/biz/ - Business & Finance

>>57098159
I did pretty well this year scooping up a large chunk of O when it was bottoming. Scaling back my REIT buys going forward and I’m just going to let them DRIP + small bimonthly contributions

>>57098159
>>57098167
pee pee poo poo

Dividends are irrelevant:
>https://www.jstor.org/stable/2351143
Above is the original paper, and below is a summary that is likely more your speed:
>https://www.investopedia.com/terms/d/dividendirrelevance.asp
Here's a good video explaining the concept as well:
>https://www.youtube.com/watch?v=f5j9v9dfinQ

Rather than relying on something irrelevant like dividends, if you really must use some generic factor criteria to drive longterm investment decisions. I'd recommend you consider the Fama-French 5 factor model:
>https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2287202

Once adjusting for other factors, dividends become entirely irrelevant as a predictor of future stock returns:
>https://www.financialplanningassociation.org/article/journal/APR13-dividend-investing-value-tilt-disguise
>In this study, the dividend yield factor has been shown to actually detract from portfolio performance.
And one final video, pointing out the drawbacks of restricting investment options based on some arbitrary irrelevant criteria:
>https://www.youtube.com/watch?v=4iNOtVtNKuU

Hope this helps you see the light. You are welcome to keep making these useless threads, but if you keep crosslinking to /smg/, expect me to continue posting this.

heres my dividend growth portfolio
https://m1.finance/gOYigz624A9X

>>57098159
Aren't dividends taxed yearly as income while stock going up isn't taxed until I sell so it's only taxed one (1) time? What are the tax benefits of dividends?
Why is this company paying me dividends? I guess it's good because it's some shitty monopoly stock like utilities or whatever that can't expand so just gives excess money out. But the entire company is a cancer and why would I want to invest in a company that can't reinvest in itself but pays dividends out?

Not trying to be an ass, but
>for tax reasons why are dividends good unless I'm a retired boomer
>why is it good when a company pays dividends

>>57098195
Even though dividends are not “free money”, the choice to receive and re-invest dividends is not the same as the company retaining 100% of its earnings. This is the most prevalent myth perpetrated – unknowingly – by those who claim that dividends are irrelevant.

Those arguing against the relevance of dividends provide the following argument. Let’s say a company’s stock is worth $10. In scenario A, it provides a $1 dividend. In scenario B, it retains its earnings. According to them, the two scenarios are equivalent because of the following math:

Scenario A – with a dividend
Total value = Dividend + (Stock Price – Dividend)

= $1 + ($10-$1) = $10

Scenario B – without a dividend

Total value = Stock price = $10

In other words, the total return is the same because the value of your stock drops by $1 after issuing the dividend (which is paid from the company’s assets). So according to them, this is like transferring money from one pocket to the other. Ben Felix – who has become famous, thanks to his well-known Youtube video on the “Irrelevance of Dividends”

>>57098195
Dividends are Like Moving Money from One Pocket to the Other?
But Ben Felix and others who repeat the above sentiment are wrong. While the math for the immediate stock price + dividend is the same because the dividends come out of the stock price, the difference behind the scenes is very large.

Re-Invested Dividends Buy Proven, Existing Cashflows

When you use your dividends to purchase additional shares in a company, you are purchasing more of the same, proven cashflow that the company has already demonstrated it can pull off. There’s no speculation. Mind, I’m not saying that dividends are guaranteed and that the company won’t cut them in the future. But the company has shown that it can generate the cashflow it already has, and you are using your dividends to buy more of the same.

In other words, you are using your dividends to purchase another tap, compared to retained earnings, where the company only promises to grow the size of the existing tap.

>>57098195
Each time you re-invest your dividends, you are purchasing another tap that already exists.

Retained Earnings are Only a Promise of Future Growth

When a company retains its earnings, it’s making the following promise to you:

I will invest this money into the company to generate at least the same returns as the one I’m generating now, if not more. These earnings will be in addition to my existing operations.

