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/biz/ - Business & Finance


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895006 No.895006 [Reply] [Original]

How do you feel about dividend stocks, /biz/?

pic unrelated

>> No.895025

I think they're very good as a long term investment. They're where I would put my money if I was saving for retirement.

However right now I don't have any money in dividend stocks because I'm trying to start my own business and I need a certain amount of liquidity.

Ok actually I lied. I own some AT&T and some Verizon that I inherited, however I own it directly through compushare and haven't put it in my brokerage account yet. I need to do that at some point.

>> No.895031

OUTSIDE a tax-advantaged account, a dividend stock will lose out to a growth stock over time because the dividends are taxable as long-term capital gains. This eats into your investment capital, and saps your compounding.

Consider two equivalent stocks -- a growth stock (Stock G) and a high-dividend stock (Stock D) -- both of which yield 10% per year. Stock G earns its 10% by price accumulation alone, and Stock D earns its 10% by paying a 10% cash dividend. You own 1 share of each, and they are both worth $100/share. At the start, therefore, both Stock G and Stock D are worth $100.

At the end of 1 year, Stock G is now worth $110 (10% growth), and Stock D is still worth $100 but has paid you a $10 dividend which you re-invest. Your return on both stocks is the same -- before taxes. After taxes, however, Stock G is still worth $110 (no tax consequences) but Stock D has only returned you $108 because you paid 20% in capital gains taxes on the dividends. (I'm using 20% to keep the math simple in this example, but the principle is the same for any tax rate.) So after one year, Stock G is ahead by $2.

After year two, Stock G is now worth $121 ($110 x 10%), and stock D is worth $108 ($100 original + $8 reinvested) but has paid you a $10.80 dividend, reduced by taxes to $8.64, for a total gain of $116.64. Stock G is now ahead by $4.36

Hopefully you can now see where this is going. Every year the spread between Stock G and Stock D is going to get wider and wider because taxes aren't depleting any of your Stock G capital.

INSIDE a tax-advantaged account, you don't suffer the tax hit when dividends are declared. You get to reinvest the full amount. Therefore, inside a tax-advantaged account, growth and distributions both add EQUALLY to your growth and your compounding. So what you should be focused on is maximizing your overall return (growth PLUS dividends) instead of focusing on one or the other.

>> No.895064

>>895025
Oh and it's a game of "let's pick 3 dividend paying companies that will be around when I retire."

Of course it's possible to pick wrong. Someone I know picked AIG as one of theirs unfortunately.

I'd personally pick:
>Consolidated Edison
>Boeing
>idk what the third would be

>>895031
>OUTSIDE a tax-advantaged account, a dividend stock will lose out to a growth stock over time because the dividends are taxable as long-term capital gains. This eats into your investment capital, and saps your compounding.
Yes. A tax advantaged account is the whole idea basically.

>> No.896413

>>895031
Excuse me sir, but you are wrong. It works in theory, but in reality, you can never get a stock company, that can stay strong, increase its profits and optimize its structure for longer periods of times (tens of years). Dividend paying company is built on dividends and offers different principles to owners and investors, it is a completely different universe honey, you don't know your shit. Also during turbulent times and recessions so called value investing tent to underperform growth based dividend stock investing, always in the long term. That is ALWAYS. Why do you pay 20% on capital gains, while you can create offshore account and pay less or almost none? I do it, everyone else around me does it. Do you think I am a liar? Here is my portfolio you dickhead.

500 ED Consolidated Edison Inc
1500 SAN Banco Santander, S.A.
400 BHP BHP Billiton Limited
750 UHT Universal Health Realty Income Trust
500 HCP HCP, Inc.
400 NNN National Retail Properties
600 LDR Landauer, Inc.
100 KMP Kinder Morgan Energy Partners, L.P. , KMI FROM NOW ON
1000 MNR Monmouth Real Estate Investment Corp.
200 SPH Suburban Propane Partners, L.P.
200 NS Nustar Energy L.P.
500 STON StoneMor Partners L.P.
350 UVV Universal Corporation
800 T AT&T Inc.
600 ESV ENSCO plc
100 CVX Chevron Corporation
200 EMR Emerson Electric Company
500 PM Philip Morris International Inc
150 CAT Caterpillar, Inc.
500 NYCB New York Community Bancorp, Inc.
500 PBCT People's United Financial, Inc.

