dividend investing general /dig/

[Anonymous No.57234040]

Bimonthly recurring Roth buy edition.
>dividend aristocrats
https://www.nasdaq.com/stocks/investing-lists/dividend-aristocrats
>dividend achievers (10 year dividend increase history)
https://www.marketbeat.com/dividends/achievers/
>check dividend history, dividend growth history, payout ratio etc.
https://www.financecharts.com/
>dividend calendar
https://www.nasdaq.com/market-activity/dividends
>dividend growth calculator
https://dividendathlete.com/dividend-investing-
calculator/
>what are qualified dividends and how are they taxed
https://www.investopedia.com/terms/q/qualifieddividend.asp
>REITs
https://www.reit.com/what-reit
>power of dividend growth
https://www.investopedia.com/articles/basics/04/072304.asp

[Anonymous No.57234125]

My first special dividend as a COST shareholder. Only 1.25 shares but I’ll be ready in a couple of years when the next special dividend is announced.

[Anonymous No.57234189]

[Anonymous No.57234256]

Test

[Anonymous No.57234511]

Dividends are irrelevant in an idealized market — one with no mispricings that you can reliably exploit, no taxes, no transaction costs:
https://www.youtube.com/watch?v=f5j9v9dfinQ

>The researchers are wrong
That's very unlikely. If you proved that Miller and Modigliani's famous research on dividends was wrong on its own terms, you'd quickly become a celebrated intellectual.

>But real markets aren't ideal
You're right. Keep reading this.

>But there are mispricings I can reliably exploit
Then make money by exploiting your special knowledge of stock valuations. Don't worry about dividends per se.

>But tax treatment of dividends is significant for me
Fair enough. Seek or avoid dividends based on your tax situation (but as little as possible, because it's valuable for your portfolio to be broadly diversified).

>But transaction costs are high for this stock (for example, it's not publicly traded)
Fair enough. Dividend policy might matter in your case.

>But pushing the "sell" button is so much work
No it's not. If you can handle buying securities, transferring money to and from your bank account, and reading an investing forum, then you can handle periodically selling shares.

>But dividends prove that the company is making genuine profits, that its management actually works for the shareholders' benefit, etc. etc.
Every investor can see that. So either it's already reflected in the price or it's a special case of "but there are mispricings I can reliably exploit."

>But some stocks have steady dividends, whereas the price at which I can sell shares fluctuates and is sometimes very low
Every investor can see that. So either it's already reflected in the price or it's a special case of "but there are mispricings I can reliably exploit."

>But I just like dividends
That's fine. But some people reading this thread want to maximize their investment returns and would benefit from knowing about the science.

[Anonymous No.57234544]

>>57234511
Yeah, no shit! This is the go-to line of the “dividends are irrelevant” crowd, as they play what they think is the trump card to end all arguments.

Except that it’s a strawman. Not a single person who has the slightest knowledge about how finance works is ever under the delusion that dividends grow on trees. It’s kind of obvious that dividends come from a company’s assets, right? Or did they believe that those who want dividends think the money “magically” appears out of nowhere?

Retaining and Paying a Dividend are NOT Equivalent

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

[Anonymous No.57234567]

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.

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

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.

[Anonymous No.57234579]

>>57234544
>>57234567
Absolutely fascinating. You guys really took that one guy who posts dividend irrelevance in every thread to task

[Anonymous No.57234608]

>>57234567
>Re-Invested Dividends Buy Proven, Existing Cashflows
This is equally true of share buybacks, so this has nothing to do with dividends specifically.

[Anonymous No.57234642]

>>57234608
That depends entirely on when the buybacks occur. This picture sums up pretty nicely the risks with share buybacks to meet EPS targets. As a shareholder I hate being diluted under the premise of manipulative buybacks. That said, share buybacks are phenomenal when implemented correctly

[Anonymous No.57234654]

>>57234040

Love this fuckin thread. I'm at a 5% div and roughly 5-7% yearly return on actual stock values. Can't get enough of that cash flow

[Anonymous No.57234659]

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.


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.


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.

Apparently, I’m not the only one who thinks this. I have my problems with Buffet’s policy on Berkshire dividends, but in this matter, his views are my own. In Buffet’s 1999 letter to shareholders, he had this to say:
>Now, repurchases are all the rage, but are all too often made for an unstated and, in our view, ignoble reason: to pump or support the stock price. The shareholder who chooses to sell today, of course, is benefited by any buyer, whatever his origin or motives. But the continuing shareholder is penalized by repurchases above intrinsic value. Buying dollar bills for $1.10 is not good business for those who stick around.

Letter to the shareholders of Berkshire Hathaway, Inc – 1999

[Anonymous No.57234670]

Dividends, on the other hand, are a direct reward to long-term shareholders who are incentivized to keep holding the stock to reap its benefits. If they sell, they stop receiving those benefits. Why should a company provide liquidity to those who want to sell their shares?