The last part is important. The company is promising to grow its business at an Internal Rate of Return (IRR) that is at least the same as what it is currently generating. That growth hasn’t happened yet. It is a speculation. It may never happen. There’s a good chance that the company will fail to generate higher returns on its retained earnings than what it is currently generating.

In general, I don’t believe that magical, revenue-growing opportunities are just randomly lying around in which companies can easily invest their retained earnings at a higher IRR than their already existing cashflow machine.

If you think of a company as a tap from which money flows, then by retaining its earnings, a company is promising to increase the size of that tap.
How much faith do you have in the capacity of human managers to consistently grow the rate of a cashflow? Do you think that they’re all-wise and super-efficient? I don’t. Companies suffer from an exaggerated sense of their own importance and capabilities and routinely overestimate the IRR they can generate from new investments.

>>57098207
>Aren't dividends taxed yearly as income while stock going up isn't taxed until I sell so it's only taxed one (1) time? What are the tax benefits of dividends?

Bro, Google exists and so does investopedia why dont you just use it?

https://www.investopedia.com/terms/q/qualifieddividend.asp

>why is it good when a company pays dividends
Because you get PAID. Dont you want money? Idiot. On top of capital appreciation

>>57098195
Those who argue against the relevance of dividends create a false dichotomy. They present their arguments as one of two options:

A company retains ALL of its earnings
A company pays out ALL of its dividends
In reality, cashflow-rich companies will never pay out all their earnings as dividends. Healthy companies maintain a payout ratio of less than 60% – namely the percentage of earnings paid as dividends. This leaves a very healthy chunk of change to re-invest into the company to chase that magical extra IRR that investors seem to believe is just lying around for the taking. Fine! Just because a company pays a dividend doesn’t mean it won’t invest in its growth. And if that extra growth comes to fruition, it too will be paid out as dividends.

Yes, Dividends are Less Tax-Efficient

I won’t debate this one. Yes, you will most likely be taxed on your dividends. Some countries, like Canada, give extremely favorable treatment to Canadian dividends, so you might be impacted to a greater or a lesser degree depending on where you live. In most countries, dividends – at least those generated in your home country – are taxed quite favorably, and often at the same rate as capital gains. Nonetheless, there’s no denying that they are taxed in one way or another, while capital gains are not.

The question then becomes, are the taxes worth it? For me, knowing that I’m buying something of value is worth the additional taxation. Yes, your unrealized capital gains are safe from being taxed. But at the same time, you are holding worthless assets that don’t generate a cashflow. If I need to pay tax to hold assets that have value, then so be it. I’m not going to force myself to make poor investing decisions by buying something I consider worthless, simply to avoid taxes. The tail cannot wag the dog.

Why Stock Buybacks Aren’t Good Enough

Stock buybacks are supposed to be the perfect form of returning money to shareholders. After all, they increase the price of the stock without any taxation event! Buybacks appear to be the magic pill that forever puts dividends in the shade. Why would you waste money on giving a dividend, when you could purchase back your own stock? Well, here’s why buybacks are a terrible alternative to dividends.

Dividends vs Buybacks: Investing vs Speculation

I will show, how buybacks encourage short-term thinking by company executives whose compensation depends on the stock price and stock-related metrics like EPS. Buybacks encapsulate the fundamental difference between investing and speculation. Speculation concerns itself with price movements, while investing concerns itself with cashflows.

More on that below.

Buybacks Reward Sellers and Often Penalize Existing Shareholders

I find it a cruel irony that by purchasing its own stock, a company is rewarding those who sell their shares and are no longer investors, while existing investors are left with paper gains that can evaporate in the wind. Particularly when the impact of the buybacks is mitigated by stock dilution in the form of stock-based executive compensation. The only ones who win in that scenario are those who sold out of the company, and the executives.

thoughts on this line-up: BITO,TSLY, MAIN, SPYI, JEPI and JEPQ?

>>57098195
Based. dig BTFO once again

>>57098247
Covered call funds are still too new for me to get behind

>>57098225
My issue is you are getting taxed every year, I don't give a shit that it's actually a capital gain not an income tax. The fact that you thought my issue was how it was taxed not that it was taxed every year proves you are a fucking moron.

