Dividend paying stocks

[foxfirev5]

Warren Buffet makes the an argument against dividends in his 2012 Berkshire Hathaway annual shareholder letter starting on page #19.

Now that's just funny. Warren makes a ton of money off dividends and preferred shares that the rest of us have no opportunity to share.

 

[sengsational]

You aren't seriously trying to make a point with a portfolio of two stocks, are you? I'll accept that you actually held those in that time frame, but how does that help anyone else?

Probably doesn't really help anybody except for me and my mom. My dad was an "individual stocks" kind of guy and he left my mom with these utilities. I had them too, gifted to me. Now he's gone and mom has zero experience, so it fell to me to review her investments. I could have gone in and revamped the whole thing, or I could convince myself that maybe my Dad's picks will hold up ok in a down-turn and wouldn't be leaving too much on the table. With the lack of proof for dividend stocks that has been the major topic of this thread, I became concerned. But the analysis here seems to lump all "dividend stocks" into one bucket and that provides the "answer" that you've clearly identified: total return. But someone else might be helped knowing that certain subsets of dividend stocks might have a reasonable total return, lower beta, or some other measure that is sought.

 

[ERD50]

... But someone else might be helped knowing that certain subsets of dividend stocks might have a reasonable total return, lower beta, or some other measure that is sought.

Only if we have a time-tested proven method for picking those stocks in advance, and in all sorts of markets. I think that could be done if you are looking to give up one factor for another (like trade total return for stability - but maybe that's best done with bonds and AA?).

I keep asking for evidence of that, and I have not seen it.

Or to turn that around for illustration - does it help anyone to know they could have made a fortune in AAPL and AMZN? Not now.

-ERD50

 

[Luck_Club]

VTI compared to DIV Payers

I can't do the cool graphics, but like Sengsational, I just grabbed a few bell weather stocks, and plugged them in.

My picks vs VTI

VZ, ED, PG


VTI came out in 2001, so what was the composition in 2001?

 

[Luck_Club]

Future Portfolio Picks

I keep asking for evidence of that, and I have not seen it.

-ERD50

So over the past few weeks I have been trying to figure out how to redeploy some money. The money is divided about 50/50 in taxable and IRA accounts. This had me doing substantial back testing against VTI. Some of these holdings have been in my portfolio for some time, and some are recent picks.

Needless to say portfolio analyzer tool has helped tremendously in giving me the confidence to go this way. As mentioned earlier I did back testing against the VTI, along with some adviser based portfolio. The surprising thing is that the risk is lower and the returns higher with my picks vs the Adviser or VTI by itself. This took some massaging of the data because some of the picks are new funds like INDA & SCHD, but both fit with my thoughts on broad economic and global trends.

Taxable account
PYMDX 50%
FOHFX 25%
FTABX 25%

IRA Portfolio
SCHD 50%
FHMKCX 10%
INDA 10%
MAPIX 10%
ED 10%
VZ 10%

 

[ERD50]

So over the past few weeks I have been trying to figure out how to redeploy some money. The money is divided about 50/50 in taxable and IRA accounts. This had me doing substantial back testing against VTI. Some of these holdings have been in my portfolio for some time, and some are recent picks.

Needless to say portfolio analyzer tool has helped tremendously in giving me the confidence to go this way. As mentioned earlier I did back testing against the VTI, along with some adviser based portfolio. The surprising thing is that the risk is lower and the returns higher with my picks vs the Adviser or VTI by itself. ...

I can't help you there. Sounds more like a post for the "Stock Picking" thread, or do we have a "Fund/ETF picking" thread here?

Everything I've seen says sectors rotate, so I see sector picks as a form of market timing. I'm not convinced I can do it (or can pay someone to do it), so I stick with Total Market.

I can't do the cool graphics, but like Sengsational, I just grabbed a few bell weather stocks, and plugged them in.

My picks vs VTI

VZ, ED, PG ...

I'm a big fan of diversification, anything with less than 100 stocks is of no interest to me. I consider anything less to be "stock picking", and a few stocks are far too small a sample size to tell us anything in general.

