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Old 01-25-2016, 11:06 AM   #141
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I thoroughly understand the "theory" of total return vs. income, and understand fully both sides of the issue. But I only care about reality. And the reality of the situation for me is... "If there is no dividend there is no purchase!"


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One more whack at this. I promise!

Yes, I GET the NAV dropping to equal the dividend pay-out. I get that.

What I have noticed--at least in my holdings-- is that after the new lower NAV that (this year excepted) most of the time the NAV rebounds to it's original, pre-dividend pay-out price within a few weeks.

Sometimes within a few days and other times as long as two months. but in general it seems to gain in price quickly; more quickly than it might during the other 11 months.

Of course, it's possible that the price would've gone up anyway--there's no way to really know-- but I wonder if a 5% dividend and subsequent 5% drop in price makes that equity more attractive, attracting more buyers.

Just an observation of my own performance, not trying to restart a whole new discussion.
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Old 01-25-2016, 11:24 AM   #142
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Of course, it's possible that the price would've gone up anyway--there's no way to really know-- but I wonder if a 5% dividend and subsequent 5% drop in price makes that equity more attractive, attracting more buyers.
Actually there is a way to know. People do regression studies to see if dividends explain equity returns -- lots of studies on this and as far as I'm aware they do not once you control for other factors.

It's not that dividends aren't predictive it's just that they are subsumed by other more predictive factors (like value).

However, at the level of individual stocks I think you might not always have a choice simply because a matching company that doesn't pay dividends isn't available (or vice versa).
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Old 01-25-2016, 02:17 PM   #143
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One more whack at this. I promise!



Yes, I GET the NAV dropping to equal the dividend pay-out. I get that.



What I have noticed--at least in my holdings-- is that after the new lower NAV that (this year excepted) most of the time the NAV rebounds to it's original, pre-dividend pay-out price within a few weeks.



Sometimes within a few days and other times as long as two months. but in general it seems to gain in price quickly; more quickly than it might during the other 11 months.



Of course, it's possible that the price would've gone up anyway--there's no way to really know-- but I wonder if a 5% dividend and subsequent 5% drop in price makes that equity more attractive, attracting more buyers.



Just an observation of my own performance, not trying to restart a whole new discussion.

I only buy preferred stocks so their dividends do matter in relationship to price, yield and safety of issuer. So my comment wasn't really directly related to normal common stock purchases. My worthless opinion of common stock dividends are they are an emotional pacifier for purchaser. And I do not mean that in a disrespectful way since I am all about dividends myself.


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Old 01-25-2016, 03:55 PM   #144
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-- but I wonder if a 5% dividend and subsequent 5% drop in price makes that equity more attractive, attracting more buyers. ...
But if this extra buying occurred every quarter in significant numbers/amounts, it would be a growth stock as well!

Again (and again) - the dividends are not 'magic money' that appears from fairies and is sprinkled on investors - it comes out of the underlying value of the stock price. If paying dividends was the sign of a 'better than average' stock, there would be active mutual funds with managers picking these fairy dust emitting stocks, and routinely outperforming the market on a total return basis (allowing for any risk adjustments - there may be a volatility versus performance benefit to dividend payers, but we didn't see it in DVY in 2008 ).

But we don't see that, do we? Why not? Maybe because the advantage does not exist?

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Old 01-25-2016, 05:43 PM   #145
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One more whack at this. I promise!

Yes, I GET the NAV dropping to equal the dividend pay-out. I get that.

What I have noticed--at least in my holdings-- is that after the new lower NAV that (this year excepted) most of the time the NAV rebounds to it's original, pre-dividend pay-out price within a few weeks.

Sometimes within a few days and other times as long as two months. but in general it seems to gain in price quickly; more quickly than it might during the other 11 months.

Of course, it's possible that the price would've gone up anyway--there's no way to really know-- but I wonder if a 5% dividend and subsequent 5% drop in price makes that equity more attractive, attracting more buyers.

Just an observation of my own performance, not trying to restart a whole new discussion.
Stocks, in general, go up. Dividends are usually paid quarterly, so a 5% payer is only paying 1.25% quarterly. A stock going up 1.25% in a few weeks is not at all spectacular, generally speaking.

It's also possible there is some confirmation bias here. When it does recover the dividend drop, you notice and see that as proof. When it doesn't, you don't notice, or attribute it to a bad overall market.

What are some specific stocks you are seeing this in?
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Old 01-25-2016, 06:13 PM   #146
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... It's also possible there is some confirmation bias here. ...

Possible?

Seriously, no charts of the dividend funds have convinced him. Yes, some people believe what they want to believe, and confirmation bias comes on strong.

Geez, I'd love to learn the secret sauce that makes one group of stocks obviously better than the average. But then, we'd need to keep it secret, before everyone else buys them up and drive them to the point there is no excess value left. Darn, I hate when that happens.

Not trying to bust your chops marko, it's just something you really ought to consider.

Even though I'm an index fund investor, I'm still looking for that active management style that seems to be a winner. Wellesley maybe? How do they do it? FAIRX was looking great for a very long time - is it's recent big drop a buy, or a warning?

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Old 01-25-2016, 07:48 PM   #147
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Ok, ok, ok. Uncle!
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Old 01-25-2016, 07:57 PM   #148
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Ok, ok, ok. Uncle!

That still doesn't mean change what you believe in. If your investment style is sound and you believe in it, you will be better off as you wont bail at the wrong time from lack of conviction. My style is not conventional but it is relatively conservative and safe and I am comfortable with it.


