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Old 07-11-2015, 09:00 PM   #21
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Tweedy Browne is an advocate of investing in higher dividend stocks and has some research on their website. Here's one paper http://www.tweedy.com/resources/libr...UND2014Web.pdf
Interesting, but when I look at how can I do this, I come up empty.

They mention Dogs of the Dow - but I googled setting the limit to before year 2000 to get some funds with history, and they don't look good (again, stretch the bar to max time frame - JAN 1999, lagging SPY by a large margin, and no obvious volatility improvement):

PerfCharts - StockCharts.com - Free Charts

And dividend payers in general, isn't that what DVY is about? But it lags SPY in total return, in fact it looks almost like a clone, but not as good as SPY (goes back to NOV2003). If you slide the start time bar, it almost never outperforms SPY.

PerfCharts - StockCharts.com - Free Charts

Why don't I see how to make money from this supposed advantage?

-ERD50
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Old 07-11-2015, 09:15 PM   #22
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I have owned companies like SWA and I bought it super low about 7 years ago and just recently sold my shares.

I just prefer companies that payback the shareholders with a solid dividend.

I might buy SWA again if we ever get another real correction . I love SWA as a company.
Do you mean LUV (South West Airlines)? I couldn't find a ticker SWA. Are you sure you owned it?

Hey, I love stocks that I buy low, and sell when they go up (and if they don't go up, don't buy 'em - thanks Will Rogers!).

But what does that have to do with dividends? Anyone can cite a past winner, regardless of dividends or anything else. There are thousands of them. The question is, will a diversified portfolio of dividend payers do better than the overall market? I've been looking at the dividend based funds, and I don't see it. Can you show me?

Apple did incredibly for me (AAPL stock ticker), I bought a truckload at the low, and sold on the way up, some 13x baggers in there for me, and they paid zero dividend in that time. And of course, that proves nothing.

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I just prefer companies that payback the shareholders with a solid dividend.
Like Bernie Madoff?

-ERD50
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Old 07-11-2015, 09:26 PM   #23
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According to Jeremy Siegel who actually studied the data dividend paying stocks outperform non dividend paying stocks while having a lower risk factor, he reccomends low cost dividend index funds.
Real Returns Favor Holding Stocks


Here is another paper.
http://www.suredividend.com/wp-conte...al-Returns.pdf

And using berkshire hathaway as a "proxy" for non dividend paying stocks when it really is a closed end managed portfolio with very low fees is not correct in my mind, it makes most of it's overperformance from investing in dividend paying stocks.
I'm not sure what to make of those. The results are discontinuous, with the 4th quintile of div payers outperforming the 5th quintile of div payers almost 2:1, while the rest seem to follow a trend.

I suspect there are some other things going on, the low payers are small companies that never succedd so never get to the pointof paying a div, or large ones that had to cut their divs?

I don't know - I'd like to see a total return chart of a low cost, no-load diversified mutual fund or ETF I could buy that had a clear advantage based on selecting dividend payers (or anything else for that matter - I like money in any form!).

-ERD50
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Old 07-11-2015, 10:00 PM   #24
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Do you mean LUV (South West Airlines)? I couldn't find a ticker SWA. Are you sure you owned it?

Hey, I love stocks that I buy low, and sell when they go up (and if they don't go up, don't buy 'em - thanks Will Rogers!).

But what does that have to do with dividends? Anyone can cite a past winner, regardless of dividends or anything else. There are thousands of them. The question is, will a diversified portfolio of dividend payers do better than the overall market? I've been looking at the dividend based funds, and I don't see it. Can you show me?

Apple did incredibly for me (AAPL stock ticker), I bought a truckload at the low, and sold on the way up, some 13x baggers in there for me, and they paid zero dividend in that time. And of course, that proves nothing.

Like Bernie Madoff?

-ERD50
Yes I owned LUV and sold it recently and I made some nice gains. For me LUV is not a long term hold. Thats why I sold it. I bought it during the downturn when it was super cheap. All stocks were cheap. LUV is not a real dividend payer so it was time to say goodbye.

So what is the issue? I just said that I like stocks like UPS that will pay me income in retirement and I won't need to sell shares or worry about the day to day share price.

I actually own more index funds and ETFs than individual stocks.