>male, 24
>current dividend income from the above ~ $20,000 a year
>rental income ~ $15,000 a year
>net worth $760,000
>no wife, no children, no debt, I work two days a month
>fuck off

>> No.896449

>>896413
Ok, open offshore account. Where? How? What triggers possible legal issues?

>> No.896653

>>896413
Yep - please enlighten me on how to open one. I'm 25, 20k Net worth.... good govt job and first rental purchase in the next yr
CPA in two years>>896413
>>896413

>> No.896883

>>896413
>>male, 24
>>current dividend income from the above ~ $20,000 a year
>>net worth $760,000
Why would post this? Do you think it makes your nonsensical post any more credible?

Fine then. I earn $400,000/year in dividends, interest, and fund distributions -- 20 times what your make. My net worth is well over 18x yours. So by your own logic, you should leave /biz/ forever for being such a poor fuckwit.

Fortunately for you, I don't judge people based on their net worth, and I certainly don't judge the quality of their posts based on how rich or poor they are. I judge posts based on the quality of the information presented.

And you, son, are full of shit. Dividend paying companies are subject to the same market forces and long-term volatility as growth companies. For you to believe otherwise displays an incredible degree of financial naivete. I'm sure you'll learn your lesson (painfully) in time.

>P.S. Fuck off with the passive-aggressive bullshit. You want to disagree with something I said? Fine, state so clearly and convincingly, with evidence. Otherwise, fuck off back to /pol/ kid.

>> No.897029

>>896449
SureTrader international corporate account owned by company based on Bahamas and/or Malta. Everybody does it.

>>896653
From my experience minimum legal fees for having offshore business are about $500 to $1000 a year.

>>896883
>I earn $400,000/year in dividends, interest, and fund distributions -- 20 times what your make.
That is fucking great and I envy you in a good sense, I will not be able to beat you if you do not fuck up heavily or if I am not unbelievable lucky. I won't leave 4chan for that, you have fucked me over and I want to fuck you over, that is why I stay here and exploit your ideas until I get more money. If you don't judge people based on net worth, you don't like money at all, if you don't like money at all, you'll lose them sooner or later. I love money, I want money, I judge people based on their net worth. I don't care about ethics, social justice or any kind of different bullshit pseudo material. There is only one true measure and it will always be net worth.

Also dividend paying stock do well better than non dividend paying stock in the long run. Run your data analysis right now if you don't know it yet.

>> No.897041

>>895006
>stock picking
Just buy and hold all of them. Sometimes dividend stocks perform, sometimes they don't.

>> No.897045

>>897029
>If you don't judge people based on net worth, you don't like money at all, if you don't like money at all, you'll lose them sooner or later. I love money, I want money, I judge people based on their net worth. I don't care about ethics, social justice or any kind of different bullshit pseudo material. There is only one true measure and it will always be net worth.
Jesus. Between your Google Translate quality English skills and your sociopathic life views, you might be the most retarded person on the board. Any one who takes any advice from this "person" should seriously question their own judgment.

>you have fucked me over and I want to fuck you over
Seriously, wtf. I want to be embarrassed and ashamed for you, but I just can't stop laughing.

>Also dividend paying stock do well better than non dividend paying stock in the long run.
I've already provided a comprehensive mathematical example proving otherwise. You've posted nothing but ad hominem attacks and (highly) dubious personal opinions. You have no facts and no data.

Look kid, even on 4chan we try to have intelligent discussions in intelligent threads, especially on this board. You're either a troll or a mental case, and either way your kind isn't wanted here. /b/ or /pol/ would be right up your alley.

>> No.897056

>>895006

We give our employees preferred shares that pay quarterly dividends.

This class of preferred shares amounts to about 10% of total shares most of the time, which however is entitled to 100% of the profit generated by the company.

However, we regulate the amount of total profit generated with smart writeoffs, which are effectively tax exemt reinvestments.

