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Old 02-27-2009, 09:12 AM   #41
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I'd agree. Dividend investing just doesn't work in an index because there's too much distressed junk in the index. I like indexing in general but not for dividend investing.
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Old 02-27-2009, 10:03 AM   #42
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Old 02-27-2009, 10:20 AM   #43
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I think that was my point.
Of course that does not count the $750B in TARPs and $45B injected into AIG.

The amount I quoted was just what FDIC had to dish out so far.

Total $1.15T is double of the Savings and Loan disaster and C and BAC (DOW stocks) are zombies.
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Old 02-27-2009, 10:21 AM   #44
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we had this discussion a few times put i still dont see the merit in "dividend paying stocks" in the first place.

anything that gives me something and takes it away in the form of a price per share reduction isnt a benefit.

imagine the bank paying you interest then reducing your principal by the same amount. thats exactly what happens when a stock pays out its dividend, the next morning the price is automatically reduced by the payout amount.



want me to think of the dividend as as a bonus? dont take it back with the other hand reducing my stocks value by that amount... aaaah good trick!

I don't understand- how does the company have the power to reduce the market value of the stock to reflect the amount of the divvie?
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Old 02-27-2009, 10:32 AM   #45
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Of course that does not count the $750B in TARPs and $45B injected into AIG.

The amount I quoted was just what FDIC had to dish out so far.

Total $1.15T is double of the Savings and Loan disaster and C and BAC (DOW stocks) are zombies.
Well, at least the Government made money on the S&L disaster. The jury is still out on this one. If we get a robust recovery I would think even the Government could make money owning a bank.
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Old 02-27-2009, 11:52 AM   #46
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Well, at least the Government made money on the S&L disaster. The jury is still out on this one. If we get a robust recovery I would think even the Government could make money owning a bank.
We are on pace for the worst February in the history of the stock market.

I believe January 2009 was the second worst in history.

Somehow I think this period is worse then the S&L period.
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Old 02-27-2009, 05:00 PM   #47
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I don't understand- how does the company have the power to reduce the market value of the stock to reflect the amount of the divvie?

the company dosnt do it, the stock exchanges automaically do it since just like when a mutual fund goes ex- dividend the money thats paid out reduces the companies worth by that same amount,

automatically all offers are reduced at the open the next day by the amount paid out effectively dropping the opening stock price by the very same amount along with the normal market action.

you can check out new york stock exchange rule 118 for the details of how it works
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Old 02-27-2009, 09:06 PM   #48
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the company dosnt do it, the stock exchanges automaically do it since just like when a mutual fund goes ex- dividend the money thats paid out reduces the companies worth by that same amount,

automatically all offers are reduced at the open the next day by the amount paid out effectively dropping the opening stock price by the very same amount along with the normal market action.

you can check out new york stock exchange rule 118 for the details of how it works
I never knew that! I have seen the "adj." for dividends on yahoo finance stock price but thought that was some bookkeeping jigger they did. Anyway, wouldn't this reduction of the opening offers only hold true for a brief moment in time at the open and then market forces take over?
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Old 02-28-2009, 02:27 AM   #49
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Hold on, hold on. Yes the stock price is adjusted for dividends but demand for dividend paying stocks is high hence the price goes up.

Look, if those who think share price is reduced by dividend value look at the following for a $100 stock paying a $4 annual divi. The divi is not dependent on share price but economic success.

Now, the dividend doomsters say the following should happen:

year 1 stock price 100 pays out $4
year 2 stock price $96 pays out $4
year 3 stock price $92 pays out $4
year 4 stock price $88 pays out $4
year 5 stock price $84 pays out $4
year 6 stock price $80 pays out $4
year 7 stock price $76 pays out $4
year 8 stock price $72 pays out $4
year 8 stock price $68 pays out $4
year 8 stock price $64 pays out $4
year 8 stock price $60 pays out $4
year 8 stock price $56 pays out $4
year 8 stock price $52 pays out $4
year 8 stock price $48 pays out $4 etc.....

Doh. Is that what happens to income stocks?

NO.

Banks have bombed cos of they're cr*p decisions.

Coke doesn't bomb quite as much because it makes less cr*p decisions.

