I love Dividend Distributions

[mathjak107]

Quote:

Originally Posted by eta2020 That math us useless. It is nice to own dividend growers because that is how you make money

that is correct , while paying a dividend can be alot of smoke and mirrors as even the most financially poor companies try to keep the dividend gowing ,raising dividends is proclaiming good financial health.

while dividends themselves do not mean much the psychology of them has historically had them out perform because investors liked that show of good health.

but from a math standpoint there is no reason they are any better or worse. about the only real benefit is you get a check without the hassle of having to sell a piece on your own. of course the flip side is the taxes on dividends are usually not qualified and do cost more ,.

as head of s&p research silverblat said lately it has been the non dividend payers the last 6 years that have out performed their larger cousins by 5 to 6% a year ,at least up until just this year.

since in the mechanics of things there is no inherent advantage to receiving dividends and just reinvesting them anyway i agree with those who much rather be in control of their tax liability by keeping them as low as possible and going for the same total return without them.

[mathjak107]

Quote:

Originally Posted by dallas27 Directly from vanguard below. Everyone does NOT pay the same price in the market. Think about how silly what your suggesting is, that 3-10 days after ex-div i can go back and by shares at the ex-div + 1 market open price. Makes no sense. Who would sell those shares at a discount? Assuming it went up. From vanguard: How does the reinvestment program work? When reinvesting dividends, Vanguard Brokerage Services combines the cash distributions from the accounts of all clients who have requested reinvestment in the same security, and then uses that combined total to purchase additional shares of the security in the open market. Vanguard Brokerage will attempt to purchase the reinvestment shares by entering a market order at the market opening on the payable date. The new shares are divided proportionately among the clients' accounts, in whole and fractional shares rounded to three decimal places. If the total purchase can't be completed in one trade, clients will receive shares purchased at the weighted average price paid by Vanguard Brokerage Services. Sent from my iPhone using Early Retirement Forum

irrelevant . the fact is the main investment itself is reset to the same lowered price for everyone. the fact a small reinvestment may go through at a higher or lower price does not change the fact that there is no inherent advantage to dividends being reinvested.

in fact since markets are up generally 2/3's of the time and down only 1/3 the odds are if that reinvestment does not go through at the same price as the adjusted price there is a good chance the reinvestment may go through at higher price actually hurting you by giving you less shares.


but not even figuring that it is still irrelevant to the mechanics of it and any advantage it has. you are arguing about market action effecting things. that has nothing to do with the fact a dividend is a zero sum event and merely reflects what you already had prior to it being paid out.

[eta2020]

Quote:

Originally Posted by mathjak107 that is correct , while paying a dividend can be alot of smoke and mirrors as even the most financially poor companies try to keep the dividend gowing ,raising dividends is proclaiming good financial health. while dividends themselves do not mean much the psychology of them has historically had them out perform because investors liked that show of good health. but from a math standpoint there is no reason they are any better or worse. about the only real benefit is you get a check without the hassle of having to sell a piece on your own. of course the flip side is the taxes on dividends are usually not qualified and do cost more ,. as head of s&p research silverblat said lately it has been the non dividend payers the last 6 years that have out performed their larger cousins by 5 to 6% a year ,at least up until just this year. since in the mechanics of things there is no inherent advantage to receiving dividends and just reinvesting them anyway i agree with those who much rather be in control of their tax liability by keeping them as low as possible and going for the same total return without them.

You could go and teach Warren Buffet one or two things Since he for most will buy only dividend growers.

[mathjak107]

i think you need to reread what i wrote about stocks that GROW dividends. growing dividends proudly proclaim ,look at me i have money just to give away that i don't even need.

whether it is a good thing or a bad thing going forward when it comes to compounding investor money we don't know anymore but it sure does show good financial strength.

[eta2020]

I think you are making lot bold statements which are simply not true....
IE: "flip side is the taxes on dividends are usually not qualified and do cost more ,."

Berkshire Hathaway collects dividend from KO which EQUALS to its cost bases and it is all qualified.

"Time is the friend of the wonderful business, the enemy of the mediocre.".

[mathjak107]

the problem is even if the dividends are qualified you still get taxed unless you are in the zero bracket. you may had no reason to sell a non div payer but the dividend does trigger a taxable event in a taxable account

[eta2020]

Before you worry about taxes you have to worry about making money.

Growing dividend is sign of "Healthy Glowing Skin" in company. It is not the only metric, but it is very important one especially if growth is driven by earnings growth.

That is number one reason many investors like/desire it.

[mathjak107]

the only issue is with record dividends being payed out the last 5 years the non dividend payers have beaten the s&p 500 by 5 to 6% every year except this one.

so rising dividends may not be the best use of investor money going forward. time will tell. historical patterns do not last forever as the only thing that usually repeats itself is historians.things in life have a way of playing out just different enough over time to make what worked in the past just different enough eventually to no longer be the best way. . .

with indexing becoming more and more popular eventually the same money pouring into the dow and s&p 500 dividend payers will over value them and the value will be everywhere else. only 30% of all fund sales are in indexing so it has not been an issue. but that can change too as it catches on more and more.

remember markets have a way of disappointing the majority.