>> No.897141

>>895031
At the risk of being thick: how would we know, except in hindsight, that the non-dividend stock was going to yield 10%? It could have yielded 2%. Or negative 20%. With the dividend paying stock you're at least guaranteed a return (barring the company getting into severe financial difficulties) even if the stock price has a short term nosedive.

Or am I talking shit?

>> No.897214

>>897141
>With the dividend paying stock you're at least guaranteed a return
No you're not. First, dividends aren't guaranteed. Second, a stock that pays a 6% dividend but loses 8% in value over a year leaves you with a negative 2% return at the end of the day (before taxes). And in the real world, many dividend stocks are subject to price erosion or price stagnation because the company isn't growing. P.S. Guess when companies start to cut their dividends ... when economic conditions get tough (i.e., the same time that growth stocks start slowing down). You can't escape market risk and market volatility with dividend stocks.

Return is return is return. What matters is whether your net account balance is going up or down. Sometime dividend stocks will outperform growth stocks, and sometimes the reverse. Best approach is to own both.

>At the risk of being thick
Yeah, you're being a little bit thick, but that's ok. I was giving a *hypothetical* example to prove that even if you have two equally performing stocks, the growth stock is going to getter better long-term performance because of the tax hit on the dividends. Its an intellectual exercise designed to help understand one of the weaknesses of dividend investing. Nothing more; nothing less.

>> No.897253

>>897214
Oh I know its not guaranteed, but you can find companies that have a long history of increasing dividends throughout the years.

Oil stocks cut at the waist their dividends, but a company like Union Pacific has increased theirs steadily for 15+ years
Not a sure thing, in a boring industry like rail transport, but it made good money.

Each their own I guess /shrug

>> No.897347 [DELETED] 

>>897253
>Oh I know its not guaranteed, but you can find companies that have a long history of increasing dividends throughout the years.
And I can find companies with a long history of price growth throughout the years.

There's nothing special about dividend stocks in terms of finding good, stable investments with reliable year-over-year yields. And they don't have adverse tax consequences for long-term investors.

But as you say, to each their own.

>> No.897354

>>897253
>Oh I know its not guaranteed, but you can find companies that have a long history of increasing dividends throughout the years.
And I can find companies with a long history of price growth throughout the years.

There's nothing special about dividend stocks in terms of finding good, stable investments with reliable year-over-year yields. And the growth stocks (and value stocks, for that matter) don't have adverse tax consequences for long-term investors like dividend stocks.

But as you say, to each their own.

>> No.897381

>>897354
>don't have adverse tax consequences for long-term investors like dividend stocks.
I haven't worked out the math, but in your earlier posts you talked about the taxes and other shit.

Aren't you just front loading the taxes with dividends, instead of back loading when you sell later on ?
eg the $10 div VS $10 increase in stock price.
I'm not familiar with tax laws in the US, but I assume the 20% applies to both equally?

Also, some companies do offer a discount for DRIPS, 2% usually , sometimes higher.
I know my discount broker gets me the discount without me having to do paperwork/registering shares , but I lose out on any fractional shares so...

Whatever works for you man, there are multiple ways of getting to the same place, in my current position I feel pretty comfortable with dividend stocks so thats where i'm putting my money.

>> No.897401 [DELETED] 

>>897381
>Aren't you just front loading the taxes with dividends, instead of back loading when you sell later on ?
Paying taxes later is always better than paying now. Paying now depletes my capital, meaning I have less money to invest and grow over time. Paying later means I've already earned the benefit of compounding that money, possibly for decades. Its not that you pay less tax by deferring it; its that you get to keep that money for a longer time so it can work for you.

>Also, some companies do offer a discount for DRIPS
Fair point, but that's still the exception rather than the rule. And note that I didn't even include commissions for reinvesting dividends in my example above. For any dividend stocks with a DRIP plan, you can't reinvest that cash without paying the toll.

>in my current position I feel pretty comfortable with dividend stocks so thats where i'm putting my money
If you're an older investor, or need the income, that a fine choice. If not, then its pretty hard to defend putting all or most of your eggs into a basket that underperforms comparatively in the long run. Better to spread your bets around. Diversification is a thing because it works.

Good luck with your financial goals.