The long term share price has diddly squat to do with dividend payments and everything to do with business acumen, and the value placed by shareholders on the stream of earnings that generates.
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Old 02-28-2009, 04:02 AM   #50
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theres no reason dividend paying stocks have to go up... in fact they might cut the dividends so they dont go down more then the market action may drive them in a down market.

while there are many resons people may like dividend paying stocks they are no different than any mutual fund thats makes a distribution... because stocks used to be up 2/3 of the time and down only 1/3 it looked like the distribution was a non event also but we all know its not a non event....

no matter how you slice it when you give away millions of dollars in a companies assets it effects the share price....what market action may or may not do after that is a seperate issue...

if a stock dropped 6% in the market action for the year maybe it would only be down 1% if it didnt payout that 5% dividend that year.....


you cant say either way but the point was paying a dividend is a non event from a net asset value standpoint its not like getting interest from the bank where your principal stays the same and the payout is added to it
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Old 02-28-2009, 09:10 AM   #51
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Based on the theory you put forth, the price of a stock paying a consistent dividend should eventually go to zero.
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Old 02-28-2009, 01:00 PM   #52
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it certainly could but most companies cut the dividend after a certain amount of time of no growth as they need the cash and dont want the stock price diminishing even more
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Old 02-28-2009, 01:31 PM   #53
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What world do you live in?
Most companies certainly do not cut their dividends over time.
In a recession as serious as this one, sure, more than normal are.
And, if you chase the dividend yields you will see more cuts than if you look for good strong companies.
GE just cut theirs yesterday. Prior to that, they have been increasing their dividend for decades.
PEP, JNJ, PG, MCD, KMB have all long records of increasing dividends as well as growth.
Dividend payers tend to do better than non-dividend payers. This is not because they are paying dividends. This is because dividend payers tend to have some things in common.
The tend to:
Be mature, well run companies.
Most are larger companies.
Most have a dedication of some level of responsibility to share holders.

And yes, there are always exceptions. The financial sector is full of them.
Right now though, in a really horrible year for equities, my income stream from dividends is growing (although it is close to break even with GE's move).
I don't have to sell any equities to maintain that level and I am looking to take advantage of low prices to get grow the income stream even more.
I just don't see where you get 'most companies cut the dividend after a certain amount of time of no growth'. Most companies don't have no growth for very long unless you cherry pick the dates and pick a valley of a recession.
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Old 02-28-2009, 01:44 PM   #54
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What world do you live in?
Most companies certainly do not cut their dividends over time.
In a recession as serious as this one, sure, more than normal are.
And, if you chase the dividend yields you will see more cuts than if you look for good strong companies.
GE just cut theirs yesterday. Prior to that, they have been increasing their dividend for decades.
PEP, JNJ, PG, MCD, KMB have all long records of increasing dividends as well as growth.
Dividend payers tend to do better than non-dividend payers. This is not because they are paying dividends. This is because dividend payers tend to have some things in common.
The tend to:
Be mature, well run companies.
Most are larger companies.
Most have a dedication of some level of responsibility to share holders.

And yes, there are always exceptions. The financial sector is full of them.
Right now though, in a really horrible year for equities, my income stream from dividends is growing (although it is close to break even with GE's move).
I don't have to sell any equities to maintain that level and I am looking to take advantage of low prices to get grow the income stream even more.
I just don't see where you get 'most companies cut the dividend after a certain amount of time of no growth'. Most companies don't have no growth for very long unless you cherry pick the dates and pick a valley of a recession.
the above applys to all decent companies... they show growth or they die over time...


dont loose track of the origonal premise. the origional statement was about the fact that exchange rule 118 says all stock offers must be reduced at the open by the amount being payed out making the dividend financially a non event, nothing gained nothing lost from the dividend itself. your worth is exactly the same before the dividend was paid out. .... forget about market action, investor sentiment etc thats a different issue that moves the stock up down,......


the question was could a stock go to zero paying out a dividend and yes the answer is without growth a company could give itsself away ... is that realistic a company would that? of course not
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Old 02-28-2009, 02:07 PM   #55
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dont loose track of the origonal premise. the origional statement was about the fact that exchange rule 118 says all stock offers must be reduced at the open by the amount being payed out making the dividend financially a non event, nothing gained nothing lost from the dividend itself. your worth is exactly the same before the dividend was paid out. .... forget about market action, investor sentiment etc thats a different issue that moves the stock up down,......
Yes, but companies can die (or at least bankrupt and have shareholders wiped out) without ever paying a dividend at all. You could own a stock like this, get no dividends out of it for 30 years and watch it go bust. How is that preferable to getting a 4% dividend year after year (especially when it has a tendency to grow over time) for 30 years and then losing the equity? Wouldn't it be better to get that cash every quarter?
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Old 02-28-2009, 02:22 PM   #56
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Yes, but companies can die (or at least bankrupt and have shareholders wiped out) without ever paying a dividend at all. You could own a stock like this, get no dividends out of it for 30 years and watch it go bust. How is that preferable to getting a 4% dividend year after year (especially when it has a tendency to grow over time) for 30 years and then losing the equity? Wouldn't it be better to get that cash every quarter?
Or take your own profits out every year of a non dividend paying stock thats growing...sell 4% a year or so or what ever you choose.... your missing the point, its the same deal.. only thing i may have is an extra 8 buck commission on the sale but non the less someone could do it......
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Old 02-28-2009, 04:29 PM   #57
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i tend to think most people re-invest their dividends anyway so even the fact the stock may drop is a moot point as your just as into it as the non dividend paying stock.

