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Old 01-18-2018, 11:13 AM   #21
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Originally Posted by LOL! View Post
Studies show conclusively that this is not a good strategy, but does satisfy some mental issues for many investors. See also https://en.wikipedia.org/wiki/Dividend_puzzle

Just about any mutual fund or ETF will pay dividends, so they cannot be avoided anyways.

In a taxable account, dividends cost you in extra taxes, so should be avoided.
What studies? Iíve seen lots of studies claiming both sides. Most of their conclusions say more about the people running the studies than your expected return going forward IMO.

The dividend puzzle has a pretty straightforward answer to me, though. IMO, most of the people running big companies are reasonably likely to re-invest money poorly. They start stock buybacks when their valuations are terrible and end them when they are screaming buys. They pay too much for acquisitions, etc, etc.

There are plenty of exceptions of course. Iím happy to own Berkshire because Iím confident that Buffett wonít fritter away money just because heís got extra cash. Growth companies should have something better to invest in than paying a dividend.

However, for most big, mature companies I would rather have them pay a dividend than try to get creative by acquiring companies or entering new businesses. Iíve not been impressed with Corporate Americaís track record in those areas.
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Old 01-18-2018, 11:30 AM   #22
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Our equity side is 80% VTI and VXUS (total market ETFs). The other 20% is high-dividend ETFs, VYM and 2 others. We also have 11% of the AA in VNQ (REIT) and one rental property. I see this as a balanced approach that produces more cashflow vs VTI/VXUS alone without sacrificing much performance in the long-term. I would never go all-in with a dividend strategy. But for us it's just a convenient way to close the cashflow gap not covered by our two pensions.
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Old 01-18-2018, 12:48 PM   #23
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I'm fascinated by some people's thought processes.

While the statements above may be true, they are stated in a vacuum. There's no comparison to readily available alternatives. It strikes me as nothing more than confirmation bias. Who is served by that?

-ERD50
Hear you, can't agree. Not a vacuum at all. The clear bias on this forum and elsewhere is with other approaches that seem to be well understood and taken as gospel.

I'm happy to present an opinion and people can take what they want from it, or not. I think people are served by diversity of thought and challenges to convention rather than by rigid doctrinaire thinking. There is rarely if ever one absolute right path and personal circumstances have to be the main guide.
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Old 01-18-2018, 01:13 PM   #24
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Taking it out of order...
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Originally Posted by timemoveson View Post
Quote:
Originally Posted by ERD50
I'm fascinated by some people's thought processes.

While the statements above may be true, they are stated in a vacuum. There's no comparison to readily available alternatives. It strikes me as nothing more than confirmation bias. Who is served by that?

-ERD50
... I'm happy to present an opinion and people can take what they want from it, or not. I think people are served by diversity of thought and challenges to convention rather than by rigid doctrinaire thinking. There is rarely if ever one absolute right path and personal circumstances have to be the main guide.
I 100% agree with you on that. I'll just add that it is helpful when people present the thought process behind their opinion. It's usually pretty hard to get anything useful from the opinion alone.

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Hear you, can't agree. Not a vacuum at all. The clear bias on this forum and elsewhere is with other approaches that seem to be well understood and taken as gospel. ...
I'm not sure what "clear bias" you are talking about, so I guess it's not clear? And to explain, yes, to me your comment was in vacuum. You said:

Quote:
Me too. Several 100's of thousands of dollars worth, per year, in fact. For doing absolutely nothing.
Without putting that in %, or providing the portfolio amount so we can put it in %, it's pretty meaningless, and it can be done without restricting yourself to dividend payers. In practical terms, OK, a portfolio made up of higher than average dividend rate stocks would kick off more income (w/o selling anything) than a broad-based index of stocks. But that only means one might decide to sell off some of the stock fund from time to time (like once per year) to make up the difference. That also provides a good time to re-balance an AA if desired.

In practical terms, making a sale once a year isn't a meaningful amount of effort, so to me, your "doing absolutely nothing" comment strikes me as more "dogma" and "bias" - just what you accuse the forum of in general?

There's nothing "wrong" with you deciding you want to focus on dividend payers, and I'm certainly not going to try to convince you otherwise. But I am usually tempted to respond when someone makes a post that seems to indicate "their way" has clear advantages, when the data doesn't back it up. That's not "doctrine" at all, that's letting the numbers speak.

-ERD50
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Old 01-18-2018, 02:22 PM   #25
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Depending on total income, you may pay zero tax on dividends in a taxable account or 15% max if over a certain amount. Only the highest tax bracket pays 20% on long term dividends.
Entirely incorrect, plus there are no "long term dividends".
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Old 01-18-2018, 05:52 PM   #26
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Taking it out of order...

I 100% agree with you on that. I'll just add that it is helpful when people present the thought process behind their opinion. It's usually pretty hard to get anything useful from the opinion alone.