>> No.897405

>>897381
>Aren't you just front loading the taxes with dividends, instead of back loading when you sell later on ?
Paying taxes later is always better than paying now. Paying now depletes my capital, meaning I have less money to invest and grow over time. Paying later means I've already earned the benefit of compounding that money, possibly for decades. Its not that you pay less tax by deferring it; its that you get to keep that money for a longer time so it can work for you.

>Also, some companies do offer a discount for DRIPS
Fair point, but that's still the exception rather than the rule. And note that I didn't even include commissions for reinvesting dividends in my example above. For any dividend stocks without a DRIP plan, you can't reinvest that cash without paying the toll.

>in my current position I feel pretty comfortable with dividend stocks so thats where i'm putting my money
If you're an older investor, or need the income, that a fine choice. If not, then its pretty hard to defend putting all or most of your eggs into a basket that underperforms comparatively in the long run. Better to spread your bets around. Diversification is a thing because it works.

Good luck with your financial goals.

>> No.897411

Why not just invest in bonds preferred stock if all you are looking for is dividend income?

>> No.897415

>>895006
It's essentially like putting your money in the bank except it's for the upper class, so it's rigged to give them a much better rate than the banks will ever give the rifraff.

>> No.897443

>>897405
>reinvesting dividends in my example above. For any dividend stocks without a DRIP plan, you can't reinvest that cash without paying the toll.


You should check with your broker, mine does it for free, and offers me the DRIP/SPP[whatever] discount where available, I assumed this was a norm..


Granted, I don't know how exhaustive the list of synthetic DRIPS is, but I don't buy penny stocks in the first place so I don't expect to be turned down on a half billion dollar company.

Maybe shit is different down south, but TD in Canada makes it very hassle free

>Hello TD ?
>I would like to convert X stock to DRIP
>ok thanks, bye.


But for some reason you have to call in and do it, there is no online option for this.

>> No.897444

ihaz is ITT? im out. the guy spews bullshit all day his theory that a growth stock will ALWAYS grow and that a dividend stock ONLY has a dividend and doesn't grow is bullshit. stocks go up and down i rather have a dividend paying stock that is staying flat then to have a "growth" stock that isnt paying a dividend and staying flat.

who knows, maybe the "growth" stock tanks and the dividend stock has climbed 7% and has given you a dividend.
the problem is that some companys can't afford to give a dividend, they don't re-invest that money and the company can sometimes start to lose money due to a high dividend.. but whatever the case, don't listen to ihaz. they stay on here all day trolling people.

>> No.897475
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897475

>>897444
>his theory that a growth stock will ALWAYS grow and that a dividend stock ONLY has a dividend and doesn't grow is bullshit
It's not a theory. It's a hypothetical example to demonstrate a point about taxes.

Why am I not surprised that it went over your head.

>> No.897954

>>897475

You're not completely wrong, but it ain't right either, because it's very superficial.

Your theory only holds up if you're an american investor using american brokers exclusively on corporations based in the maledives operating in unsaturated markets.

plus, you're sort of comparing apples and oranges. A corporation in a sector with a saturated market can actually increase its market cap by paying dividends in stead of not. For a corp in an unsaturated market it's often the opposite, but not always. It heavily depends on the corporation type and the jurisdiction it's in.

It depends on context. In a very narrow context it works.

>> No.897969

>>897954
>Your theory only holds up if you're an american investor using american brokers exclusively on corporations based in the maledives operating in unsaturated markets.
Look kid, it's not a theory. It's an example. I.e., an intellectual exercise to demonstrate a point. This is a common teaching tool that you should have first encountered in elementary school.

Are there really so many dim-witted people out there that they don't know what a hypothetical means?

As for my example, it does indeed only apply in situations where dividends are taxed. Therefore I explicitly excluded tax-advantaged accounts right in my original post. If your dividends are not taxed for any other reason, such as your local tax regulations, then the same caveat applies. That should be evident from the context -- since the entire illustration is about taxing dividends -- but obviously you're the kind of person who needs things spelled out.

The example has NOTHING to do with American brokers or not. It's about taxes, which are dependant on your domicile not the domicile of your brokerage.

The example has NOTHING to do with the market conditions or differences between the exemplar companies. The example states right in the premise that the companies are equivalent and generate the same return. If you change the premise, then you change the example. Again, you should have learned this by around age 8 or 9, but its never too late.