[Rustward]

Quote:

Originally Posted by mathjak107 . . . they only hang out with and support the views of those in their camp. . . .

This is quite prominent in these forums.

[mathjak107]

one of the reasons i like PFAU and KITCES is they go against the grain and with facts dispel many of the the notions that we all accept and believe as true. but yet there is no longer evidence that any of that may be true or even really was true.

[mathjak107]

Quote:

Originally Posted by eta2020 You could go and teach Warren Buffet one or two things Since he for most will buy only dividend growers.

he may buy dividend growers but he knows dividends are not the best route to grow investor money when it comes to his own stock and that is why berkshire pays none..

we learned that when he addressed the issue of why berkshire will not pay a dividend.

from dividend.com
----------------------------------------------------------------------

Buffett and Share Repurchases

Buffett believes that disciplined repurchases are the “surest way to use funds intelligently” for shareholders, as long as purchases are made below the intrinsic value of the stock. If the opportunity presents itself, Buffett will not hesitate to snatch up BRK shares. The opportunity, as defined by Buffett, is any time the stock is available up to 120% of book value.

On the matter, Buffett stated “We originally said we would not pay more than 110% of book value, but that proved unrealistic. Therefore, we increased the limit to 120% in December when a large block became available at about 116% of book value.” This came from the 2012 annual report.

Berkshire’s profits have continued to climb, which has made the calls for dividends and repurchases only grow. Taking a look at what the company has been doing with its hard earned cash, however, reminds investors that they are staying plenty busy.

Berkshire’s Use of Earnings

Berkshire made 27 acquisitions in 2013, each worth anywhere from $1 billion to $2 billion and higher. This included purchasing half of the H. J. Heinz Company (with 3G Capital Management) for a hefty $23 billion. For anyone who questions how well this strategy has worked, just look at the growth of BRK over the years. Berkshire Hathaway has managed an average annual return of 17.41% since it went public in 1990. Over that time the S&P 500 has averaged 9.46% by comparison. The chart below displays the annual returns of Berkshire Hathaway versus the S&P 500 since 1990:


Why Warren Buffett Doesn’t Pay a Dividend - Dividend.com

[redduck]

Quote:

Originally Posted by mathjak107 one of the reasons i like PFAU and KITCES is they go against the grain and with facts dispel many of the the notions that we all accept and believe as true. but yet there is no longer evidence that any of that may be true or even really was true.

which of the "many of the notions that we all accept and believe as true" are you talking about?

[mathjak107]

there are to many to even list that ended up being incorrect.

annuities can play a very key role in success rates and all are not the same awful products.

spending from taxable accounts first in retirement and leave deferred money until last may not be the best advice as a flat out statement .


dividends pay you to wait in downturns and you reinvest at lower prices and it puts you ahead

buy low and sell high has lost more money for folks than any other mantra.

target date funds are a good way to invest .

i can go on and on with many things we believed as true but are not true either in practice or in general most of the time.

[redduck]

Quote:

Originally Posted by mathjak107 there are to many to even list that ended up being incorrect.... dividends pay you to wait in downturns and you reinvest at lower prices and it puts you ahead..

ok, thanks for the list in your last post. but, are you sure that the one about dividends is not correct? seems like it would work out well. and, one thing it might do, is cause an investor from selling in a downturn.

[mathjak107]

This entire thread ended up being devoted to why mathamatically reinvesting dividends has no real inherent advavantage vs getting the same total return and getting no dividend.

[fanmail]

Quote:

Originally Posted by mathjak107 This entire thread ended up being devoted to why mathamatically reinvesting dividends has no real inherent advavantage vs getting the same total return and getting no dividend.

As it should be. Do you buy stock so that you can watch it grow and sell it when you want to, or so the company sells it for you creating a taxable event?

[UnrealizedPotential]

Quote:

Originally Posted by mathjak107 This entire thread ended up being devoted to why mathamatically reinvesting dividends has no real inherent advavantage vs getting the same total return and getting no dividend.

Well,I was hoping for something magical that happens by reinvesting dividends and capital gains. Sometimes what we want to believe are true and what really is true are two different things entirely. I am still going to reinvest my capital gains and dividends. The bottom line I think is there is no substitute for saving and regular investing and hard work and patience.

[mathjak107]

if something magical happens by reinvesting dividends as opposed to straight appreciation we would all just buy before the dividend and reinvest it right?

folks get lost in the fact they have more shares but they forget everything is based on the dollar value of the investment and what happens to that amount over a given time frame.

all that counts is what your dollar value is on the opening of the next quarter and where it ends. it has nothing at all to do with number of shares that make up that value.

[eta2020]

Quote:

Originally Posted by mathjak107 This entire thread ended up being devoted to why mathamatically reinvesting dividends has no real inherent advavantage vs getting the same total return and getting no dividend.

You are focusing on wrong/insignificant thing

[mathjak107]

i think not. it is the answer to the op's statement . you seem to be the only one dancing around what the thread was about.