>>57098225
>you get PAID
You get taxed retard.
>On top of capital appreciation
But much less because the dividends go out of the stock price, as the irrelevant link you posted above shows.

Jesus Christ. So lets be clear, you are a fucking retard happy instead of paying capital gains once (1) when you sell, you pay capital gains every year. And you are happy for capital appreciation, though your "gains" you are paying taxes on every year take away from that.

Please KYS you fucking retarded faggot.

>>57098209
>>57098214
>>57098221
You can spam your full 10 post copypasta response but none of this hits on the actual facts of dividend irrelevance.
It's just pure cope. You can't dispute the math and logic behind the theory, a theory that has held up for nearly 100 years now against assaults from much smarter minds than your own.

The real reason it takes you over 10 thousand characters to get across your point, is not that it has any validity to it. It doesn't. You can't even begin to refute the most basic tenets of dividend irrelevance theory. Your bloat is purely an attempt to confuse readers and extend this thread to make it appear as if there's some real substance.
Sadly, no one is falling for this.

What's truly incredible is that contained within all this delusion over some hypothetical dividend reinvestment play, you've effectively written up the case for buybacks. All the same compounding advantages, but with generally better tax benefits. But you can't admit this, as doing so would be admitting this thread is a useless waste of space. So instead you just call them a ponzi and move on.
There's a reason many of the top modern-day businesses choose to focus more on buybacks, and it's the same reason they continue to outperform high yielding dividend focused plays.

>>57098267
Ahem

the total return is the same because the value of your stock drops by $1 after issuing the dividend (which is paid from the company’s assets). So according to them, this is like transferring money from one pocket to the other. Ben Felix – who has become famous, thanks to his well-known Youtube video on the “Irrelevance of Dividends”
Dividends are Like Moving Money from One Pocket to the Other?
But Ben Felix and others who repeat the above sentiment are wrong. While the math for the immediate stock price + dividend is the same because the dividends come out of the stock price, the difference behind the scenes is very large.

>>57098277
I’m glad the dividend relevance pasta makes you so upset kek. Imagine coming here week after week to just get BTFO by the dividends relevance pasta.

>>57098207
>for tax reasons why are dividends good unless I'm a retired boomer
Dividends can be qualified or unqualified. Qualified dividends are taxed as long term cap gains. For a divvy to become qualified, you only have to hold the stock for about 3 months, shorter than 1 year requirement for selling at long term. Dividends also tend to grow exponentially, providing passive income that usually outpaces inflation. Also you can take advantage of regulatory arbitrage if you hold BDCs or REITs in tax-advantaged accounts, and harvest extra yield.
>why is it good when a company pays dividends
Several reasons. One being that it gives the shareholder the optionality to either reinvest into the same company or a different one which is at a more opportunistic price. There's no requirement a divvy from one company be reinvested in the same, as many might make the mistake when evaluating the role of a divvy stock in a portfolio. Another reason is divvies are technically less risky, as you are not trusting management with the entirety of the company's earnings. Rather than fund every project, some of which might have poor or negative returns, they only invest earnings in their selected best projects. I like to use the example of what if Google had given all the money spent on Google Glass, Stadia, and Google+ on divvies instead.

Without a dividend, a shareholder only benefits when selling to another, or the company is bought out. The person buying the share from you has the same expectations, so without divvies, the only purpose of shares would be expected buyouts. Divvies are a sign of company maturity. They spend on growth when there is opportunity, and pay a share of income as gains when the marginal roic tapers off as they become large.

Unlike some anons may claim, this is not a suggestion that dividends are superior, but merely they are indicator of company health and the primary reason for investment. The term share comes from "share of profits", which is the dividend

>>57098295
I don't come here every week. In most of your recent threads, some other anon has already generously reposted my irrelevance pasta for me. So I have no need to participate.
Embarrassingly, you are the only person who believes all that dogshit you've typed. You don't have anyone else to spam your shit for you, because no one is retarded enough to save that trash to their own hard drive. It's you against the world, and in your grand delusion you've convinced yourself the entire world is wrong.

