|
|
01-14-2018, 01:16 PM
|
#1
|
Full time employment: Posting here.
Join Date: Mar 2011
Location: Mpls
Posts: 585
|
Dividend paying stocks
I've read several thread comments about investing in stocks that provide consistent dividends. The commenters often mention withdrawing the dividend payouts as an annual income stream.
These comments usually involve listing some of the best dividend paying stocks.
I prefer to avoid purchasing individual stocks. Are there mutual funds that focus on dividend paying stocks? Does Vanguard possibly offer something like this?
- As long as I'm bringing this topic up, is this a good idea?
- What are the pros and cons of buying stock in companies that provide consistent annual dividends?
- Could this be used as an alternative to some of my bond holdings?
Thanks,
JP
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
01-14-2018, 01:46 PM
|
#2
|
Moderator Emeritus
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,645
|
Quote:
Originally Posted by JP.mpls
I've read several thread comments about investing in stocks that provide consistent dividends. The commenters often mention withdrawing the dividend payouts as an annual income stream.
These comments usually involve listing some of the best dividend paying stocks.
I prefer to avoid purchasing individual stocks. Are there mutual funds that focus on dividend paying stocks? Does Vanguard possibly offer something like this?
- As long as I'm bringing this topic up, is this a good idea?
- What are the pros and cons of buying stock in companies that provide consistent annual dividends?
- Could this be used as an alternative to some of my bond holdings?
Thanks,
JP
|
Here's a dividend ETF that is very popular (VIG):
https://advisors.vanguard.com/VGApp/...ew?fundId=0920
There are lots of topics here on your other open ended questions so I would suggest using the search function to locate those threads rather than try to regurgitate the information.
__________________
*********Go Astros!*********
|
|
|
01-14-2018, 01:47 PM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Apr 2011
Posts: 2,962
|
Dividend-paying stocks tend to be cheap relative to their earnings/book value, so if you like to buy stuff at a discount, they're worth considering. As a retiree, I prefer dividend paying value stocks over the high flyers because they tend to be less volatile. Nearly all of my equity holdings are in mature, value-based stock or asset-allocation funds that produce dividends.
The Schwab exchange-traded fund Schwab US Dividend Equity (SCHD) has been a good performer over the last several years. Yield is 2.63%; expenses are 0.07%.
Stock equity funds are in no way a substitute for a bond allocation. However, you could opt for an asset-allocation fund that's a mix of stocks and bonds. Vanguard's Wellington and Wellesley are good examples. The equity holdings in both are weighted toward the value side of the stock spectrum. Either is a very good core holding for a retirement portfolio, kind of a "set it and forget it" investment.
|
|
|
01-14-2018, 01:50 PM
|
#4
|
Thinks s/he gets paid by the post
Join Date: Nov 2011
Posts: 3,877
|
The share price of dividend stocks generally holds up better during a market downturn, but rises more slowly during upturns. Due to taxation differences between dividends and capital gains, unless your income is low enough to pay minimal income taxes, dividend stocks are often less tax efficient than growth stocks.
|
|
|
01-14-2018, 02:47 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
|
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.
|
|
|
01-14-2018, 02:52 PM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
|
My dividend ETFs are DVY and HDV. Look for no commission trades and low expenses.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
|
|
|
01-14-2018, 03:07 PM
|
#7
|
Recycles dryer sheets
Join Date: Dec 2012
Posts: 335
|
|
|
|
01-14-2018, 03:33 PM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2013
Location: Limerick
Posts: 5,638
|
Quote:
Originally Posted by LOL!
In a taxable account, dividends cost you in extra taxes, so should be avoided.
|
Long term holdings of dividend stocks are much more tax efficient than in a tIRA or 401k where you pay ordinary income tax rates when withdrawn. 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.
|
|
|
01-14-2018, 03:35 PM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2013
Location: Texas
Posts: 10,864
|
In 2017 all my equity trades were in dividend paying stocks. I played the game of buying a "chunk" of stock a day or so before it's ExDiv date and I would sell on or after ExDiv date. (just a form of swing trading) Yes, the stock corrects for the dividend amount on the ExDiv date, but it "usually" recovered pretty quickly, in 2017. (not always though) Consider the tax implications of doing this between a T-IRA, Roth IRA, cash account, etc.
|
|
|
01-14-2018, 03:59 PM
|
#10
|
Thinks s/he gets paid by the post
Join Date: Feb 2014
Posts: 3,054
|
Looked up some dividend ETFs.