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Old 01-25-2016, 09:53 PM   #149
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That still doesn't mean change what you believe in. If your investment style is sound and you believe in it, you will be better off as you wont bail at the wrong time from lack of conviction. My style is not conventional but it is relatively conservative and safe and I am comfortable with it.
Agreed. And I don't mean to give the impression that I think there is anything wrong with a dividend investment strategy. I just don't believe the claims that it is superior overall, or 'special', are warranted, at least not w/o some data that confirms it, in a plan that a poster here could implement (like "invest in DVY", or some other broad based div-payer selections).

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Old 01-25-2016, 10:00 PM   #150
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Agreed. And I don't mean to give the impression that I think there is anything wrong with a dividend investment strategy. I just don't believe the claims that it is superior overall, or 'special', are warranted, at least not w/o some data that confirms it, in a plan that a poster here could implement (like "invest in DVY", or some other broad based div-payer selections).



-ERD50

The key is to deftly time market when value dividend payers are in, then switch to growth at appropriate time, sell out when market is about to swoon, then max out when market bottoms out. If you can do those four simple things getting maximum market returns is actually very simple to do.


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Old 01-25-2016, 10:40 PM   #151
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The key is to deftly time market when value dividend payers are in, then switch to growth at appropriate time, sell out when market is about to swoon, then max out when market bottoms out. If you can do those four simple things getting maximum market returns is actually very simple to do.


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Mulligan, your words can be very succinctly summed up in the well known phrase : " Buy low, sell high "
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Old 01-25-2016, 10:50 PM   #152
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Mulligan, your words can be very succinctly summed up in the well known phrase : " Buy low, sell high "

Even though you have made it an even simpler plan to follow than mine, I still cant even do that correctly, so I have quit trying.... Mostly....


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Old 01-26-2016, 05:05 AM   #153
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But if this extra buying occurred every quarter in significant numbers/amounts, it would be a growth stock as well!

Again (and again) - the dividends are not 'magic money' that appears from fairies and is sprinkled on investors - it comes out of the underlying value of the stock price. If paying dividends was the sign of a 'better than average' stock, there would be active mutual funds with managers picking these fairy dust emitting stocks, and routinely outperforming the market on a total return basis (allowing for any risk adjustments - there may be a volatility versus performance benefit to dividend payers, but we didn't see it in DVY in 2008 ).

But we don't see that, do we? Why not? Maybe because the advantage does not exist?

-ERD50
it isn't even a question of whether it recovers the dividend or not . the fact is what ever percentage it went up would be on less dollars then the night before if you didn't reinvest those dividends .

if you do reinvest the dividends then whatever compounding up or down happens would be on the same dollars you had the night before the dividend .
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Old 01-26-2016, 09:31 AM   #154
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That still doesn't mean change what you believe in. If your investment style is sound and you believe in it, you will be better off as you wont bail at the wrong time from lack of conviction. My style is not conventional but it is relatively conservative and safe and I am comfortable with it.


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Thanks for the support Mulligan.

One of my personal weaknesses in life has been a tendency to say things in broad, hyperbolic brush strokes, assuming that everyone knows what I'm trying to say. It has failed me throughout my work career and life in general.

Too many times on this forum I've found myself replying with "you've missed my point!" only later realizing that my point was not clearly stated from the beginning.

When I originally re-initiated this thread my simple point (poorly stated) was this:

Considering that the market had tanked so badly in the first few weeks of January, I was happy that I had banked my year-end dividends in a safe spot and not forced to sell equities at the current market prices (now well below the ex-dividend price) to cover my annual expenses; by January I'm running out of cash. Had I reinvested and then needed cash, selling at a much lower price (below ex-div) would be a bad thing.

This was based upon my false belief that true TR investors must sell equities at whatever price is current when cash is needed.

Yes, the dividend paid will lower the NAV to equilibrium but the market has further dropped the NAVs a whole lot further downward. I viewed having those dividends not losing value while the equity itself fell in January as a good thing. Again this was based upon a false premise.

So......apologies to all you good folks for all the digital ink spent on my 1) poor communications and 2) my hardheadedness.

I think it's time for me to visit "what did you do today" or something less volatile.

M
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Old 01-26-2016, 09:45 AM   #155
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Thanks for the support Mulligan.

One of my personal weaknesses in life has been a tendency to say things in broad, hyperbolic brush strokes, assuming that everyone knows what I'm trying to say. It has failed me throughout my work career and life in general.

Too many times on this forum I've found myself replying with "you've missed my point!" only later realizing that my point was not clearly stated from the beginning.

When I originally re-initiated this thread my simple point (poorly stated) was this:

Considering that the market had tanked so badly in the first few weeks of January, I was happy that I had banked my year-end dividends in a safe spot and not forced to sell equities at the current market prices (now well below the ex-dividend price) to cover my annual expenses; by January I'm running out of cash. Had I reinvested and then needed cash, selling at a much lower price (below ex-div) would be a bad thing.

This was based upon my false belief that true TR investors must sell equities at whatever price is current when cash is needed.

Yes, the dividend paid will lower the NAV to equilibrium but the market has further dropped the NAVs a whole lot further downward. I viewed having those dividends not losing value while the equity itself fell in January as a good thing. Again this was based upon a false premise.

So......apologies to all you good folks for all the digital ink spent on my 1) poor communications and 2) my hardheadedness.

I think it's time for me to visit "what did you do today" or something less volatile.

M

Nah, stay here and have some fun! I was reading in another forum and research basically came up with 3 reasons for investing in dividend securities. And yes they were all psychological only in nature. But they still acknowledged that these were important reasons for some individual investors.


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