Dividends disappearing so fast my head is spinning!

[mathjak107]

its not that dividends are a ponzi scheme... its just there is no difference in the mechanics of it whether your non dividend paying stocks rose 4% and you sold off 4% on your own or whether they sell 4% of the value of the company on your behalf and give it to you... its no different then a mutual fund distribution.

the mechanics of paying that dividend are not a bonus, an extra kicker or anything else thats giving you anything extra they are merely symbolic ..


its all about total return ,,,,PERIOD no matter how you get it

[Hal3]

I thought the whole theory of owning stock was basically: "I have a great idea for a profitable business. I don't have the money to create it but if everyone will put money into the business I will split the profits pro rata."

So why should I invest in your company again?

Because the shares will increase in value?

Only until we run out of bigger fools.

We are getting close!

[Hal3]

Quote:

Originally Posted by mathjak107 its just there is no difference in the mechanics of it whether your non dividend paying stocks rose 4% and you sold off 4% on your own or whether they sell 4% of the value of the company on your behalf and give it to you.

I disagree.

Dividends paid from operating profits are a distribution of real income.

If a stock goes up 4% because Cramer says it is great and you sell 4% that is not a distribution of real income.

In the short run it doesn't matter which is which - that is true - but in the long run it really does. Price changes in a stock due to supply and demand for the paper stock certificates (don't get me started on that) are not the same as price changes due to the supply and demand for the companies products and the underlying profit.

[mathjak107]

hal re-read what i posted,.... thats what i said,.... the dot coms went up in price on pure specualation.. alot had no earnings or even a product....


thats has nothing to do with the mechanics of the dividend for the payout, forget about the financial shape of the companies assume they are both good . the mechanics stays the same whether the company sells 4% off and gives to to you or you sell 4% off yourself of a growing non dividend paying company.


forget about the merits of dividend paying stocks thats not what im referring to... dividend paying stocks tend to do better because of the symbolic gesture of the dividend .... it says im a healthy growing profitable company and i have cash to spare........

at least it used to say that.... all the mechanics refer to is that the actual paying of a dividend from a total return stand point is a non event... the dividend made you not 1 penny richer by itself; thats all im saying

[MichaelB]

Quote:

Originally Posted by mathjak107 all the mechanics refer to is that the actual paying of a dividend from a total return stand point is a non event... the dividend made you not 1 penny richer by itself; thats all im saying

If your point is that the value of your investment is the same after that one transaction, technically you are correct. However, you can not conclude anything about investing from analyzing one transaction at one instance.

Over a period of time, however, there is a considerable difference between receiving a regular dividend payment or not.

Quote:

the mechanics of paying that dividend are not a bonus, an extra kicker or anything else thats giving you anything extra they are merely symbolic ..

There is nothing symbolic about receiving a dividend payment. Retained earnings are reinvested at management discretion and in line with management objectives while paid dividends are reinvested at investor discretion and in line with portfolio objectives. From this perspective a dividend is much more valuable to the investor. As a kind of forces rebalancing it also allows for a significant reduction in portfolio risk.

[mathjak107]

no less risk if you re-invest the dividends like most do

[mathjak107]

Quote:

Originally Posted by MichaelB If your point is that the value of your investment is the same after that one transaction, technically you are correct. However, you can not conclude anything about investing from analyzing one transaction at one instance. Over a period of time, however, there is a considerable difference between receiving a regular dividend payment or not. There is nothing symbolic about receiving a dividend payment. Retained earnings are reinvested at management discretion and in line with management objectives while paid dividends are reinvested at investor discretion and in line with portfolio objectives. From this perspective a dividend is much more valuable to the investor. As a kind of forces rebalancing it also allows for a significant reduction in portfolio risk.

michael you can have a million transactions the fact is you cant dispute how a dividend works.. its a payment offeset by a drop in share price by the same amount... thats all it is.....

you want to debate the merits of a dividend paying stock over a non paying stock thats a different discussion then the above

[haha]

Quote:

Originally Posted by mathjak107 michael you can have a million transactions the fact is you cant dispute how a dividend works.. its a payment offeset by a drop in share price by the same amount... thats all it is.....

Mathjak, this argument of yours is a powerful example of the theory tail wagging the empirical dog. You really don't know what you are talking about, and reams of data prove it. Just becaseu the exchanges adjust limit orders, and adjust the day's gain or loss on an ex-div day says nothing even remotely as far reaching as your rather cranky thesis.

