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Old 08-10-2018, 12:49 PM   #41
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Originally Posted by Canned at 62 View Post
High yield stocks like ATT (T) historically have much lower total return than a total stock market ETF. For example, if you invested $1000 in T on January 1st, 2000 it would be worth $964 today with dividends reinvested. A Total Stock Market ETF (VTI) would be worth $3746 today with dividends reinvested.
Interesting how you calculated return in VTI since 1/1/2000 as inception date of that fund is 5/24/2001.

https://institutional.vanguard.com/i...dfs/FS970R.pdf
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Old 08-10-2018, 01:22 PM   #42
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Originally Posted by ownyourfuture View Post
Well that certainly silenced the bulls
But in fairness to them, it seems like most of them are either new to the stock, or are only considering buying.
Or we just don't live on the forum and just got around to seeing the post. Otherwise, cherry-picking T at a certain point in time and comparing it to VTI and then making a declarative statement like his seems like a narrow viewpoint, FWIW.

Anyway, I viewed the stock as very much undervalued at 30.50, I have a fair value target. When it hits that, I'll sell, just like I have done with double the position of AAPL. If it never hits that, well, sucks for me and that 1% of my portfolio, I guess! But the 65% of my port that's VTSAX should pick up the slack. :-)
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Old 08-10-2018, 01:43 PM   #43
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Originally Posted by Canned at 62 View Post
...If I own T (ATT) and have $1000 in shares and it has a 6% yield, the dividend is paid quarterly. The night before the dividend is paid the price of the share is adjusted down to the to the same as the dividend. If you reinvest the dividend you are equal. If you spend the dividend your account is now 6% less than before.

High yield stocks like ATT (T) historically have much lower total return than a total stock market ETF. For example, if you invested $1000 in T on January 1st, 2000 it would be worth $964 today with dividends reinvested. A Total Stock Market ETF (VTI) would be worth $3746 today with dividends reinvested.

https://www.portfoliovisualizer.com/...nalysisResults
I have a question:

Let's say ATT (T) has had a once-a-year dividend pay-out of 6%. And, the stock price is adjusted down by 6% the night before the payout. If the company's value is diluted by 6% each year why doesn't the stock price eventually hit $0.00?
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Old 08-10-2018, 01:49 PM   #44
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I have a question:

Let's say ATT (T) has had a once-a-year dividend pay-out of 6%. And, the stock price is adjusted down by 6% the night before the payout. If the company's value is diluted by 6% each year why doesn't the stock price eventually hit $0.00?
Why does any stock increase in value? Same reason.
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Old 08-10-2018, 02:01 PM   #45
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Originally Posted by Canned at 62 View Post
Yield is not the same as interest.

If I have a $1000 in a bank that pays 3% interest, at the end of the year I have earned $30.

If I own T (ATT) and have $1000 in shares and it has a 6% yield, the dividend is paid quarterly. The night before the dividend is paid the price of the share is adjusted down to the to the same as the dividend. If you reinvest the dividend you are equal. If you spend the dividend your account is now 6% less than before................
I don't think it works like this. Stocks are paying dividends from retained earnings. Accordingly, in a static world, if the dividend equals the earnings, the price of the stock would stay level over time. (In the real world dividends and retained earnings are never equal, and investor sentiment also drives stock prices.)

Here is investopedia's take on this topic. They describe a theoretical run-up in price once the dividend is announced and then a decrease once it is paid. So price is static excepting market sentiment.

"The declaration of a dividend naturally encourages investors to purchase stock. Because investors know that they will receive a dividend if they purchase the stock before the ex-dividend date, they are willing to pay a premium. This causes the price of stock to increase in the days leading up to the ex-dividend date. In general, the increase is about equal to the amount of the dividend, but the actual price change is based on market activity and not determined by any governing entity.

On the ex-dividend date, investors may drive down the stock price by the amount of the dividend to account for the fact that new investors are not eligible to receive dividends and are therefore unwilling to pay a premium. However, if the market is particularly optimistic about the stock leading up to the ex-dividend date, the price increase this creates may be larger than the actual dividend amount, resulting in a net increase despite the automatic reduction. If the dividend is small, the reduction may even go unnoticed due to the back and forth of normal trading."
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Old 08-10-2018, 02:11 PM   #46
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I try to be diversified, so do have some dividend stocks myself. Hence, I find this thread to be of interest.

Quote:
Originally Posted by Canned at 62 View Post
Yield is not the same as interest.

If I have a $1000 in a bank that pays 3% interest, at the end of the year I have earned $30.

If I own T (ATT) and have $1000 in shares and it has a 6% yield, the dividend is paid quarterly. The night before the dividend is paid the price of the share is adjusted down to the to the same as the dividend. If you reinvest the dividend you are equal. If you spend the dividend your account is now 6% less than before...
True.

However, if a company is any good, its stock price will slowly resume its climb, at least to keep up with inflation in the long run.

Quote:
...High yield stocks like ATT (T) historically have much lower total return than a total stock market ETF. For example, if you invested $1000 in T on January 1st, 2000 it would be worth $964 today with dividends reinvested. A Total Stock Market ETF (VTI) would be worth $3746 today with dividends reinvested.

https://www.portfoliovisualizer.com/...nalysisResults
Wow, is T that bad?

To double check, I use Morningstar which also uses historical records to show stock and MF performance. I compare T and VFINX (Vanguard S&P500), using a $10K investment starting on 1/1/2000 with dividends reinvested.

Date ATT VFINX
1/1/2000 10,000 10,000
1/1/2005 6,358 8,864
1/1/2010 8,882 9,016
1/1/2015 14,031 18,359
1/1/2018 18,964 25,288

So, T is trailing the S&P500, but not as bad as a ratio of 1:4. There were even some periods where it led.

So, some Web site is wrong. Is it portfoliovisualizer, or is it Morningstar?
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Old 08-10-2018, 03:23 PM   #47
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To further complicate matters, AT&T in 2000 is not the same company as in 2018. AT&T was broken up, sold off and merged with other companies over the years. SBC bought AT&T in 2005. This history of AT&T is here https://en.wikipedia.org/wiki/History_of_AT%26T
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Old 08-10-2018, 04:37 PM   #48
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VTSAX Total US Mkt beats all, I think, in those time periods up to present.

T is a different company as of the recent merger. As pointed out it in the Wiki there are many splits and recombination of telecom companies. Some history matters, but AT&T/Time Warner has great potential.

Indices get to drop their laggards, while an individual company has M&A to stay ahead of the pack, at least in theory.
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Old 10-24-2018, 02:19 PM   #49
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Well, if we liked T at $32 with a 6% dividend, we should love it today trading at $30, down 7%. I didn't check but I assume an earnings miss? Hey the PE is 6. The original thread question asked about T as a bond replacement. At the current price, PE and a +6% dividend, maybe.
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Old 10-24-2018, 02:39 PM   #50
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I bought it at 30.50 in July, and will continue to hold.
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