cashflo2u2
Recycles dryer sheets
- Joined
- Oct 31, 2007
- Messages
- 332
Based on the theory you put forth, the price of a stock paying a consistent dividend should eventually go to zero.
What world do you live in?
Most companies certainly do not cut their dividends over time.
In a recession as serious as this one, sure, more than normal are.
And, if you chase the dividend yields you will see more cuts than if you look for good strong companies.
GE just cut theirs yesterday. Prior to that, they have been increasing their dividend for decades.
PEP, JNJ, PG, MCD, KMB have all long records of increasing dividends as well as growth.
Dividend payers tend to do better than non-dividend payers. This is not because they are paying dividends. This is because dividend payers tend to have some things in common.
The tend to:
Be mature, well run companies.
Most are larger companies.
Most have a dedication of some level of responsibility to share holders.
And yes, there are always exceptions. The financial sector is full of them.
Right now though, in a really horrible year for equities, my income stream from dividends is growing (although it is close to break even with GE's move).
I don't have to sell any equities to maintain that level and I am looking to take advantage of low prices to get grow the income stream even more.
I just don't see where you get 'most companies cut the dividend after a certain amount of time of no growth'. Most companies don't have no growth for very long unless you cherry pick the dates and pick a valley of a recession.
Yes, but companies can die (or at least bankrupt and have shareholders wiped out) without ever paying a dividend at all. You could own a stock like this, get no dividends out of it for 30 years and watch it go bust. How is that preferable to getting a 4% dividend year after year (especially when it has a tendency to grow over time) for 30 years and then losing the equity? Wouldn't it be better to get that cash every quarter?dont loose track of the origonal premise. the origional statement was about the fact that exchange rule 118 says all stock offers must be reduced at the open by the amount being payed out making the dividend financially a non event, nothing gained nothing lost from the dividend itself. your worth is exactly the same before the dividend was paid out. .... forget about market action, investor sentiment etc thats a different issue that moves the stock up down,......
Yes, but companies can die (or at least bankrupt and have shareholders wiped out) without ever paying a dividend at all. You could own a stock like this, get no dividends out of it for 30 years and watch it go bust. How is that preferable to getting a 4% dividend year after year (especially when it has a tendency to grow over time) for 30 years and then losing the equity? Wouldn't it be better to get that cash every quarter?
I play BONDS and their Divs..Not stocks..
Like he said>"anything that gives me something and takes it away in the form of a price per share reduction isnt a benefit." And to me it's a Ponzi Scheme...
Unless? Your Very good at selecting What Stocks to Buy and When to sell them..that is a differenet animal..GE and many other Co.s stock Owners are taking a bath on both ends now..getting very Poor Divs and loosing 50% vallue of their Stocks..
go play that game while your accumalating Wealth, but not into Retirment..
other play both and that can work out well too.. but I'm not good at that Stock and Div's game.. so, If I don't Understand it or ain't good at it? I pass..
GNMA's are paying about 4-5% Ylds and so are my other Bond Funds..and that's good enough for me.. I let my Bal. Funds handle the Growth of the Port..since they know alot more than me about it..and I'm both too old and to impatient Now to want to bother to learn..
Only for a short play was Treasuries last yr and for the Rtns... that paid off very well ( ave 17.5% btwn VFITX and VUSTX) but that's a once in a blue moon deal. Am back into GNMA, Corp. and FFRHX. for now.
Keeping Fingers Crossed!
last yr: My Port was 50% in 3 bonds did 17.5% & 50 % in 3 Bal. Funds ave -15% and a 9.2% apy for the past 10 yrs..If it ain't broke? Don't fix it..LOL
its just there is no difference in the mechanics of it whether your non dividend paying stocks rose 4% and you sold off 4% on your own or whether they sell 4% of the value of the company on your behalf and give it to you.
If your point is that the value of your investment is the same after that one transaction, technically you are correct. However, you can not conclude anything about investing from analyzing one transaction at one instance.all the mechanics refer to is that the actual paying of a dividend from a total return stand point is a non event... the dividend made you not 1 penny richer by itself; thats all im saying
There is nothing symbolic about receiving a dividend payment. Retained earnings are reinvested at management discretion and in line with management objectives while paid dividends are reinvested at investor discretion and in line with portfolio objectives. From this perspective a dividend is much more valuable to the investor. As a kind of forces rebalancing it also allows for a significant reduction in portfolio risk.the mechanics of paying that dividend are not a bonus, an extra kicker or anything else thats giving you anything extra they are merely symbolic ..
If your point is that the value of your investment is the same after that one transaction, technically you are correct. However, you can not conclude anything about investing from analyzing one transaction at one instance.
Over a period of time, however, there is a considerable difference between receiving a regular dividend payment or not.
There is nothing symbolic about receiving a dividend payment. Retained earnings are reinvested at management discretion and in line with management objectives while paid dividends are reinvested at investor discretion and in line with portfolio objectives. From this perspective a dividend is much more valuable to the investor. As a kind of forces rebalancing it also allows for a significant reduction in portfolio risk.
michael you can have a million transactions the fact is you cant dispute how a dividend works.. its a payment offeset by a drop in share price by the same amount... thats all it is.....
That's precisely what it is with mutual funds that pay out dividends, but not strictly what a stock does. Yes, it has a tendency to open lower by fairly close to the amount of the dividend, plus or minus whatever amount the stock would have otherwise changed in value at the open. But it's not as formulaic as you describe.michael you can have a million transactions the fact is you cant dispute how a dividend works.. its a payment offeset by a drop in share price by the same amount... thats all it is.....
you want to debate the merits of a dividend paying stock over a non paying stock thats a different discussion then the above
For a mutual fund there is no difference in value after the distribution. When a stock pays a distribution there is a great difference. You have the distribution cash in hand and the marketplace determines the price of the stock, which may or not reflect the distribution.my answer was the 5% dividend is a non event, just like a fund distribution you gained nothing in total return..... thats it , thats all i said...
Absolutely not. The stock prices is determined by open market bidding, period. Dividend payments may or not be reflected in stock prices.
I think you may have confused stocks with mutual funds.
For a mutual fund there is no difference in value after the distribution. When a stock pays a distribution there is a great difference. You have the distribution cash in hand and the marketplace determines the price of the stock, which may or not reflect the distribution.