in my opinion the bottom line is this: theres no disputing the mechanics of the dividend being a wash but the dividend is symbolic...

if you think back to the good ole dot coms we had tons of companies with rising share prices.. they had no real products , no real earnings but they sold at amazing prices.

dividend paying companies that raise their dividends only do so because they have real earnings and real money to do it.

investors being basically lazy , myself included would never want to spend hours reviewing a companies financials to see if they had real profits and real revenue and so it became easier to just find companies with histories of raising dividends .... much easier then studying financials.

so typically these stocks out perfornmed because of the demand and attention they got....

now with all the dividend cuts, smoke and mirrors and companies on life support i no longer think you can count on any of this being the case and soooooooooo its back to those company financials we go
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Old 02-28-2009, 05:14 PM   #58
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I play BONDS and their Divs..Not stocks..
Like he said>"anything that gives me something and takes it away in the form of a price per share reduction isnt a benefit." And to me it's a Ponzi Scheme...

Unless? Your Very good at selecting What Stocks to Buy and When to sell them..that is a differenet animal..GE and many other Co.s stock Owners are taking a bath on both ends now..getting very Poor Divs and loosing 50% vallue of their Stocks..

go play that game while your accumalating Wealth, but not into Retirment..

other play both and that can work out well too.. but I'm not good at that Stock and Div's game.. so, If I don't Understand it or ain't good at it? I pass..
GNMA's are paying about 4-5% Ylds and so are my other Bond Funds..and that's good enough for me.. I let my Bal. Funds handle the Growth of the Port..since they know alot more than me about it..and I'm both too old and to impatient Now to want to bother to learn..

Only for a short play was Treasuries last yr and for the Rtns... that paid off very well ( ave 17.5% btwn VFITX and VUSTX) but that's a once in a blue moon deal. Am back into GNMA, Corp. and FFRHX. for now.

Keeping Fingers Crossed!

last yr: My Port was 50% in 3 bonds did 17.5% & 50 % in 3 Bal. Funds ave -15% and a 9.2% apy for the past 10 yrs..If it ain't broke? Don't fix it..LOL
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Old 02-28-2009, 05:23 PM   #59
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"Total $1.15T is double of the Savings and Loan disaster and C and BAC (DOW stocks) are zombies."

Re: sorry freind but you fail to mention This was how long ago? 25 yrs ago? Infaltion alone? Is equal to about $600 Billion back thenand As I recall We also Made a Major Profit on that deal too! Of course GM and the others having to pay 8-9% Interest on these Loans and us owning it's stocks now? We should recap and come out even vs the Loosers we buy out..., if not ahead of the deal.. It's really All the 9,000 Earmarks that is the Problem.. and us Bailing out So many near Bankrupt States that broke it's own laws in not balancing their budgets every yr prior....that I think is the real problem..and who's going to Bail them out again, Next Yr? LOL
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Old 03-01-2009, 03:47 AM   #60
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I play BONDS and their Divs..Not stocks..
Like he said>"anything that gives me something and takes it away in the form of a price per share reduction isnt a benefit." And to me it's a Ponzi Scheme...

Unless? Your Very good at selecting What Stocks to Buy and When to sell them..that is a differenet animal..GE and many other Co.s stock Owners are taking a bath on both ends now..getting very Poor Divs and loosing 50% vallue of their Stocks..

go play that game while your accumalating Wealth, but not into Retirment..

other play both and that can work out well too.. but I'm not good at that Stock and Div's game.. so, If I don't Understand it or ain't good at it? I pass..
GNMA's are paying about 4-5% Ylds and so are my other Bond Funds..and that's good enough for me.. I let my Bal. Funds handle the Growth of the Port..since they know alot more than me about it..and I'm both too old and to impatient Now to want to bother to learn..

Only for a short play was Treasuries last yr and for the Rtns... that paid off very well ( ave 17.5% btwn VFITX and VUSTX) but that's a once in a blue moon deal. Am back into GNMA, Corp. and FFRHX. for now.

Keeping Fingers Crossed!

last yr: My Port was 50% in 3 bonds did 17.5% & 50 % in 3 Bal. Funds ave -15% and a 9.2% apy for the past 10 yrs..If it ain't broke? Don't fix it..LOL

ffrhx was a real killer 2 years ago... that and ultra short bond fund were looked at like money markets on steriods and then the bottom fell out and investors couldnt believe how much it dropped ....

i recently bought it too as it looks like the smoke cleared....

i use tlt long term treasury bond fund alot for portfolio protection, that thing soars on those days we drop....

also like fidelity high income....

im not smart enough to pick individual stocks other then for speculation.. i can not pick just the right company in just the right industry in just the right time in just the right market...

even if i got everything above correct i still no nothing about what the competitors are doing... my preference is all funds

tried the dividend thing a while ago with dogs of the dow and at that time highly rated dvy..... didnt do well at all and so back to my fidelity insight newsletter and permanent portfolio for now
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