Author Topic: Anyone long term invest in dividend stocks?  (Read 4532 times)

MoonLiteNite

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Anyone long term invest in dividend stocks?
« on: February 11, 2017, 02:59:39 AM »
I always had a dream about owning the perfect set of stocks like KO, JNJ, BP, INTL, etc....
But now that i am starting to save a large amount of money and reading about long term investing it doesn't seem like the BEST idea, it is  more of a "safe" type of stock and returns i guess...

Does anyone here actually have a set of dividend stocks? or do most folks stay away from that and just buy up their index funds instead?

Hargrove

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Re: Anyone long term invest in dividend stocks?
« Reply #1 on: February 11, 2017, 07:09:35 AM »
I started with dividend stocks.

Everything has risk. A dividend portfolio's risk is that the stocks in it are already overbought. You're buying stocks that are overvalued, hoping they are similarly overvalued or even more overvalued than they already are in the future (not so you can sell them, but so the dividend doesn't tank).

I love the idea of having a financial investment that gives you raises and allows you to withdraw without withdrawing principal. In any dividend investor setup, you're going to get way more dividends at the end than the money you have invested (or that's the goal), giving you wider control when you're withdrawing that 4%. It's lower risk in the sense that your companies are the monoliths of today. It's higher risk in that you're betting on them often for a very, very long time. That said, I think it's more lucrative than some think, and pretty awesome to get raises like 33% by just holding steady! You also get the support of knowing most of your losses are paid for in just a few months.

From my stock-picker post:

I research extensively on mostly blue-chips and stick around for dividends. My down swing isn't 33%, it's 12%. My upswing isn't 33% either, but it is around 20%, and I'm fine with that. I haven't had a downswing that wasn't made even or better by dividends in the same year, and I haven't realized a loss in two years. My lowest current potential loss is only about -.26% in a year. With a long investment horizon, blue-chips are PLENTY volatile. I was up something like 25% on T, down 5-10%, then back up 20%.

I managed to invest in Abbot Labs just before they finished their biodegradable heart stent, so when it came, I looked like a winner. Then their buyout issues came and dropped them under my cost, but the approval of St. Jude has pushed them back up again. I'm up about 8% there in under a year, so, not bad, then dividends push it into double digits. Score.

IBM was my biggest win. I read a lot about AI, and IBM appeared to be the sleeper that only Buffet was betting on. Up 25% since Strategic Imperatives seized the ship, and sweet, sweet dividends. Dividends were also hiked recently.

Ford and InBev are bizarre value plays to me. Ford just hiked dividends a unicorn 33% and the stock is down. "CARS ARE OVER!!!" (record year) "CARS ARE DONE!" (record year). I'm not buying cars, but most of America still thinks living 10+ miles from work is reasonable or necessary, and neither employers nor consumers are going out of their way to change that. Even self-driving cars will need companies. The US can convert to driverless cars and lower sales figures, but the rest of the world is still buying cars, too. I wouldn't buy more than one car company, but Ford or GM are pretty easy choices to me.

InBev basically just bought 4/5 of the mainstream beer industry and they're down (read: on sale) 12% as they consider buying Coca Cola.

I'm eating up O Realty's doom predictions. This is a company with hilarious amounts of real estate that they're paying off every day, which is required to pay out all the money it makes, which already pays a dividend higher than the retirement withdrawal rule. Hiked dividends 6% this month, like they often do. They make up too much of my "post 65" portfolio before a year or two, but I don't even mind. I love dividend hikes. Next year I'll have more of this in index funds.