I'm not sure what "clear bias" you are talking about, so I guess it's not clear? And to explain, yes, to me your comment was in vacuum. You said:



Without putting that in %, or providing the portfolio amount so we can put it in %, it's pretty meaningless, and it can be done without restricting yourself to dividend payers. In practical terms, OK, a portfolio made up of higher than average dividend rate stocks would kick off more income (w/o selling anything) than a broad-based index of stocks. But that only means one might decide to sell off some of the stock fund from time to time (like once per year) to make up the difference. That also provides a good time to re-balance an AA if desired.

In practical terms, making a sale once a year isn't a meaningful amount of effort, so to me, your "doing absolutely nothing" comment strikes me as more "dogma" and "bias" - just what you accuse the forum of in general?

There's nothing "wrong" with you deciding you want to focus on dividend payers, and I'm certainly not going to try to convince you otherwise. But I am usually tempted to respond when someone makes a post that seems to indicate "their way" has clear advantages, when the data doesn't back it up. That's not "doctrine" at all, that's letting the numbers speak.

-ERD50
Good challenge, no problem. I'm happy if you're happy.

About $7.5M working for me, 4% yield per annum, roughly 70% common stock, 5% preferred, 5% REITs, and 20% privately placed fixed income. Perpetual construct.

I think I may have more choices than do others. Will adapt as needed just like you.
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Old 01-18-2018, 07:44 PM   #27
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VYM is my favorite ETF dividend payer.
If you would like a good divie stock, one of the most consistent is EMR.
I got into it quite a few years ago through their dividend reinvestment program and it has paid off nicely. One of those "set it and forget it" deals.
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Old 01-18-2018, 07:51 PM   #28
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Good challenge, no problem. I'm happy if you're happy.

About $7.5M working for me, 4% yield per annum, roughly 70% common stock, 5% preferred, 5% REITs, and 20% privately placed fixed income. Perpetual construct.

I think I may have more choices than do others. Will adapt as needed just like you.
But what are the income taxes? That portfolio instead invested for growth but with equivalent annual withdrawals can incur little income tax, perhaps even none some years via loss harvesting.
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Old 01-19-2018, 10:20 AM   #29
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But what are the income taxes? That portfolio instead invested for growth but with equivalent annual withdrawals can incur little income tax, perhaps even none some years via loss harvesting.
Totally agreed. It doesn't change the concepts behind this type of larger, perpetual portfolio but it influences the execution a lot. In Canada, but like the US it depends on:

- mix of taxable and non-taxable assets
- tax treatment of qualified (eligible) dividends which are favorable up to a quite high income point, particularly with assets and incomes spread across spouses.

I'm not stuck on the concepts at all and will watch carefully to see if another approach or a mix would yield similar or better results on a risk adjusted basis.
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Old 01-19-2018, 10:46 AM   #30
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I have to admit - I have predominately dividend players (SDY and DVY specifically). The divs fund most of my annual budget sparing me the need to decide what to sell to fund my annual spend when I do my rebalance on Jan 1. I also haven't needed to rebalance because I have a 10% range in my target AA. Maybe I need to change my name to "Ostrich"
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Old 01-19-2018, 10:58 AM   #31
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The total return and dividend growth arguments don't align, because most dividend growth investors are happy if the stock price is flat or declining. This way they can buy more of that issue at the same or higher yield. Many people use DRIP (Dividend Reinvestment Programs) to reinvest in the company. This is especially fruitful if the stock price stays flat or declines.

DGI (dividend growth investing) can also be lucrative on a case-by-case basis. I bought Cummins when it was out of favor and it has since doubled. I sold my gain and bought another stock on the house! Walmart is another example which has nearly doubled since I bought it. Looking for value in the DGI universe is especially rewarding. The ETF may benefit from this, but it's far easier to make individual stock selections on your own. They don't always work out, but you still have the solid dividend stream to fall back on.
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Old 01-19-2018, 11:17 AM   #32
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The total return and dividend growth arguments don't align, because most dividend growth investors are happy if the stock price is flat or declining. This way they can buy more of that issue at the same or higher yield. Many people use DRIP (Dividend Reinvestment Programs) to reinvest in the company. This is especially fruitful if the stock price stays flat or declines. ...
This seems contrary to what most div investors discuss. The div investors tell me their stocks are more stable, because they pay dividends.

Further, if we are being apples-apples, and reinvesting any divs, then the more volatile non-div payers would have more "buy low" opportunities (granted, less would be bought).

Regardless - if this was a measurable effect, it would show up when you compare a basket of div paying stocks to the total market of stocks. I have yet to see any clear measurable advantage to the div payers.

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... DGI (dividend growth investing) can also be lucrative on a case-by-case basis. ...
The same can be said of any sector.

edit/add: Check this link (set slider to "ALL") -

http://stockcharts.com/freecharts/pe...ig,dvy,fdl,sdy

I picked the first five DIV paying ETF/Funds I could find with histories that go back to 2006 or earlier. The total return of VTI (Total Stock Market) beat every single one of them. If you move the slider, sure, some swapping of positions, but no clear advantage to the div payers that I can see. At least w/o cherry-picking, which can only be done in hindsight.