Buybacks Benefit Company Executives More than Shareholders

Further down, I discuss the Modigliani-Miller theorem, and explain why it fails due to the “agency problem”. Namely that we can’t assume that what’s good for the shareholders will also be good for company management. Stock buybacks are so popular because they benefit executives in the company whose compensation is based on stock options and hitting EPS targets.

In a study for the Harvard Business Review titled “Profits Without Prosperity: How Stock Buybacks Manipulate the Market, and Leave Most Americans Worse Off“, William Lazonick makes the following point:
>In 2012 the 500 highest paid executives named on proxy statements averaged remuneration of $24.4 million, with 52% coming from stock options and another 26% from stock awards. With ample stock‐based pay, top corporate executives can gain from boosts in stock prices

Lazonick, W. (2014). Profits Without Prosperity: How Stock Buybacks Manipulate the Market, and Leave Most Americans Worse Off. Paper prepared for the Annual Conference of the Institute for New Economic Thinking, Toronto, April 10-12, 2014 (p. 2).

[Anonymous No.57234678]

Bottom line: There is ample evidence that stock repurchases are overly utilized to meet EPS targets to confirm with analyst expectations, to pump stock prices for enhancing executive pay and stock-based compensation.

But in theory, it should still be fine, right? Dividends or stock repurchases are all the same thing! Nope.

Stock Buybacks are Most Often Inefficient

Basic common sense will tell you that stock repurchases only make sense when the share is trading at below its intrinsic value. The same principles of investing apply when purchasing your own shares, as when you buy those of another company. Ideally, a company is in a better position to know the intrinsic value of its shares, so wouldn’t companies buy back their shares at attractive prices? But this doesn’t happen.

If the thesis is true, then share buybacks should increase during recessions and lowered prices, and decrease during bull-runs, right? After all, if share prices are depressed beyond reason, then it’s the perfect time to pick up your own shares on the cheap. The truth is that the reverse happens.

executives often claim that buybacks are financial investments in undervalued shares that signal confidence in the company’s future as measured by its stock-‐price performance. But as we have seen, over the past two decades major US companies have tended to do buybacks in bull markets and cut back on them, often sharply, in bear markets

Lazonick, W. (2014). Profits Without Prosperity: How Stock Buybacks Manipulate the Market, and Leave Most Americans Worse Off. Paper prepared for the Annual Conference of the Institute for New Economic Thinking, Toronto, April 10-12, 2014 (p. 11).

[Anonymous No.57234696]

>>57234642
If you know that management is doing "manipulative buybacks," then the rest of the market knows too, so it's priced in.

[Anonymous No.57234715]

>>57234696
That’s the problem, oftentimes you don’t know.
>>57234654
Nice yield. What are your favorite companies? You seem to be interested in the higher yielding up front stocks. Have you looked into low yield, high dividend growth stocks like Costco or visa?

[Anonymous No.57234731]

>>57234715
>That’s the problem, oftentimes you don’t know.
But you do know when to time your purchases of a "dividend stock"?

[Anonymous No.57234762]

>>57234715

I mix some jepi with some reit's, energy companies (many right around the 5% mark and long term great bets), and some lower more stable divvies like telecoms, utilities etc. Been playing the cycle on O too, have made a good bit back on them. Hbu?

[Anonymous No.57234763]

>>57234731
No need to time them. Personally I have bi-monthly recurring buys for my dividend Roth IRA portfolio. Sure I like to buy when the market is red but as long as I’m buying I don’t really care. Good dividend stocks are very easy to find, take the aristocrats list for example, it’s well known and those companies strive to continue raising dividends. And most do, see >>57234189

[Anonymous No.57234786]

Just stopping by to laugh at this schizo >>57234659 again. If you really want to make him seethe just mention autozone.

[Anonymous No.57234792]

Smells of curry in here.

[Anonymous No.57234801]

>>57234762
I went a little crazy and put 85% of my portfolio into O between $48-$55. Now I’m leveling that out over the course of the next few years. I dropped my bimonthly contribution to $10 + the monthly DRIP. As far as REITS go I’m now focusing on building a stack of AMT and VICI. You can look at the OP image to see how I disbursing between companies. My focus this year is SCHD and my basket of high dividend growers like V, MSFT, and COST

[Anonymous No.57234818]

i like dividends but this thread is hot garbage

[Anonymous No.57234837]

>>57234731
It certainty isn't obvious if you're not paying attention but I've got a good example:
VZ and AT&T dropped like 10-15% in a month due to the media running a dumb hitpiece about lead in legacy cables. When in reality next to nothing had changed for their business model, thats a good time to take a look. Not every stock event is so obvious though.

