Dividend Growth Investing

Discussion of the Stock portion of the Permanent Portfolio

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Kbg
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Re: Dividend Growth Investing

Post by Kbg » Sat Jun 29, 2019 9:58 pm

There is some new AQR research on this very topic. It turns out dividends aren’t so bad after all when looking at various investing strategies.
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Re: Dividend Growth Investing

Post by dualstow » Sat Jun 29, 2019 10:09 pm

What’s AQR - my gaelic is rusty.
Something Quantitative something?
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Re: Dividend Growth Investing

Post by Smith1776 » Sat Jun 29, 2019 10:10 pm

Found it.

From the conclusion: "As a result, dividend avoidance results in reduction in expected after-tax returns."

https://poseidon01.ssrn.com/delivery.ph ... 28&EXT=pdf

Huh. Well that's verrrrrry intriguing.

...

Take that, Larry. Ha! ;)
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Re: Dividend Growth Investing

Post by sophie » Sun Jun 30, 2019 8:58 am

Ironically, the experience of holding physical gold in my hand is what got me interested in buying individual stocks. There's nothing like direct ownership.

Yes it may not be optimal to be paying taxes as you go on dividends, but the tax rates are certainly better than ordinary income and you probably will end up paying it eventually anyway. Or more, if the cap gains tax rate increases. Plus, if you own individual stocks you can play the tax loss harvest game, and 100% of your earnings are qualified dividends. WIth funds, some of the payouts are ordinary dividends so you get stuck paying correspondingly higher taxes on them, and you can only tax loss harvest after large overall market swings.
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Re: Dividend Growth Investing

Post by dualstow » Sun Jun 30, 2019 2:08 pm

You can add VCIT or another bond fund and roll your own Wellesley.
(or buy Wellesley. They do it better),
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Re: Dividend Growth Investing

Post by Ad Orientem » Mon Aug 19, 2019 2:52 pm

I have a smallish position in VIG. I like it. The dividend is not especially impressive but it's probably pretty safe given the way that particular ETF is structured. Most of my stock investments are obviously in standard index funds. But I have to admit, I've never seen the point of owning a company, no matter how profitable, that doesn't share any of its profits with the owners.
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Re: Dividend Growth Investing

Post by mathjak107 » Thu Sep 05, 2019 9:05 am

sophie wrote:
Sun Jun 30, 2019 8:58 am
Ironically, the experience of holding physical gold in my hand is what got me interested in buying individual stocks. There's nothing like direct ownership.

Yes it may not be optimal to be paying taxes as you go on dividends, but the tax rates are certainly better than ordinary income and you probably will end up paying it eventually anyway. Or more, if the cap gains tax rate increases. Plus, if you own individual stocks you can play the tax loss harvest game, and 100% of your earnings are qualified dividends. WIth funds, some of the payouts are ordinary dividends so you get stuck paying correspondingly higher taxes on them, and you can only tax loss harvest after large overall market swings.
as little as a 2% dividend in a taxable account can wipe out any lower tax advantage over the long term ... fund turnover adds to that problem .
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Re: Dividend Growth Investing

Post by Ad Orientem » Mon Dec 30, 2019 7:50 pm

VIG ytd +27.16%. That's not bad. A few thoughts on dividend stocks...

* Companies that pay a regular dividend, especially if they also regularly increase it, tend to be healthy companies.
* Dividends if reinvested can compound.
* Never really grasped the rational for owning a company, no matter how profitable, if they don't share any of the profits and you can't touch the company's assets. What the hell is the point?
* Dividends can cushion the downside in bad years.
* If you are living off your investments you will be paying tax on either dividends or your capital gains.

Long term I am a big fan of index funds. But VIG has done quite well over the years. If I had hit the giant super lottery I toyed with the idea of putting 75% into VIG and VIGI with 15% in VWSUX and 10% in gold and just saying "f--- it I'm done."
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Re: Dividend Growth Investing

Post by mathjak107 » Tue Dec 31, 2019 2:59 am

there is a lot of stuff in your assumption that is only slightly true .
a dividend is paid whether the company makes money or not . the blue chip grave yard is full of the bluest of blue chips that paid dividends right up until their last breath .

there is no difference between a non dividend paying portfolio paying out say 4% vs a 4% dividend that is reinvested ... except for some slight tax issues the balance assuming the same or greater total return will be pretty much the same , with the same cash flow ..

dividend payout themselves are a wash ... you have a mandatory reset in price before the stock can trade by the same amount .

if you reinvest then you have the same dollars as pre ex-div compounding for you .

if you don't reinvest then you have less . so whether you create your own cash flow by selling the equal dollars from a non div portfolio or they sell off a piece of your share price is irrelevant .

here is a perfect example ... on dec 11th if you had 10 shares of this you had 57.41 x 100 shares = 5741 for markets to compound on ..

the stock went x div and handed you back roughly .47 cents x 10 shares or 47 bucks .

when the stock opened the next morning it was reduced to 56.96 so now you have 5696 once the 47 bucks is subtracted out, compounding for you plus the dividend in pocket ... that is the same 5741 you had before the dividend .

so if you reinvest the 47 dollar dividend you will buy in at the reduced price of 56.96 giving you more shares but the same 5741 for markets to act on .

if the stock did not pay the div out and went up 5% the next day you have 5741 x 1.05 = 6028.05

if the stock paid a dividend and you did not reinvest , you have 5696 x 1.05 = 5980.80 or less then you would have had if no div was paid .

if you reinvest then you have more shares worth the same 5741 x 1.05= the same 6028 working for you .