(All of these I am invested in, at about 1k each, except O Realty, which is soon to be about 8.5k. I just wouldn't buy Netflix or Tesla right now - the people looking for the mythical entry point already got in a long time ago, if ever there was one. I buy on dips, almost always see a boost, pocket dividend raises, and am happy floating by around 11% before dividends get hiked again, and blue-chips hike them all the damned time, so I'm happy with the results)

Current dividend stocks (TDAmeritrade):
JNJ PG ABT F IBM O T MMM (last one very funny in hindsight)

Loyal3 treated like a no-cost mutual fund, as it has no commissions (I deposit every month into these and treat as my savings):
MSFT INTC GOOGL AMZN UL TGT KHC HAS BUD AXP AAPL DIS ATVI SBUX KO BRK-B

Of those, GOOGL, AMZN, and BRK-B have no dividends, but BRK-B will get you a GEICO discount.
« Last Edit: February 11, 2017, 07:23:04 AM by Hargrove »

mizzourah2006

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Re: Anyone long term invest in dividend stocks?
« Reply #2 on: February 11, 2017, 07:10:22 AM »
I do both. Most of our money is in index funds and our 401ks with matches (about 75% of what we save every year) is in index funds, but the other 25% usually goes to stocks and most typically happen to have dividends (although I don't only buy dividend payers). My dividends in these accounts produce about $4.5k/yr right now. They make the most sense in accounts that don't trigger taxable events though. Your IRA or Roth IRA is where I would hold them.

mizzourah2006

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Re: Anyone long term invest in dividend stocks?
« Reply #3 on: February 11, 2017, 07:16:38 AM »
One thing to keep in mind about foreign owned stocks, AB InBev being one is that you always want to hold those in brokerage accounts. They don't care what you are holding it in, they want their taxes, you get to write them off of the US taxes, but you pay the tax on dividends regardless of the type of account you hold them in. So hold them in a brokerage so you can atleast claim the tax credit.

Financial.Velociraptor

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Re: Anyone long term invest in dividend stocks?
« Reply #4 on: February 11, 2017, 08:41:02 AM »
There are a number of bloggers who invest entirely in dividend growth stocks.  Two of the better ones are:

http://www.dividendgrowthinvestor.com/  <--still working

http://www.mrfreeat33.com/  <--FIREd

David Fish updates a list of dividend growth stocks monthly at: http://www.dripinvesting.org/Tools/Tools.asp
« Last Edit: February 11, 2017, 08:42:38 AM by Financial.Velociraptor »

Ursus Major

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Re: Anyone long term invest in dividend stocks?
« Reply #5 on: February 11, 2017, 09:47:01 AM »
One thing to keep in mind about foreign owned stocks, AB InBev being one is that you always want to hold those in brokerage accounts. They don't care what you are holding it in, they want their taxes, you get to write them off of the US taxes, but you pay the tax on dividends regardless of the type of account you hold them in. So hold them in a brokerage so you can atleast claim the tax credit.

The UK doesn't withhold foreign taxes, so those stocks can be held in a retirement account. Also once you're in retirement and hopefully you'll have a super-low tax rate (thanks to all those qualified dividends being taxed at 0% in your 15% tax bracket), your foreign tax credit will also be less (perhaps significantly so) than the foreign taxes that were withheld.
« Last Edit: February 12, 2017, 11:55:53 AM by Ursus Major »

MoonLiteNite

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Re: Anyone long term invest in dividend stocks?
« Reply #6 on: February 12, 2017, 12:28:57 AM »
Of those, GOOGL, AMZN, and BRK-B have no dividends, but BRK-B will get you a GEICO discount.

no way??? really?

John Doe

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Re: Anyone long term invest in dividend stocks?
« Reply #7 on: February 12, 2017, 05:45:23 AM »
I am fully invested in dividend stocks and have been for many years.  I like that many offer DRIP option often at a small discount. Over time using DRIPs really adds up and gives the portfolio a boost.  I personally don't like index investing as it includes sectors or stocks I would not normally buy ie I don't like resource stocks. Also as my goal is to build a portfolio that does pay out an income stream many index stocks either don't pay dividends or pay out small dividends.  It really is a personal choice re investment styles.  I have been taking this approach for about 20 years now and my portfolio (all currently Canadian stocks) has about a 5% payout overall which generates around 68k per year. It's worked well for me but it does take time to make the various investment decisions.

