asset (their investment in this company). At this point their total Assets remain unchanged. As does their Equity remain unchanged at $100,000. They've just jointly decided to deploy their Equities into a different form of asset.

As an accountant the only way I can analyze certain things is through the basic Accounting Equation -- Assets = Liabilities + Equity

For all three investors I'm seeing the following:

ASSETS

Cash: +$50,000 (A1) - $50,000 (A2) + $100,000 (A3) - $50,000 (B) - $50,000 (B) = -$0

Company Value -- +$50,000 (A2) + $50,000 (A3) - $100,000 (A3) + $100,000 (B&C) = $100,000

EQUITY
Equity -- +$50,000 (A1) + $50,000 (A3) - $100,000 (A3) + $50,000 (B) + $50,000 (C) = $100,000

I've never done an analysis like this but I think my intuition (and what Mathjak has been adhering to) is represented by what I state above.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 2:27 pm

all the math in the world and all the spins you want to put on it , can't change the fact a hypothetical 9% total return does not matter if it is a 9% dividend , 9% appreciation or a combination of both ...except for taxes there can not be one difference in your balance or cash flow ... ever!

it does not matter what the stocks are , the total return is inclusive of all as far as what it means to you as an investor
Last edited by mathjak107 on Mon Feb 17, 2020 2:30 pm, edited 1 time in total.
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: PP vs Dividend Growth Investing

Post by Xan » Mon Feb 17, 2020 2:29 pm

Another difference in assumptions may be that I assume all companies will eventually wind down and stop operating. And in the housing example, I assumed the house fell over after 50 years. If you follow my example down to the end, then the company winds down and distributes everything that's left as a dividend.

Vinny, do you agree that if the value of the shares eventually goes to zero, that my assertions end up being true?

So maybe what Mathjak and InsuranceGuy are saying is true, that everybody will be a winner without dividends, as long as it's true that the company keeps going, and growing, forever without limits. And that what I say is true if the company will eventually stop operating.

I suppose it's up to the reader to decide which scenario is more likely.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 2:32 pm

Xan wrote:
Mon Feb 17, 2020 2:29 pm
Another difference in assumptions may be that I assume all companies will eventually wind down and stop operating. And in the housing example, I assumed the house fell over after 50 years. If you follow my example down to the end, then the company winds down and distributes everything that's left as a dividend.

Vinny, do you agree that if the value of the shares eventually goes to zero, that my assertions end up being true?

So maybe what Mathjak and InsuranceGuy are saying is true, that everybody will be a winner without dividends, as long as it's true that the company keeps going, and growing, forever without limits. And that what I say is true if the company will eventually stop operating.

I suppose it's up to the reader to decide which scenario is more likely.
to be honest , you really have to stop trying to spin things with the what if's ... everything is based on reality and what you see is what you got ...

once you start throwing personal assumptions in to the mix we can say don't invest at all because the world can end . so we need to compare apples to apples with what we know .

and we know mathematically all total returns regardless of composition work the same . so does them force selling your money from the investment or you voluntarily selling some money from the investment

Image
Last edited by mathjak107 on Mon Feb 17, 2020 2:40 pm, edited 1 time in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 2:37 pm

Xan wrote:
Mon Feb 17, 2020 2:29 pm
Another difference in assumptions may be that I assume all companies will eventually wind down and stop operating. And in the housing example, I assumed the house fell over after 50 years. If you follow my example down to the end, then the company winds down and distributes everything that's left as a dividend.

Vinny, do you agree that if the value of the shares eventually goes to zero, that my assertions end up being true?

So maybe what Mathjak and InsuranceGuy are saying is true, that everybody will be a winner without dividends, as long as it's true that the company keeps going, and growing, forever without limits. And that what I say is true if the company will eventually stop operating.

I suppose it's up to the reader to decide which scenario is more likely.
those who reinvested their dividends would go down with the ship regardless.. everyone else would either go down with the ship or sell .... no different than any other blue chip company circling the drain of which we have a graveyard full .
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: PP vs Dividend Growth Investing

Post by Xan » Mon Feb 17, 2020 2:41 pm

mathjak107 wrote:
Mon Feb 17, 2020 2:37 pm
Xan wrote:
Mon Feb 17, 2020 2:29 pm
Another difference in assumptions may be that I assume all companies will eventually wind down and stop operating. And in the housing example, I assumed the house fell over after 50 years. If you follow my example down to the end, then the company winds down and distributes everything that's left as a dividend.

Vinny, do you agree that if the value of the shares eventually goes to zero, that my assertions end up being true?

So maybe what Mathjak and InsuranceGuy are saying is true, that everybody will be a winner without dividends, as long as it's true that the company keeps going, and growing, forever without limits. And that what I say is true if the company will eventually stop operating.

I suppose it's up to the reader to decide which scenario is more likely.
those who reinvested their dividends would go down with the ship regardless.. everyone else would either go down with the ship or sell .... no different than any other blue chip company circling the drain of which we have a graveyard full .
So we have a graveyard full of dead blue chips, but it's a "personal assumption" to assume that companies will go to zero one day?
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: PP vs Dividend Growth Investing

Post by mathjak107 » Mon Feb 17, 2020 2:56 pm

Xan wrote:
Mon Feb 17, 2020 2:41 pm
mathjak107 wrote:
Mon Feb 17, 2020 2:37 pm
Xan wrote:
Mon Feb 17, 2020 2:29 pm
Another difference in assumptions may be that I assume all companies will eventually wind down and stop operating. And in the housing example, I assumed the house fell over after 50 years. If you follow my example down to the end, then the company winds down and distributes everything that's left as a dividend.

Vinny, do you agree that if the value of the shares eventually goes to zero, that my assertions end up being true?

So maybe what Mathjak and InsuranceGuy are saying is true, that everybody will be a winner without dividends, as long as it's true that the company keeps going, and growing, forever without limits. And that what I say is true if the company will eventually stop operating.

I suppose it's up to the reader to decide which scenario is more likely.
those who reinvested their dividends would go down with the ship regardless.. everyone else would either go down with the ship or sell .... no different than any other blue chip company circling the drain of which we have a graveyard full .
So we have a graveyard full of dead blue chips, but it's a "personal assumption" to assume that companies will go to zero one day?
irrelevant .. those who did not like the performance would have sold .. those who reinvested and didnt sell crashed and burned . those who reinvested and didnt like the performance sold in either case ...so there is nothing different here .

in fact i would say on those failed blue chips , investors speculated all the way down once performance slipped and were not the original investors from the heyday .

again you are trying to visualize some scenario that is really not likely to play out in real life .

anyone who is not going to ride herd on an individual stock regardless if dividend payer or not and not have an exit point if things go wrong is the proverbial village idiot and does not belong investing in individual stocks .

remember that dividend payer if it is doing poorly is taking a double hit down .. market action may pull the stock down 10% but a 10% dividend being paid with a 10% roll back on an already down 10% loss in share price is a 20% drop .... think that should raise an eyebrow you are getting burned ? a non div payer would show just a 10% loss not 20% so again apples to apples in real life situations .
Last edited by mathjak107 on Mon Feb 17, 2020 3:04 pm, edited 1 time in total.
Post Reply