What does Bernie Madoff have to do with me buying a large basket of large cap dividend paying stocks in my Roth IRA?

I do own VTI also. Maybe the overall market will do better than a diversified basket of dividend stocks. I have no idea.
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Old 07-11-2015, 10:06 PM   #25
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...
So what is the issue? ....
It goes back to your earlier post (bold mine this time)-

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Dividend stocks can also be a great gift to pass on to your children.

Produce retirement income and leave the shares to your heirs.
And I asked:

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Yes, but why would they be better than any other stocks?
That's the question - what is it about dividend stocks that make them stand out? How can I benefit from this (I like money)?


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What does Bernie Madoff have to do with me buying a large basket of large cap dividend paying stocks in my Roth IRA?
A tongue in cheek comment to make the point that dividends are just a portion of the stock paid out to you.

-ERD50
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Old 07-11-2015, 10:25 PM   #26
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Why don't I see how to make money from this supposed advantage?

-ERD50
ah, the $64,000 question.
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Old 07-11-2015, 10:55 PM   #27
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It goes back to your earlier post (bold mine this time)-



And I asked:



That's the question - what is it about dividend stocks that make them stand out? How can I benefit from this (I like money)?




A tongue in cheek comment to make the point that dividends are just a portion of the stock paid out to you.

-ERD50
Part of my strategy with solid large cap companies that pay dividends is that they will continue to pay a decent dividend even during a bear market.

I won't need to sell shares low to get income.
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Old 07-12-2015, 07:54 AM   #28
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Stocks are a bad thing to pass on to children. Usually they will not fit someone else's investment plan and asset allocation plan. Also folks tend to put sentimental value on "Dad's old stock shares he gifted to us on his deathbed." Such sentiments cloud rational thinking about them. If someone gets such shares, I almost always recommend they sell them before there are more taxes to be paid and invest in passively-managed, low-expense-ratio index funds in the asset allocation that one has.

Bottom line: Inherited individual stocks are like an albatross around one's neck. That's my broad blanket statement that A is worse than B.
This sounds kind of odd and misleading. If you have a large appreciation on stocks you own, holding onto them and passing them on to your children sounds ideal, because they get the step up in basis.

Now, I do agree they should probably sell them right away unless they are still solid investments and fit the heir's investment plan. Basically, if you inherit stocks you wouldn't be buying on your own, you should sell them.

Passing on stocks isn't the issue. What the heir does with them is.

That's probably what you meant but the way you stated it was very misleading the way I read it. It makes it sound like you should sell off the stocks before you die so your heir doesn't have to deal with them. That's the worst plan because of the tax hit when the original owner sells. By far.
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Old 07-12-2015, 09:42 AM   #29
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Are they based on the number of shares you own rather than a % of the stock's worth? So if there is a stock market crash then unless the companies decrease dividends, the actual % would in a sense increase?
Correct. Dividend policies however vary per company. Many blue chip ones focus on a constant or slowly increasing fixed dividend (in USD) per share, so yes.

Others pay out a fixed % of yearly profits. Still others pay out what they think the company can miss.

And there is also the dividend + buyback approach. Steady dividends + buybacks for windfalls (or when CEO options are almost due ..).

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So if I consider that somewhat of a income stream then even if market crashes, the actual $ distributed wouldn't necessarily drop a ton?
Not unreasonable to expect that.

In general dividends in absolute USD drop/rise less than market valuations. They are more closely linked to overall earnings which also fluctuate, but a lot less.

A 2009 type scenario however can still seriously ruin your day.
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Old 07-12-2015, 10:15 AM   #30
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To give you an example of what Totoro is talking about, let's look at AT&T, one of my favourite American dividend stocks. It is paying $1.88 per share this year. At its current price, $34.65, it has a 5.4% yield. When the share price goes down, you still get the $1.88 per share dividend, so your % yield goes up. If the share price goes up, your yield is going down, but your cash dividend is the same.