DIVIDENDS BEHAVE LIKE STOCK SPLITS . THEY MERELY SWITCH AROUND EXACTLY WHAT YOU HAD .

they cushion nothing in a down market -period . this is a myth that won't die ...the stock may hold up better because RISING dividends are a sign of health but that has nothing to do with the stock doing any better from the mechanics of that dividend . the stock is still solely dependent on appreciation to gain a penny .

all your gains are based on total return and all that counts is dollars invested x the percentage up or down ... number of shares is irrelevant .


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Last edited by mathjak107 on Tue Dec 31, 2019 6:08 am, edited 8 times in total.
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Re: Dividend Growth Investing

Post by mathjak107 » Tue Dec 31, 2019 3:05 am

Ad Orientem wrote:
Mon Dec 30, 2019 7:50 pm
VIG ytd +27.16%. That's not bad. A few thoughts on dividend stocks...

* Companies that pay a regular dividend, especially if they also regularly increase it, tend to be healthy companies.
* Dividends if reinvested can compound.
* Never really grasped the rational for owning a company, no matter how profitable, if they don't share any of the profits and you can't touch the company's assets. What the hell is the point?
* Dividends can cushion the downside in bad years.
* If you are living off your investments you will be paying tax on either dividends or your capital gains.

Long term I am a big fan of index funds. But VIG has done quite well over the years. If I had hit the giant super lottery I toyed with the idea of putting 75% into VIG and VIGI with 15% in VWSUX and 10% in gold and just saying "f--- it I'm done."

there is more mis-information too as far as taxes .

dividends are very tax inefficient . you pay taxes on the entire dividend . in fact if you buy right before the stock goes ex div you bought a tax liability from the dividend but gained nothing for it you wouldn't have had if you bought the next morning when it went ex div . . you won't see those taxes you paid up front become a wash until you sell

on the other hand creating that same income stream from a portfolio of non div payers gets you taxed only on the gain portion up front , not the entire draw .

dividends are also not controllable ... i lost an aca subsidy from 62-65 because i could not control those taxable dividends .. that was thousands of dollars in subsidy since the dividends put me over ... i would have had to sell and get a whopping tax bill to stop the dividends .

so yes dividends are an easy way to get money but it is not anything different then a portfolio income stream assuming the same total return which taxes you only on the gain portion .

i dont know why people have such a hard concept understanding dividends . they are no different than a mutual fund dividend ..

you go to sleep with x-amount invested , wake up with more shares if you reinvested at a lower price and it was a wash regardless of how many shares you added .

you need to add NEW MONEY to gain any advantage investing in a down market to see any difference from the fact markets are down ... then you would be adding more dollars for markets to compound ..just buying shares in a down market by reinvesting adds no additional benefit at all . you have the same dollars compounding just rearranged differently .
Last edited by mathjak107 on Tue Dec 31, 2019 4:10 am, edited 1 time in total.
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Re: Dividend Growth Investing

Post by mathjak107 » Tue Dec 31, 2019 3:21 am

as far as dividend payers being anymore responsible because they payout that money instead of doing stupid things -- MORE MYTH

as i said in another thread :

case in point .

AT&T paid $100 billion to enter the cable business

AT&T thought it would be a good idea to diversify by paying $100 billion to take on cable company TCI. It was wrong! AT&T broke itself up a few years later and sold off the cable assets.

AT&T tried to elbow its way into the personal computer business with a hostile $7 billion takeover of NCR. It didn't work, and AT&T later spun the company back out at a $4 billion valuation.

Microsoft paid an estimated $500 million for mobile phone company Danger. It was supposed to be working on new phones for Microsoft, but most of the key employees left the company. The end result of the acquisition was the Kin, a social smartphone from Microsoft that totally bombed.

Cisco probably bought Pure Digital, the company that makes the Flip, right at the peak of its value in 2009. Since then high definition video cameras have been built into just about every smartphone making the Flip pretty much worthless in the long run. Which is probably why Cisco killed the $590 million acquisition earlier this year.

After Google bought DoubleClick, Microsoft tried to keep up by buying ad company aQuantive for $6 billion. The acquisition never really worked out. The aQuantive executives left two years after the deal closed and the technology was discarded.
..
AOL-Time Warner is obviously the worst

i can go on and on
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Re: Dividend Growth Investing

Post by dualstow » Tue Dec 31, 2019 7:50 am

Ad Orientem wrote:
Mon Dec 30, 2019 7:50 pm
VIG ytd +27.16%. That's not bad. A few thoughts on dividend stocks...

* Companies that pay a regular dividend, especially if they also regularly increase it, tend to be healthy companies.
* Dividends if reinvested can compound.
* Never really grasped the rational for owning a company, no matter how profitable, if they don't share any of the profits and you can't touch the company's assets. What the hell is the point?
* Dividends can cushion the downside in bad years.
* If you are living off your investments you will be paying tax on either dividends or your capital gains.

Long term I am a big fan of index funds. But VIG has done quite well over the years. If I had hit the giant super lottery I toyed with the idea of putting 75% into VIG and VIGI with 15% in VWSUX and 10% in gold and just saying "f--- it I'm done."
I’ve never owned VIG but I am very happy with the stable of indy dividend growers that I’ve held since about ‘05. It doesn’t make much sense if you already have a sizable salary. For me it’s been fantastic, not merely psychologically — although it is a nice thing to look forward to, and wonderful to see those payments constantly stream in — but also for living expenses and reinvestment.

I’ve read all the ‘against’ views at bogleheads, and I had a pm with one of the members there who privately confided that he’d always been an anti-dividend guy but now he enjoys them in his old age. Finds them “comforting.”

They have no place in the pp, really, but they’re doing their job as far as I’m concerned, as I watch my utilities climb and my real estate tax skyrocket.
Growth of principal, income, and growth of income. No tax hit so far.
Looks like it’s going to be a good year for Coca Cola. I’m looking forward to what 2020 will bring.
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