Five year total returns
Dividend ETFs
NOBL 74.18% (since inception Oct '13)
HDV 79.02%
VIG 91.06%
SDY 101.16%
DVY 101.32%
VYM 101.85%
SCHD 108.16%
Low cost total market ETFs
VTI 107.37%
SCHB 107.48%
SPTM 107.56%
ITOT 108.20%
|
|
|
01-14-2018, 04:15 PM
|
#11
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
|
Quote:
Originally Posted by jim584672
Looked up some dividend ETFs.
Five year total returns
Dividend ETFs
[Losers]
Low cost total market ETFs
[Winners]
|
So Reality matches Studies in this case. Thanks.
|
|
|
01-14-2018, 04:34 PM
|
#12
|
Thinks s/he gets paid by the post
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
|
My Canadian div grower portfolio has outperformed the total Canadian market by about 4% per year for 20 years.
Agree that for high earners it’s not very tax efficient. It was a few years ago, but then the politicians raised rates on divs. Problem is of course, I have such high imbedded gains don’t want to switch.
|
|
|
01-14-2018, 04:52 PM
|
#13
|
Moderator
Join Date: Jul 2017
Posts: 5,664
|
I have some dividend payers in my father's (inherited) account. After refusing to look at them for years other than statements for tax purposes (only child, was completely devastated when DF died) I am finally trying to force myself to diversify by having the dividends put in as cash, and using them to purchase the Vanguard total stock market exchange traded fund.
|
|
|
01-14-2018, 06:46 PM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,479
|
Quote:
Originally Posted by aja8888
Here's a dividend ETF that is very popular (VIG):
https://advisors.vanguard.com/VGApp/...ew?fundId=0920
There are lots of topics here on your other open ended questions so I would suggest using the search function to locate those threads rather than try to regurgitate the information.
|
If you are in Vanguard already the mutual fund version is Vanguard Dividend Growth (VDIGX). The whole dividend grower concept is popular and seems to have reasonably good results.
These VG funds are not particularly high yield, but they only invest in companies that have been increasing divs for a long time.
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged
"All models are wrong, some are useful." - George Box
“There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
|
|
|
01-14-2018, 07:33 PM
|
#15
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
|
Quote:
Originally Posted by LOL!
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.
|
Excellent, concise info in that link. Thanks!
-ERD50
|
|
|
01-17-2018, 07:13 PM
|
#16
|
Dryer sheet aficionado
Join Date: Aug 2017
Posts: 39
|
Quote:
Originally Posted by LOL!
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.
|
I guess I have mental issues. Happy to collect the dividends whether the markets go up or down.
|
|
|
01-17-2018, 07:59 PM
|
#17
|
Recycles dryer sheets
Join Date: Jul 2014
Posts: 153
|
Quote:
Originally Posted by imokurok
I guess I have mental issues. Happy to collect the dividends whether the markets go up or down.
|
Me too. Several 100's of thousands of dollars worth, per year, in fact. For doing absolutely nothing.
|
|
|
01-17-2018, 08:50 PM
|
#18
|
Moderator
Join Date: Oct 2010
Posts: 10,656
|
My dad set up my mom's portfolio with a handful of mostly dividend paying stocks. Now that he's gone, she asked me what I would do. I suggested she sell the one that wasn't the same as the others (more volatile, a growth stock). Now she has a 5 year cash buffer. But the rest, are still in the utilities. If it were really me at her age, I might go with a dividend ETF, but owning these few companies, as stable as they are, is just fine for her, I think. Personally, I've got too many years to take the haircut, so I don't limit myself to dividend paying stuff.
|
|
|
01-18-2018, 09:31 AM
|
#19
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 7,111
|
That and if they are qualified dividends they are taxed at long term capital gains rates. Watch out for the 2018 tax law as LTCG rates do not match marginal rates.
__________________
Duck bjorn.
|
|
|
01-18-2018, 09:51 AM
|
#20
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
|
Quote:
Originally Posted by imokurok
I guess I have mental issues. Happy to collect the dividends whether the markets go up or down.
|
Quote:
Originally Posted by timemoveson
Me too. Several 100's of thousands of dollars worth, per year, in fact. For doing absolutely nothing.
|
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
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|