Hargrove

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Re: Anyone long term invest in dividend stocks?
« Reply #8 on: February 12, 2017, 09:09:56 AM »
Of those, GOOGL, AMZN, and BRK-B have no dividends, but BRK-B will get you a GEICO discount.

no way??? really?

Yep, there are a handful of stocks that could be worth owning for their perks. BRK-B you can get a discount at GEICO for owning, but it doesn't overlap with some discounts. Usually, you can just call and say you're a shareholder, but sometimes they'll ask you to send them proof. It's probably the only Mustachian perk.

Regarding dividend investing, note that bloggers who love it usually talk it up like it's totally better than other investments. It's not really that you make a pile of additional money dividend investing - your stocks' market value does not appreciate as quickly, and when you sell off your assets in other investment styles as you draw on the portfolio, it's not really making a difference that "share number" is going down (if your total asset value is not).

DRIP investing via old DRIP plans is no longer worth it. You can DRIP at brokerages like TDAmeritrade absolutely for free. The old programs almost universally require atrocious fees.

Angry_Retail_Banker

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Re: Anyone long term invest in dividend stocks?
« Reply #9 on: February 12, 2017, 10:52:49 AM »
I'm a big proponent of dividend stocks, more than anything else. Though I try to diversify my asset classes (I have P2P lending and gold/silver/copper bullion), nothing to me beats the idea of owning a piece of a multinational company and getting paid with no other strings attached. Dividend investing is slightly more complicated, of course, and the list of pros (and cons, I guess) can be lengthy, but I think that basic investment model alone makes it a pretty reasonable primary strategy. Especially for those looking to retire early.

Sincerely,
ARB--Angry Retail Banker

Joan-eh?

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Re: Anyone long term invest in dividend stocks?
« Reply #10 on: September 17, 2018, 05:06:21 PM »
sorry to bother again!

To confirm - you own the individual stocks directly? Do you mind me asking how many different stocks you own? How do you think about diversification? 

If you have a moment, id appreciate to hear your strategy. It sounds like its working.

Hargrove

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Re: Anyone long term invest in dividend stocks?
« Reply #11 on: September 17, 2018, 08:42:21 PM »
Wow, this is an old one.

There's a curve somewhere out there that 20 or 30 diversified stocks are about as much real diversification as can be relevant. As in, there's not much volatility reduction from 30 to 400 stocks owned.

That said, you should know I totally abandoned the exhaustive research strategies that I mentioned in yesteryear, because I learned about index investing. It's way easier, has nearly guaranteed better results, and takes no time at all.

Don't know if ARB still posts here, since he only posted 5 times, but he does have a funny blog.

PizzaSteve

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Re: Anyone long term invest in dividend stocks?
« Reply #12 on: September 18, 2018, 09:41:03 AM »
One thing to rememeber about dividend stocks is that they are effectively liquidating a piece of the company with each dividend, and some companies borrow money to pay it, so they are not always the best stocks.  That said, they tend to be less volatile, less upside.

At Schab an example, SCHD is fairly efficient at matching a good dividend oriented portfolio. Commission free to buy, .07% expense ratio.  Might even get paid 100 bucks to open an account. 

I wouldnt go with individual stocks unless I was a very sophisticated active stock watcher.  Outside a tax advantaged account, dividend ETFs and stocks tend to be a bit less tax efficient, so one might factor that into their plans, especially if you have a good pension or additional income sources.
« Last Edit: October 03, 2018, 01:07:44 PM by PizzaSteve »

smoghat

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Re: Anyone long term invest in dividend stocks?
« Reply #13 on: September 20, 2018, 06:15:22 AM »
I invested in VCSAX two years ago when I went all in the market as well as VTSAX, a little but of VOX, VEIRX, and VBLTX since everyone kept saying I should have bond funds for diversification even though my guy told me not to. My hypotheses was that there would be a recession soon and Iíd do well with divided heavy stocks. But that hasnít worked out in a rising rate environment.

The VEIRX has done decent, the VTSAX has done very well although itís just a reflection of the market. VOX has been a big money loser and Iím tax loss harvesting it. VCSAX is finally turning a profit. Philip Morris losing its value like crazy earlier this year didnít help with that.