>> No.897989

>>897969
>The example has NOTHING to do with the market conditions

I think it does. I'm not talking about bull/bear market condition, but state of the sector. maybe you're misunderstanding that.

>> No.897997

>>897989
>'m not talking about bull/bear market condition, but state of the sector. maybe you're misunderstanding that.

"Consider two equivalent stocks -- a growth stock (Stock G) and a high-dividend stock (Stock D) -- both of which yield 10% per year."

The example assume equivalent companies with equivalent yields. It's literally the perfect apple-to-apples comparison. If you want to change the assumptions about annual yields, please feel free to make up your own example. But don't change the fundamental premise of my teaching exercise and then claim that my conclusion was wrong.

>> No.898005

>>897045
I don't have time for this kind of bullshit you monkey yankee, I am from flipping Saudi Arabia; you know. I can buy your wife with my father's oil fields, I can even buy you for that kind of money. I think that is enough of explaining you how stupid you are, I don't even need to use advanced optimization structure for that kind of data analysis.

Now... back to business! Dividend stocks are the best long term investment by far and always outperform value stock investing in the long term, read any book, get historical data and compare many portfolio values each with dividend and value type of investment approach. I don't have time for this, if you are so lazy, you won't get any answers here, you should get back to /soc/.

>> No.898011

>>897444
I'm with you on that! Poster g4xkVYZ2 has personal issues and can't hold his urine anymore, his comprehensive approach consists of holding his balls in one hand and shit on the other one. He has been educated in Moscow first university of Art, graduated in schizophrenia trolling with full honours. He has literally invested zero in his life and lives of state pension with his deaf pig Alfred on a Farm in Kansas, spends all his evening on 4chan.

>> No.898019

>>897997

yes, sorry, you're absolutely right.

I realize now that I tried to interpret it in terms of future development but you're talking about something completely static which which doesn't resemble reality in the least.

I still don't agree because reinvested profit can be taxed just as much as dividends but sure, in a tax haven from where you export your dividends (why? doesn't matter, it's fictional, right?), yes, you're right.

I apologize.

>> No.898041

>>898005
>>898011
Kek. Comedy gold.

Are you the chip-warmer guy?

>>898019
>I still don't agree because reinvested profit can be taxed just as much as dividends
I already explained this. >>897405

>> No.898065

>>897444
dividends can grow, but usually, they do often stick around their call price. which i find to be more attractive than unlimited growth, because you won't ever really see a preferred share go up double it's call value.
buying the dip is more accessible in the preferred market.

also fuck iHaz

>> No.898068

>>895031

You are implying dividend stocks see no gains excluding dividend payouts, which is extremely inaccurate. This scenario is not realistic at all.

>> No.898083

>>898041
Hey, Mr Dipshit, all of your hypothetical assumptions are based on completely unrealistic environment. Wake up! I speak of years of experience and data mining. If you really believe value investing outperforms growth strategies I actually pity you as you deliberately prove intensity of your stupidity and call it a clever idea.

>> No.898084

>clowns start hating on ihaz when he's giving perfectly sound advice and having intelligent discourse with one or two other anons

I never liked this meme

>> No.898085

>>898068
It's a simplified example but everyone knows dividend stocks can grow and he never implied that they can't. But guess what growth stocks do as well? It starts with a g.

>>898083
I wish /biz/ had flags

>> No.898090

>>895031
Don't most decent dividend stocks give you the option of paying out the dividend in shares? I know all the ones I do do this. You usually even get a better rate on the "purchase".

>> No.898095

I think they completely miss the point in both ways.

Stocks should be for growth, bonds for cash payments. Dividend stocks however don't grow, but they still carry way more risk than bonds. How's your retirement if two of your big dividend stock companies go bankrupt? Or if they reduce dividends?

The reason people pick bonds is because they offer stability, which dividend stocks don't do. But they offer neither growth.

I can see how they seem attractive right now with shit bonds, but you aren't 5 years before retirement are you?

>> No.898103

>>897029
>There is only one true measure and it will always be net worth.
I like how you think

>> No.898105

>>897444
Dividend stocks don't just own a bunch of trees that grow money. They are usually mature companies and use their profit to distribute to investors.