Many companies do cut their dividends when times are bad. Others, like AT&T try to avoid doing so. It has increased its dividend in dollars every since 1987. (If you look at its dividend history, you will see some years where the dividend has gone down, but those are years when the shares were split, so if you had 100 shares paying $2.00 dividend each, now you'd have 200 shares paying $1.00 each.)
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Old 07-12-2015, 10:33 AM   #31
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To give you an example of what Totoro is talking about, let's look at AT&T, one of my favourite American dividend stocks. It is paying $1.88 per share this year. At its current price, $34.65, it has a 5.4% yield. When the share price goes down, you still get the $1.88 per share dividend, so your % yield goes up. If the share price goes up, your yield is going down, but your cash dividend is the same.
Just to confirm, these are "qualified" dividends for tax purposes? Tax free for somebody in the 15% tax bracket?
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Old 07-12-2015, 11:46 AM   #32
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Why don't I see how to make money from this supposed advantage?

-ERD50
ah, the $64,000 question.
Yep, that's where the rubber meets the road.


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Originally Posted by Davis65 View Post
To give you an example of what Totoro is talking about, let's look at AT&T, one of my favourite American dividend stocks. ...
Many companies do cut their dividends when times are bad. Others, like AT&T try to avoid doing so. It has increased its dividend in dollars every since 1987. ...
Nice, but I demand diversification. Look at DVY, dividend payers are its raison d'Ítr, and yet, we find its dividends dropped 41.74% from 2008-03-25 to 2009-09-22. In that same time frame, SPY (adjusted for divs), dropped only 17.66% (20.6% NAV only).

http://finance.yahoo.com/q/hp?s=DVY&...=12&f=2015&g=v

http://finance.yahoo.com/q/hp?s=SPY&...g=d&z=66&y=330

Or, picking the worst drop in SPY in that time frame, I get 46.32%, 44.73% (adj, non-adj) - about the same ballpark.

Here:

PerfCharts - StockCharts.com - Free Charts

You can slide both ends of that time bar and even cherry-pick any time frame you want. I'm hard pressed to see any significant difference/trend, even when I pick peak/troughs of bear markets, where I should expect this supposed dividend strength strategy to shine. Where's the beef?

So again, is there really an advantage, and if you find one that you can share (not a few specific stocks, anyone can do that in hind-sight), how do I ride that train in a diversified manner?

-ERD50
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Old 07-12-2015, 12:08 PM   #33
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So again, is there really an advantage, and if you find one that you can share (not a few specific stocks, anyone can do that in hind-sight), how do I ride that train in a diversified manner?

-ERD50
Don't bother. Whoever would try to convince you is nuts.

Ha
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Old 07-12-2015, 12:30 PM   #34
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Don't bother. Whoever would try to convince you is nuts.

Ha
Well, anyone who thinks they can convince me w/o data might as well be nuts.

And I guess I might say the same about anyone who believes in something w/o the data to back it up. Well, anything important that is, and maybe this doesn't qualify. But it's just my nature, if some one says "A is true", and it isn't clear to me why A would be true, I'm curious as to why they say this.


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Old 07-12-2015, 01:39 PM   #35
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Just to confirm, these are "qualified" dividends for tax purposes? Tax free for somebody in the 15% tax bracket?
Sorry, I can't help you with US tax questions. Not an issue for me
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Old 07-12-2015, 02:21 PM   #36
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Owning a 'silly' ('silly', really? SPY or VTSMX is 'silly?) mutual fund with hundreds of stocks protects you against the Enrons of the world, and some blue chips like GM and IBM that have had some dark days that might have a newcomer sell low.

-ERD50
No offense ERD50, I didn't mean VTSMX itself was silly, just that these funds are just not the way to teach people about how stocks work. They are too broadbased and most people wouldn't understand. You have three types of people, those that want to understand how stocks work and pick their own and those that understand how stocks work, but just want a general solid basket of stocks that someone else manages averaging the market and lastly those that have no clue and are fearful of the market because one time they put some money in a 401k and it went down...or they heard about that one time their dad lost money.. I'm talking about the 3rd... I really only know the 3rd type, the ones too afraid to own stock so if you passed on them an IRA, they would either do nothing or sell it all, take the money and blow it whether its a mutual fund or a stock. My point was whether its a stock or a mutual fund it really doesn't matter as long as you teach them or ensure they have the knowledge to handle it once you've passed.
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Old 07-12-2015, 04:02 PM   #37
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No offense ERD50, I didn't mean VTSMX itself was silly,
None taken, I just didn't understand what is silly about a mutual fund.