>>57098247
not a fan of option income funds because they limit upside capital gains and don't benefit from qualified status. Companies with consistent divvy growth are much more valuable in the long run imo, because you get both increasing divvies and capital appreciation.

>>57098319
Schizo posting after losing an argument? Can’t say I’m surprised

>>57098209
>>57098288
...what? That isn't how that works.

Scenario A - Stock is $10, pays $1 dividend, you are taxed on that $1, total value = 9.90 (stock value + dividend - taxes (YOU TURBO RETARD FOR NOT KNOWING THIS KYS FAGGOT) or whatever you paid on the capital gains

Scenario B - stock total value = stock price = $10

So you are completely wrong and do not understand taxes and are a fucking moron and should KYS.

The annoying thing is you are posting stuff like a schizo and you don't know how retarded you are. Jesus Christ I'm glad I'm not a family member of yours because there is like a 20% chance you will have a schizo moment will you realize taxes exist and kill them.

This account shown is a Roth ira so why all the concerns of paying taxes? Going to be honest I didn't read shit either.

>>57098304
Thanks for not being a schizo and actually giving an answer.

>>57098351
This dude shows up in every thread to cry about dividends and get BTFO. Pay him little mind

>>57098351
Take two scenarios:
>Scenario 1: A > B
>Scenario 2: A = B
Knowing these two possibilities, would you ever suggest a stranger choose option B?

Option B represents dividend paying stocks. Option A represents buybacks. Scenario 1 is a taxable account and scenario 2 is a tax advantaged account.

>>57098304
post was at char limit, but when companies do buybacks, it tends to be when business is booming their valuations are higher rather than lower, it's more beneficial for the shareholder to retain their divvy than reinvest immediately.

Some companies offer a variable dividend which is a percentage of free cash flow. This tends to make the stock more volatile as the market reprices the stock according to what it thinks the fair yield should be. This extra volatility gives an extra discount, and otherwise strong companies will have a higher yield than their peers due to this extra risk factor. Also when a company with a variable dividend does buybacks, it increases future dividends as payouts are divided over fewer shares. For companies with fixed dividends, it enables them to raise the payout potentially higher due to reducing the number of shares paid towards. Apple, Microsoft, and Visa are a few big name examples of companies with fixed dividends at high growth rates that also perform buybacks.

>>57098355
checked and you're welcome

>>57098408
Buybacks can be bad. Management is often rewarded huge stock bonuses for reaching EPS targets. Sometimes they squander cash on buybacks at inopportune times just to dilute shareholders by giving away stock compensation packages. Google is famous for this and it’s why they are known as the cuck stock

>>57098167
Nice companies anon. Do you know if NEE issues a K-1? I think they have a subsidiary that's a LP or MLP but I can't find any info on it. pic unrelated i just like cats

>>57099897
NEP is an LP I believe

>>57098209
>>57098214
>>57098221
Excellent takedown of dividend irrelevencetard

>>57098159
Whats the appropriate % allocation on dividends for a 1m portfolio?

>>57101631
Depends how far out from retiring you are. If my timeline was 10 years I would be comfortable allotting 75% of that towards good dividend companies and letting them DRIP

>>57098231
>The question then becomes, are the taxes worth it?
no, /thread

basic math shows dividend investing sucks with taxation, it's why nobody actually does it anymore

>>57101745
Can you show your math. You’re kind of outing yourself as a retard

dividends are irrelevant, if you want a return on your investment just sell a part of it instead of letting (((them))) tell you when you have to sell some. that's why BRK.A doesn't offer any dividends. if you want a return on your investment, just convert your class a shares to class b shares and sell some.

>>57102193
Why would I sell my shares? What if they are currently undervalued? Terrible advice

>>57102227
>Why would I sell my shares?
You wanted a return on your investment.
>What if they are currently undervalued?
There are times when BRK.B is going to be trading at a discount compared to BRK.A, in that situation you're better off selling your BRK.A and then buying the BRK.B while it is trading at a discount, and taking your return that way.