[Anonymous No.57234853]

>>57234801

Honestly I like your strat. I'm similar w about 10k split between a number of companies. I like SCHD, but honestly for the moment I need to be saving money for SPY just to get more general market pumps after it crashes these next few years. I use the investments as a way to help make my savings do something while I save for more real estate purchases and other real life stuff.

[Anonymous No.57234883]

>>57234853
I buy all of my S&P trackers (VOO, VT) in my taxable along with a few speculative biotech stocks, beverage stocks, and Mediterranean casual dining stocks. The Roth is strictly companies I sleep well at night holding

[Anonymous No.57234908]

>>57234837
>VZ and AT&T dropped like 10-15% in a month due to the media running a dumb hitpiece about lead in legacy cables.
Every stock has events and narratives that temporarily drive the price, not just dividend paying stocks.
That's the funny thing about you divvy fags. You truly believe your subset is something special. For whatever reason, your mind is incapable of comprehending the idea that the same logic can be applied to the whole investment universe. It's disappointing to see you all restrict yourselves in such a way. A real tragedy, so many good trades that could probably be made if you didn't arbitrarily limit your watchlist to this one subset of investable stocks.

[Anonymous No.57234946]

>>57234908
>trades
Sorry this a thread about investing. I’m what universe would I want to sell my shares in outstanding companies?

[Anonymous No.57235020]

Is the DIV ETF worth it? The ETF has gone down in value seems like every year.

[Anonymous No.57235032]

My friends tell me not to be an idiot and buy divi shares.

[Anonymous No.57235034]

>>57235020
DIV looks like a stinker. SCHD is a good one, it’s total return has beaten the S&P since the funds inception

[Anonymous No.57235066]

>>57234908
Sure, I look for these things in other stocks as well, but I have no intention in holding those for a long time frame except to avoid short term capital gains. Dividend stocks are something I can comfortably hold without thinking I need to offload them asap to maximize my returns.

[Anonymous No.57235088]

I'm conflicted on whether to have SCHD or DGRO in my roth

[Anonymous No.57235093]

>>57234608
share buybacks are more likely to benefit management at the expense of shareholders, especially accelerated stock repurchase programs

>>57234696
there are huge billion dollar funds built on different kinds of market arbitrage, none of them could function if the efficient market hypothesis was actually true

[Anonymous No.57235101]

>>57235088
If you buy enough SCHD, Schwab will send you socks

[Anonymous No.57235184]

>>57234883
>I buy all of my S&P trackers (VOO, VT) in my taxable
>The Roth is strictly companies I sleep well at night holding
I wrote up some thoughts on this topic yesterday >>57225927. It actually makes more sense to trade actively in a roth IRA, and leave the buy and hold positions for your taxable account.
If you're not trading, there's much less value to having an IRA at all. But one topic I didn't touch on was dividends. Dividend irrelevance ignores the impact of tax policy, but in the real world a high dividend can create significant tax drag that'll hurt long term compounding. Since dividends are taxable for anyone exceeding ~50k of income, in general it makes more sense to hold higher yielding stocks in an IRA. You could also argue that it makes more sense to hold treasuries and other bonds in an IRA as those are the least tax efficient investment options, although that's not very sensible over a long time horizon since they also tend to yield less. It would only make sense as part of a rebalancing strategy.
Sometimes, you may see ads from gold shills trying to get you to buy some gold ETF in your IRA. This is possibly the worst thing you could put in an IRA. It has zero yield. There is no tax at all until you sell. Meanwhile, those gold ETFs will continue to extract management fees slowly shrinking your actual ownership in the gold you thought you bought.

Just some things to think about. Tax planning is an interesting topic.

[Anonymous No.57235253]

>>57235184
Nice write up. I’ll add that in a Roth IRA all contributions can be withdrawn at any time with 0 penalty. If I contributed $40,000 over the span of my IRAs lifetime I can take out $40,000 if I need it.

[Anonymous No.57235414]

>>57235184
Good points anon. I started switching my taxable & roth up in exactly this way a few months ago when I came to the same conclusion.

[Anonymous No.57235475]

>>57235184
>>57235414
I don’t see why I would switch my forever hold dividend payers to my taxable instead of Roth. My Roth isn’t going to be my end all be all retirement plan, but a source of non-taxable income to supplement my wife’s 401k and my taxable accounts.

[Anonymous No.57235746]

>>57235475
If you have assets that will be taxed at the short term gains rate then holding those in your tax advantaged account is best so you pay the least taxes overall. For example most REITs, options, or other trading. Also stocks with unusually high dividend yields, since more of their returns are taxed immediately as a percentage. The tax burden on never-sell assets paying relatively small qualified dividends is very low, so since space in an IRA is limited these assets should have last priority if you get to choose.

[Anonymous No.57236407]

Thoughts on HSY/NKE/SBUX? Valuations starting to get on the cheap side and I'm looking to add some consumer goods to my sector allocation.