Growth stock companies however reinvest their profit to expand business, and thereby grow the value of the company.

Owning but will increase your net worth but what I said in the other post: you are taking a larger risk where bonds do the same thing.

In addition to that you end up paying capital gains tax instead of dividend tax which is beneficial in some countries.

>> No.898106 [DELETED] 

>>898083
>If you really believe value investing outperforms growth strategies I actually pity you as you deliberately prove intensity of your stupidity and call it a clever idea.
Kek. I haven't talked once about value investing in this thread because the tax attributes of value stocks are really hard to pigeonhole. They tend to run the gambit between dividend characteristics and growth characteristics, so you can draw easy tax-based conclusions about them.

Omar, if you want to have a discussion about the merits of value stocks, please feel free to start your own thread. I'll jump in if I feel that I can add anything to the discussion. But even with all your Saudi oil money and power, its still rude to try changing the topic of a thread midway through. Your father would be very displeased with you.

>>898084
>>898085
Thanks. It's nice to see there are some intelligent people still here.

>>898090
>Don't most decent dividend stocks give you the option of paying out the dividend in shares?
Sure, but the dividends are still taxable the same as if you received cash. A dividend re-investment plan (DRIP) won't save you from the tax consequences.

The only way to do that is by putting your high-dividend stocks into your 401k, IRA or similar tax-advantaged account. That's what I do.

>>898105
>They are usually mature companies and use their profit to distribute to investors.
Worse yet, many of the high-dividend energy stocks and trusts have finite lifetimes, meaning the stock price must by definition fall with the passage of time. And yet people still buy these things because of the gaudy yield. *sigh*

>> No.898107

>>898083
>If you really believe value investing outperforms growth strategies I actually pity you as you deliberately prove intensity of your stupidity and call it a clever idea.
Kek. I haven't talked once about value investing in this thread because the tax attributes of value stocks are really hard to pigeonhole. They tend to run the gambit between dividend characteristics and growth characteristics, so you can't draw easy tax-based conclusions about them.

Omar, if you want to have a discussion about the merits of value stocks, please feel free to start your own thread. I'll jump in if I feel that I can add anything to the discussion. But even with all your Saudi oil money and power, its still rude to try changing the topic of a thread midway through. Your father would be very displeased with you.

>>898084
>>898085
Thanks. It's nice to see there are some intelligent people still here.

>>898090
>Don't most decent dividend stocks give you the option of paying out the dividend in shares?
Sure, but the dividends are still taxable the same as if you received cash. A dividend re-investment plan (DRIP) won't save you from the tax consequences.

The only way to do that is by putting your high-dividend stocks into your 401k, IRA or similar tax-advantaged account. That's what I do.

>>898105
>They are usually mature companies and use their profit to distribute to investors.
Worse yet, many of the high-dividend energy stocks and trusts have finite lifetimes, meaning the stock price must by definition fall with the passage of time. And yet people still buy these things because of the gaudy yield. *sigh*

>> No.898111

>>898107
>run the gambit
>diamond dozen
>blessing in the skies

Can't tell if stupid or high-tier troll. The word you were looking for is gamut.

>> No.898116
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898116

>>898111
Thanks. I'm duly chastised and humbled. Obviously I'm a complete retard and you're a genius for pointing it out to the world. I'm confident that you'll have the most upvoted comment in this whole thread.

>pic not related. honestly. just a random image. doesn't apply to you, snowflake.

>> No.898379

>>898116
Oh your anger is just so delicious.

Anyway, div stocks are great if you have enough money to purchase a significant amount.

>> No.898419

>>895006

When things are good, you can expect a good yield

When things are bad, you can either expect a yield (which is downright horrible when a company is loosing money) or nothing.

So there is that.

Just got a dividend from Barrick gold of a whooping 2 fucking cents.
Why not just stop the dividends alltogether? 2 fucking cents? Why? You are spending more on administration that I am recieving! Use those money to pay down debt/make operations more profitable dammit!

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>>898419

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>>899954

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>>899955

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>>899962

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>>899963

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>>899964

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>>899966

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>>899971