>>57098340
Depends on what fucking country you live in.

>>57102227
You do realise that dividends are just an indirect way of selling your shares?

>>57101211
Thanks. I was thinking of grabbing some NEE at this price (if rates go down soon green energy won't be this cheap again for a while I think). Just wanted to avoid the K-1 you often get with utilities companies if I can help it. If it's just NEP that has one then I should be good to go.

>>57102261
>There are times when BRK.B is going to be trading at a discount
Imagine that, a company that doesn't payout dividends although they themselves receive $6 billions in divvies from the companies they hold, yet can TRADE at a discount!

>>57102296
In a vacuum sure. That isn’t how the market works unfortunately.

>>57098159
>>57098167
Hey quick question. Is dividen investing the worst form of investing for people with low capital ?

Out of the different category of investment strategy dividend focused strategy seems the worst because it can only yield few percent at best per year (20% max on average). Which will not make you rich if you have a small capital to begin with.

Two other strategy that I identifiend is growth focused strategy and value focused strategy.
The value focused strategy is the one that seems to have the greatest return at short term but also the highest risk. If a stock is undervalued there might be a reason. You can make +50% per year but it's a one trick poney. You need to change the stock when it near the correct value.

The growth strategy is a good one for an average horizon (5 years maybe). You can have 20% growth but every year it's compounding. The risk is average.

>>57102983
I would say bond investing or day trading would be worse. Options trading would be the worst of all but I don’t think people consider that investing
>only yield a few %
Starting yield maybe, you have to look into dividend growth and understand the term yield on cost

>>57102983
Best/worst depends what your specific goals are. If your goal is to turn a small amount of capital into a large amount of capital in a few years or less then yes dividend investing is not going to get you there. But it does have other advantages that I think makes it reasonably competitive in the long run.

To me the most attractive part of dividend investing is that it focuses mostly on automatic extraction of wealth from proven sources. There's less timing the market and few worries about companies "turning the corner" into profitability (or not). I find that identifying bad dividend companies is usually easier, too. If the dividend is cannibalizing the balance sheet then best to stay away.

Good dividend companies also tend to have lower beta values, which lets you be more confident with how much of your means you leverage into your investments. The dividend payments particularly help during corrections where many great investment opportunities are often missed for lack of dry powder.

That said not every strategy is for everyone in every situation. I do hold some dividend company positions but I also hold ETFs, growth companies, and engage in trading.

>>57102983
It's bad if you want to get rich quick, it's great if you have a long horizon and want to build wealth.

>>57104125
Wealth building is really my M.O. Specifically, generational wealth to pass on to my two sons. Even if the Trinity study is taken as gospel; its success criteria is to run out of money after 30 years - and that is not acceptable to me. I want my kids and grandkids to enjoy the fruits of my labor long after I am gone.
SCHD/SCHY/VNQ make up my equity position. Monero, Bitcoin and SILJ are my hedge against currency collapse. I've done incredibly well with this and see no reason to change.

>>57102983
The type of investing that is "worst" for anyone is the type that doesn't align with their needs and resources.

If you are a low capital investor, dividend investing can still work well if you have time for your dividends to compound. Dividends also tend to be lower risk, even with a minimum of research.

Moreover, dividends can provide a tax-advantaged income stream if that's something you need.

Don't fall into the myopic trap of the "dividend irrelevance" autist - there is not a "best" investment, though there may be a "best" investment for you personally.

my dividends work just fine

>throw it into MO, PM, BTI
>the price of MO and BTI has stayed damn near the same for years; PM went up
>dividends are high and paid quarterly
>put 5-10% of takehome pay into these
>buy more stock with the dividends

its the long run for me, im not planning to make it with this but its better than holding cash. big tobacco isnt going anywhere and they own many assets compared to other S&P companies.

>>57101211
Started the NEE position today. Thanks again.