So itís mixed. If I had been invested in VTSAX only, Iíd be way up. Of course you canít time the market. Am I going to sleep better when the recession comes? We will see.

CorpRaider

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Re: Anyone long term invest in dividend stocks?
« Reply #14 on: September 20, 2018, 06:46:07 AM »
Do you obtain a psychological benefit (incentive to save/invest more) and/or think you would be more likely to avoid panic during a repeat of say 2008-2009 from seeing the dividends (even if somewhat reduced) hit your account or from following the companies and using their products? 

If so, it seems like it might be a superior strategy for you (versus the probably theoretically superior index investing). 

I would make sure to diversify and watch your costs.  You can probably do it for cheaper even than most index funds if you leverage your trading fees (i.e., spread them across sufficiently large orders) and avoid activity.
« Last Edit: September 20, 2018, 06:52:46 AM by CorpRaider »

clumlee

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Re: Anyone long term invest in dividend stocks?
« Reply #15 on: September 25, 2018, 08:09:57 PM »
I didn't go into index funds. I did start with individual dividend stocks but eventually swapped out for ETFs and CEFs. I have a couple of individual names- but those are technically CEFs also. Here's my lineup:
GDV - Gabelli Dividend & Equity Trust for US exposure
IHDG - Wisdomtree International Hedged Dividend Growth fund for international exposure
AMLP - Alerian MLP ETF for exposure to the energy sector
BX - Blackstone for private equity exposure
GAIN - Gladstone Investment Corporation for non-listed company exposure
BLW - Blackrock Limited Duration Income Trust for US corporate debt exposure
JPS - Nuveen Preferred for US preferred stock exposure
GULF - Wisdomtree GULF state dividend fund as my pick for emerging market/frontier market focused exposure
BOTZ - Global X AI & Robotics as a speculation on the future of artificial intelligence.

All except BOTZ pays good dividends. GDV, JPS, GAIN, and BLW pay monthly.

My IRA on the other hand is in index funds with Vanguard.

guelphinvestor

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Re: Anyone long term invest in dividend stocks?
« Reply #16 on: September 26, 2018, 05:37:59 AM »
Hi John

I would be interested in knowing what Canadian stocks you have to generate a 5% dividend.
I am fully invested in dividend stocks and have been for many years.  I like that many offer DRIP option often at a small discount. Over time using DRIPs really adds up and gives the portfolio a boost.  I personally don't like index investing as it includes sectors or stocks I would not normally buy ie I don't like resource stocks. Also as my goal is to build a portfolio that does pay out an income stream many index stocks either don't pay dividends or pay out small dividends.  It really is a personal choice re investment styles.  I have been taking this approach for about 20 years now and my portfolio (all currently Canadian stocks) has about a 5% payout overall which generates around 68k per year. It's worked well for me but it does take time to make the various investment decisions.

Sent from my LG-V522 using Tapatalk


boarder42

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Re: Anyone long term invest in dividend stocks?
« Reply #17 on: September 26, 2018, 05:52:15 AM »
Wow, this is an old one.

There's a curve somewhere out there that 20 or 30 diversified stocks are about as much real diversification as can be relevant. As in, there's not much volatility reduction from 30 to 400 stocks owned.

That said, you should know I totally abandoned the exhaustive research strategies that I mentioned in yesteryear, because I learned about index investing. It's way easier, has nearly guaranteed better results, and takes no time at all.

Don't know if ARB still posts here, since he only posted 5 times, but he does have a funny blog.

isnt it a refreshing relief to truly understand indexing and quit trading and researching and trying to beat the market.  I started actively trading at 10 and did it for 17 years before i finally wised up and found this blog.  Its like a weight is lifted off your shoulders and you know that this just works b/c its always worked.  And if it ever fails well capitalism has failed and we've got bigger fish to fry than how many benjamins we socked into VTSAX.  The lack of stress and just waking up and checking cnbc indexes to know if i made a buck today or lost a buck today is so much easier than what should i buy next when should i get out of this etc.