I'll spend 5 minutes a year figuring out an amount of my broad-based index to sell, in favor of any sector investment. Something I may need to do to rebalance anyhow.

-ERD50
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Old 01-19-2018, 12:35 PM   #33
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My portfolio of dividend stocks and individual bonds returned only 6% last year at a time when the S&P provided a total return of over 20%. I had to think hard about my strategy and the almost $500K I passed up in order to pursue a so called "safe" yield. After some very difficult consideration, I decided to stand fast. As was mentioned earlier, if the market goes up, I get paid every month and if the market goes down, I still get paid. Plus, I expect to over-perform when the market finally corrects.

I suppose this is a psychological choice I am making so that I avoid extreme ups and downs of the market.
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Old 01-19-2018, 12:51 PM   #34
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This seems contrary to what most div investors discuss. The div investors tell me their stocks are more stable, because they pay dividends.

Further, if we are being apples-apples, and reinvesting any divs, then the more volatile non-div payers would have more "buy low" opportunities (granted, less would be bought).

Regardless - if this was a measurable effect, it would show up when you compare a basket of div paying stocks to the total market of stocks. I have yet to see any clear measurable advantage to the div payers.

note: bolding by redduck

-ERD50
Maybe this will help (or not):

It's not an apples-to-apples comparison, it's more of an apples-to-mashed potatoes comparison. Dividend stocks are more like comfort food--soothing. Basically, that's the feeling. You can count on them to be fairly predictable, yet less profitable for most dividend investors (me included).

I don't think that you will find any clear measurable advantage to the dividend payers. I haven't. However, I have found a place in my portfolio for them.
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Old 01-19-2018, 01:11 PM   #35
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My portfolio of dividend stocks and individual bonds returned only 6% last year at a time when the S&P provided a total return of over 20%. I had to think hard about my strategy and the almost $500K I passed up in order to pursue a so called "safe" yield. After some very difficult consideration, I decided to stand fast. As was mentioned earlier, if the market goes up, I get paid every month and if the market goes down, I still get paid. Plus, I expect to over-perform when the market finally corrects. ...
Except, there is no evidence I can find that indicates you should expect over-performance after a correction. Look at this chart again, move the slider (both ends) to slid it to start at troughs, and see who is in the lead at each peak - no discernible trend at all. PerfCharts | Free Charts | StockCharts.com

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... I suppose this is a psychological choice I am making so that I avoid extreme ups and downs of the market.
But you aren't avoiding the ups and downs with div payers. See the chart?

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Maybe this will help (or not):

It's not an apples-to-apples comparison, it's more of an apples-to-mashed potatoes comparison. Dividend stocks are more like comfort food--soothing. Basically, that's the feeling. You can count on them to be fairly predictable, yet less profitable for most dividend investors (me included). ...
That's what bonds are for. Again, looking at the charts, I just can't pick out this added stability that people talk about.

Again, nothing "wrong" with dividend payers, I just cringe when I hear people attribute qualities to something when there is no evidence of it.

-ERD50
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Old 01-19-2018, 01:46 PM   #36
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That's what bonds are for. Again, looking at the charts, I just can't pick out this added stability that people talk about.
Look at a multi-year period ending around 2010 and I think you'll find the high div payers, utilities and such, held up much better than growth equities.
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Old 01-19-2018, 02:10 PM   #37
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Look at a multi-year period ending around 2010 and I think you'll find the high div payers, utilities and such, held up much better than growth equities.
And why did you think that?

Based on my earlier scans, I didn't expect to see that, and I didn't. In these screen-shots, I ran the mouse over the VTI line to make it stand out - (pay no attention to the numbers in the box, those are specific to the date the mouse was at, and I just moved it so the box would be out of the way of the ending lines). In each case, VTI was in the middle or near the top.

I'm not cherry-picking data, those are your dates. I chose the first 5 divs I found with histories that go back a few years.

Here ya go. What do you see?

-ERD50
Attached Images
File Type: png VTI-versus_DIVS - 2006-2010.png (206.8 KB, 82 views)
File Type: png VTI-versus_DIVS - 2007-2010.png (204.7 KB, 86 views)
File Type: png VTI-versus_DIVS - 2008-2010.png (181.2 KB, 75 views)
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Old 01-19-2018, 02:12 PM   #38
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And one I forgot to post earlier (can only do 3 at a time I think)...

-ERD50
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File Type: png VTI-versus_DIVS - 2007-9.png (185.7 KB, 65 views)
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Old 01-19-2018, 02:31 PM   #39
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And why did you think that?
Now you have me puzzled. My father was fond of dividend payers and I recall seeing a graph of his account value from about 2005 to 2012. That graph barely budged down when all else was tanking around 2009. AA was about 60/40 IIRC, and the stock side was mostly electric and telephone companies with a smattering of other div payers like JNJ. Now I am curious about the difference between that and the graphs you attached here.
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Old 01-19-2018, 02:39 PM   #40
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And one I forgot to post earlier (can only do 3 at a time I think)...

-ERD50
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