Ha

[ziggy29]

Quote:

Originally Posted by mathjak107 michael you can have a million transactions the fact is you cant dispute how a dividend works.. its a payment offeset by a drop in share price by the same amount... thats all it is.....

That's precisely what it is with mutual funds that pay out dividends, but not strictly what a stock does. Yes, it has a tendency to open lower by fairly close to the amount of the dividend, plus or minus whatever amount the stock would have otherwise changed in value at the open. But it's not as formulaic as you describe.

Sometimes there are people waiting for a dividend to be paid out before buying in a taxable account so as to avoid "buying the dividend" and immediately getting some of their purchase price back as taxable income. These people could produce some added demand to buy.

[mathjak107]

im not following your statement.... i think we got side tracked here and lost focus.... the comment was made that such and such a stock was paying a 5% dividend so even though it got pummelled it paid to wait it out.... my answer was the 5% dividend is a non event, just like a fund distribution you gained nothing in total return..... thats it , thats all i said... where the markets take it after that distribution god only knows but thats a seperate issue .. of course the question is now that most stocks are down down down and havent been recovering from those payouts how much less would they be down if they didnt pay a dividend all those years but then again maybe they wouldnt have attracted as many investors either so its impossible to really tell or maybe just had a higher share price and fell the same percentage anyway.... beats me.... all i know is im tired of seeing red every day...

after that comment about the dividend being a total return wash everyone is talking about the benefits of dividend paying stocks .... im not disputing that, theres tons of studies that show investors like the idea of seeing that a company has money to give them, even if the investor plows it right back in as a re-investment ...

i think this got dragged off course somewhere

[MichaelB]

Quote:

Originally Posted by mathjak107 you want to debate the merits of a dividend paying stock over a non paying stock thats a different discussion then the above

Absolutely not. The stock prices is determined by open market bidding, period. Dividend payments may or not be reflected in stock prices.

I think you may have confused stocks with mutual funds.

Quote:

my answer was the 5% dividend is a non event, just like a fund distribution you gained nothing in total return..... thats it , thats all i said...

For a mutual fund there is no difference in value after the distribution. When a stock pays a distribution there is a great difference. You have the distribution cash in hand and the marketplace determines the price of the stock, which may or not reflect the distribution.

[mathjak107]

Quote:

Originally Posted by MichaelB Absolutely not. The stock prices is determined by open market bidding, period. Dividend payments may or not be reflected in stock prices. I think you may have confused stocks with mutual funds. For a mutual fund there is no difference in value after the distribution. When a stock pays a distribution there is a great difference. You have the distribution cash in hand and the marketplace determines the price of the stock, which may or not reflect the distribution.

read nyse rule 118 and then you will understand how it works,,,its no different .... where market bidding takes it after the reduction is up to the markets..

if the stock closes flat then your down the amount of the payout,,,simple concept.....

[ziggy29]

I believe this sums up this thread at this point:

[mathjak107]

ziggy i loooove that icon ha ha ha... wish we could find a bigger one

[DblDoc]

Can we go off topic for a moment and discuss which is better: buy and hold low cost index funds or active management?

FWIW mathjak I'm in your "camp". Total return is all that matters... I think Vanguard has several white papers that discuss it.

DD

[mathjak107]

easy answere, which ever gives you the higher return.....

i use both and some years my index funds do better some years my active.... its the kind of thing that you dont know which is better until after it happens....overall though over the last 20 years i went back as far as i could and my managed did outperform ... i follow fidelity insight newsletter for my active

[MichaelB]

Quote:

Originally Posted by ziggy29 I believe this sums up this thread at this point:

Got that right.

mathjak, it's clear we are talking different things, so I'm gonna leave this thread, 'cause the only thing that's gonna change is that horse is gonna get tired of ziggy hittin 'it in the - well, you get the picture.

ziggy - how'd you do that?

[Brat]

Does anyone have an opionion about O & STON?

[CCdaCE]

Quote:

Originally Posted by Brat Does anyone have an opionion about O & STON?

Unbelievable yields. Can it last?

[O] Realty Income Corp link

[STON] StoneMor Partners link

It's weird how STON's P/E ratio is 88 or something. Do they distrib. 99% of their earnings as dividends? I like the monthly payout on O.

-CC

[CyclingInvestor]

Quote:

Originally Posted by Brat Does anyone have an opionion about O & STON?

O is a well-run, conservative REIT. They are less vulnerable than most retail REITs to recessions because of their triple-net structure. I do not invest in O because of their slow long term growth prospects - 4-5% over the years, IIRC.