Hargrove

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Re: Anyone long term invest in dividend stocks?
« Reply #18 on: September 26, 2018, 06:28:17 AM »
isnt it a refreshing relief to truly understand indexing and quit trading and researching and trying to beat the market.  I started actively trading at 10 and did it for 17 years before i finally wised up and found this blog.  Its like a weight is lifted off your shoulders and you know that this just works b/c its always worked.  And if it ever fails well capitalism has failed and we've got bigger fish to fry than how many benjamins we socked into VTSAX.  The lack of stress and just waking up and checking cnbc indexes to know if i made a buck today or lost a buck today is so much easier than what should i buy next when should i get out of this etc.

Definitely. I started trading knowing I had a huge disadvantage vs Wall Street.  "But if I keep individual stocks small and volatile, I'll stay under the radar. Or, big, safe, and lower returns on dividend stocks. Or bet on collective wisdom's loser for the resurgence. Calls! Puts! Just keep learning more! On to options!"

My bets went reasonably well. But I beat the market for a few grand, which did not compare favorably at all with my research time. Once you reach that point, you realize you have to bet the farm - not generally once or twice, but several times, maybe for years, with all the support work that inspires. The most elite financiers on the planet, as well as the odds, are crushingly against you. And once you really have something to lose, yes, the stress. There's only one strategy I know of that has won in any 30-year window, though, and you never have to bet the farm with it, and it takes 0 working hours. There's a psychological comfort to dividend stocks only if you believe, through faith or fear, they'll do better than all of the stock market (they won't) and that your slowly rising dividend is almost as good as the growth on VTSAX (it's not). I read some of Financial Velociraptor's and CheapBstrd's posts and the allure of "just learning more" is really enticing. How many mathematically able overachievers don't want to go all-in on that? But what makes the personal story so exciting is a big part of why it's a terrible plan, statistically. It's 20 million people attempting to attend Juilliard to be one of the next 4 pop stars.

boarder42

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Re: Anyone long term invest in dividend stocks?
« Reply #19 on: September 26, 2018, 06:34:14 AM »
isnt it a refreshing relief to truly understand indexing and quit trading and researching and trying to beat the market.  I started actively trading at 10 and did it for 17 years before i finally wised up and found this blog.  Its like a weight is lifted off your shoulders and you know that this just works b/c its always worked.  And if it ever fails well capitalism has failed and we've got bigger fish to fry than how many benjamins we socked into VTSAX.  The lack of stress and just waking up and checking cnbc indexes to know if i made a buck today or lost a buck today is so much easier than what should i buy next when should i get out of this etc.

Definitely. I started trading knowing I had a huge disadvantage vs Wall Street.  "But if I keep individual stocks small and volatile, I'll stay under the radar. Or, big, safe, and lower returns on dividend stocks. Or bet on collective wisdom's loser for the resurgence. Calls! Puts! Just keep learning more! On to options!"

My bets went reasonably well. But I beat the market for a few grand, which did not compare favorably at all with my research time. Once you reach that point, you realize you have to bet the farm - not generally once or twice, but several times, maybe for years, with all the support work that inspires. The most elite financiers on the planet, as well as the odds, are crushingly against you. And once you really have something to lose, yes, the stress. There's only one strategy I know of that has won in any 30-year window, though, and you never have to bet the farm with it, and it takes 0 working hours. There's a psychological comfort to dividend stocks only if you believe, through faith or fear, they'll do better than all of the stock market (they won't) and that your slowly rising dividend is almost as good as the growth on VTSAX (it's not). I read some of Financial Velociraptor's and CheapBstrd's posts and the allure of "just learning more" is really enticing. How many mathematically able overachievers don't want to go all-in on that? But what makes the personal story so exciting is a big part of why it's a terrible plan, statistically. It's 20 million people attempting to attend Juilliard to be one of the next 4 pop stars.

yep all in all i beat the market too  mostly thru luck and a well timed tesla play at the end of 2013 i actually out performed VTSAX in that year - but found this blog in feb 2014 and everything was in an index by april 2014.  I'm a have to learn it myself kinda guy - i didnt know any better though til i found this blog and read up on indexing and it really is the simple no brainer.  As the late Ron would say set it and forget it!

fn43086

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Re: Anyone long term invest in dividend stocks?
« Reply #20 on: September 26, 2018, 07:45:17 AM »
Of those, GOOGL, AMZN, and BRK-B have no dividends, but BRK-B will get you a GEICO discount.