VTI came out in 2001, so what was the composition in 2001?

FYI: VTSMX goes back further, or just choose their benchmark.

I suppose you could find a prospectus from 2001, but why do you ask? What does it matter? Realize the performance history that is reported is based on the makeup at the time, the numbers are the numbers.

-ERD50

 

[Brat]

Based on my limited experience with a friend dividend stocks can be reassuring to an older investor who is dependent on those dividends for income. Older (70+) investors who need dependable income will forgo the possibility of growth for a check in the mail.

 

[Running_Man]

There is a certain comfort in pretending that the decision of a corporation as to declare dividends, buyback stock or just reinvest all available cash in the business, has no effect on the present valuation as these are all future events undertaken with assets of the business that exist today.

If you were on the board of directors of any major company, and in interviewing for a CEO had 3 to choose from:
1) Candidate one states the importance of financial governance and sharing the results with shareholders via dividend a predictable income stream - between 30 to 40 percent of the profits, with the dividend expanding faster than the general rate of inflation and the investment of the other 60-70 percent of the earnings in projects that allow the company to grow into the future.

2) Candidate 2 states reinvesting all profits in a tax free manner to the owners of the company in such a way as they decide when to take their profits by selling at an opportune time. As such the annual cash flow of a project undertaken does not hold as much importance rather he is looking long term down the road.

3) Candidate 3 believes the assets of the company should be leveraged immediately to buy back as much stock as possible through all available cash flow including utilizing debt to maximize share count reduction. Through reducing share count the company will be able to concentrate the value of the company in fewer hands and increase shareholder value. As long as the return of the company financials exceeds the cost of debt, as much debt as can be financed without risking credit issues will be the result of hiring this executive.

I for one try to invest with CEO's that fit into category #1, but to think that any of these styles have no long term or short term impact on the valuation of a company or the financial outlook of the corporation; is a result of a market at an all time high when almost any idea is rewarded as a good idea and aggression is exceptionally well rewarded. And there are many times as now when aggression is very well rewarded. But as Jeremy Siegel pointed out in his study of stocks over an 85 year period, dividend paying stocks outperformed non dividend paying stocks by more than one percent per year over an 85 year period, but that does not mean dividend stocks fit your personality and investment style.

 

[ERD50]

.... But as Jeremy Siegel pointed out in his study of stocks over an 85 year period, dividend paying stocks outperformed non dividend paying stocks by more than one percent per year over an 85 year period, but that does not mean dividend stocks fit your personality and investment style.

Anything that can be shown to reliably beat the general market by 1% per year, especially with decreased volatility, "fits my personality and investment style"! I like making money.

But how can this realistically be achieved by a personal investor? The charts I've done throughout this thread of div-focused funds versus the Total Market don't show this advantage.

Hmmm, that might be tricky wording from Mr Siegel - dividend paying stocks versus non dividend paying stocks. My benchmark is not divs or no-divs, it's the Total Market versus anything else that can be purchased/replicated by me. Div versus non-div is just comparing two sectors of the Total market. Why do that? My Total Market investments don't make any distinction.

What is "actionable" here?

-ERD50

 

[Dash man]

I have a mix of 30 dividend stocks and growth stocks, mixed in with 4 ETFs for some extra diversification. I like the income because it saves me the trouble and small cost of selling. I regularly check the health of the companies and if things turn sour I’ll dump them to find a better company to invest in. I treat growth companies the same way. If they’re performing I’ll keep them and if not I’ll sell them for something better.
Spreadsheets and data are great for showing the past and to a limited extent the future. But I enjoy the challenge of stock picking for the companies that make people millionaires along with dividends to pay the bills. Total market investing doesn’t weed out the losers as we can with individual stocks. Past performance doesn’t predict future gains. Healthy companies are likely to rebound better than those buried in debt or plummeting revenues during a downturn. So I pick a mix and have done well by monitoring company reports, news, quarterly calls when I can. Just my two cents.