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just that these funds are just not the way to teach people about how stocks work....
OK, I'm going to (and beyond!) extremes here just to make a point, but to me, that's like saying "Let's go out and drive drunk w/o our seat belts on to understand just how dangerous that is"!

I think a mutual fund, (a basket of stocks) is an excellent way to teach people how personal investing works. They learn diversification among other things.

A single stock, even a former 'blue chip' can tank. What will an inexperienced investor do? A single stock can go to the moon, will an inexperienced investor learn that taking long shots is the way to riches?


Quote:
You have three types of people, those that want to understand how stocks work and pick their own and those that understand how stocks work, but just want a general solid basket of stocks that someone else manages averaging the market and lastly those that have no clue and are fearful of the market because one time they put some money in a 401k and it went down...or they heard about that one time their dad lost money.. I'm talking about the 3rd... I really only know the 3rd type, the ones too afraid to own stock so if you passed on them an IRA, they would either do nothing or sell it all, take the money and blow it whether its a mutual fund or a stock. My point was whether its a stock or a mutual fund it really doesn't matter as long as you teach them or ensure they have the knowledge to handle it once you've passed.
OK, but that sounds different to me from what you first said. At any rate, if they are just going to sell it, true, it makers no difference, but so what?

I guess we will just disagree on whether inheriting a few individual stocks is 'better' for someone, because they might learn from those stocks, versus a diversified fund. I don't think it is clear that they will learn anything because of it, and there are risks to a lack of diversification that a newcomer may not understand.

My MIL inherited stocks in the 60's - she knows nothing about them other than she gets dividend checks, and she doesn't want to sell them for emotional reasons. Just one example, but if it were up to me I'd start harvesting losses and those with little/no gain (they were stepped up at my FIL's passing), maybe sell some with gains to offset losses, and move to an index fund, and maybe hold remaining gainers so that they possibly get stepped up in basis to the heirs. She could lower her taxable income by $3,000 each year, but she won't do it because of emotional ties to some initials on a piece of paper.

-ERD50
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Old 07-12-2015, 04:53 PM   #38
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Mr. Buffett may not like dispensing dividends but he sure loves to invest in companies that give dividends to him.....But it goes back to the non answerable question of who will spend the money more wisely. The company or the individual. Your logic is certainly sound ERD, but I guess it comes down to individual taste. Kevin O'Leary cant get on CNBC to discuss the weather without going into his religious passion of only buying stocks of companies that pay dividends. He wants his cash, and he wants to get paid to wait. If nothing else you like a person true to his convictions as he gives the same speech week after week, year after year.


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Yes, I wonder if Buffet really is just an old guy over the hill. His results since 1997 have been about 8.5% CAGR total return. I have done much better. Agree that the div debate tends to obscure the fact that many div payers own excellent business franchises, earn high ROe's, have mature business models, and good management. These are the type of co's that retirees should like.
Finance theory states emphatically that divs or no divs should not matter. But I sure like my divvies. Just more convenient and my yield approximates a good SWR I think. Anyway, to each their own but once retired divs seem a lower risk way to generate cash flow.
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Old 07-12-2015, 05:06 PM   #39
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Yes, I wonder if Buffet really is just an old guy over the hill. His results since 1997 have been about 8.5% CAGR total return. I have done much better. Agree that the div debate tends to obscure the fact that many div payers own excellent business franchises, earn high ROe's, have mature business models, and good management. These are the type of co's that retirees should like.

Finance theory states emphatically that divs or no divs should not matter. Doesn't seem to be working that way recently though. I sure like my divvies.

I agree with you Danmar. I am worse though. I freely admit I am not investing for maximum returns, I am investing for maximum income within a degree of relative safety. I wont panic knowing I am clipping 7% dividends on a downdraft. But I cant put it past myself to buy high and sell low in equities. But psychologically knowing if my stocks dropped 25% I am still in the good 4 years later with 7% divvies, I will not panic. In fact I will continue to reinvest and get even a better yield if that happens.


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Old 07-12-2015, 05:24 PM   #40
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based on the discussion we had on dividends in another thread there is no such thing as getting paid to wait because you are getting a dividend.

as we said you can sell off a piece of a stock and have the same cash flow with the same effect. either the company gives you a piece of the share price or you can sell a piece of the share without the reduction of a dividend . it is the same thing and you are just as down in both cases ..
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