I just want to give you a big thanks. Seconds after reading this, I sent GEICO an e-mail asking about a shareholders discount and mentioned I was a shareholder of BRK.B. Minutes later, without even sending proof (but I am a shareholder, not scamming here), they e-mailed back stating they applied the discount and have updated my policy.

Thank you to Hargrove!

boarder42

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Re: Anyone long term invest in dividend stocks?
« Reply #21 on: September 26, 2018, 07:53:54 AM »
Of those, GOOGL, AMZN, and BRK-B have no dividends, but BRK-B will get you a GEICO discount.

I just want to give you a big thanks. Seconds after reading this, I sent GEICO an e-mail asking about a shareholders discount and mentioned I was a shareholder of BRK.B. Minutes later, without even sending proof (but I am a shareholder, not scamming here), they e-mailed back stating they applied the discount and have updated my policy.

Thank you to Hargrove!

whats the discount? geico ususally isnt the cheapest but if its like 20% off i may go buy a share.

fn43086

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Re: Anyone long term invest in dividend stocks?
« Reply #22 on: September 26, 2018, 08:15:32 AM »
Of those, GOOGL, AMZN, and BRK-B have no dividends, but BRK-B will get you a GEICO discount.

I just want to give you a big thanks. Seconds after reading this, I sent GEICO an e-mail asking about a shareholders discount and mentioned I was a shareholder of BRK.B. Minutes later, without even sending proof (but I am a shareholder, not scamming here), they e-mailed back stating they applied the discount and have updated my policy.

Thank you to Hargrove!

whats the discount? geico ususally isnt the cheapest but if its like 20% off i may go buy a share.

It depends on the state you live in, I believe the max you can receive is 8%. I live in NY so of course, good ol' NY it was only 3%, but hey, it's better than no discount. In other words, no, not near 20%.  However, for me, I was very excited to save every percent I could get! 

Hargrove

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Re: Anyone long term invest in dividend stocks?
« Reply #23 on: September 26, 2018, 08:18:55 AM »
You're welcome. :)

Other stock perks are not so Mustachian, but you can get freebies from McDonalds and Starbucks sometimes. Ford still has an "X-Drive" program I think, which requires 6 months of 100+ shares held in Ford to buy a personal vehicle near factory prices, but soon they won't sell cars. Royal and Carribean offer cruise discounts (though I hear these are being curtailed), and you can bet on horses in the UK if that's, uh, your thing. Not much else available anymore. Disney used to have something, but I think they cut theirs, too. Kimberley Clark still has a care package that might be a good deal for people expecting or with young kids.

effigy98

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Re: Anyone long term invest in dividend stocks?
« Reply #24 on: October 02, 2018, 04:25:19 PM »
DGRO... Low expense ratio, filters companies to raised dividends 5+ years consecutive, good diversity, and also has free trades at fidelity.

wheezle

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Re: Anyone long term invest in dividend stocks?
« Reply #25 on: October 02, 2018, 08:37:01 PM »
Agree with the OP that dividend stocks are not something to focus on -- happy to see that some people come to the same conclusion.

Berkshire Hathaway (BRK-A/BRK-B) has always been really strong on the point that dividend payouts are a very tax-inefficient way to return money to investors -- growth is actually better (and so are stock buybacks). Some companies allegedly simply can't do anything great with the cash that they have, so they "return" it to shareholders.

It should be clear that the best type of company to invest in for absolute returns won't be returning cash in the form of dividends. But that doesn't mean dividends are bad... just that they're not truly optimal.