Author Topic: Dividend stock article  (Read 2565 times)

milesdividendmd

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Dividend stock article
« on: September 04, 2014, 09:37:42 AM »
Dividend stock strategies are quite popular around these parts.

My personal view is that there's nothing wrong with dividend stocks but nothing magic about them either.

This article by Dan Solin does a pretty good job of laying out many of the myths of dividend stock investing.

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/02/04/7-myths-about-dividend-paying-stocks?utm_content=buffer41933&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

Enjoy!

MooseOutFront

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Re: Dividend stock article
« Reply #1 on: September 04, 2014, 10:15:50 AM »
I honestly have a tough time wrapping my head around it.  I've seen Swedroe and Ferri in some pretty in depth arguments with dividend chasers on the bogleheads forum and I intend to go back and read through those again soon.  Obviously us early retiree aspiring folk value the income stream that dividends provide, but on the other side of the coin it is argued that the amount of dividend paid is exactly equal to how much the stock would have increased in value had the dividend not been, resulting in a wash over time.  Then there's the aspect of playing the individual stock picking game to get the dividends and almost everything I've ever read says no individual stock picking.

All that said, there's more to this and I need to read about it more than I have.

milesdividendmd

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Re: Dividend stock article
« Reply #2 on: September 04, 2014, 12:28:47 PM »
An important point that is not specifically made in the article is that now is likely a particularly bad time to pursue a dividend strategy.

Any outperformance of dividend stocks historically has been attributable to their exposure to the value factor. (Ie dividend stocks have been cheaper than the market as a whole. )  Now dividend stocks are more expensive than the market as a whole. (So they have a negative exposure to the value factor.

Buyer beware!

Retired To Win

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Re: Dividend stock article
« Reply #3 on: September 05, 2014, 06:16:47 AM »
I "love" the way the article's author doesn't have one good thing to say about dividend-paying stocks. LOL!

An unbiased source of information, that article is not.

milesdividendmd

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Re: Dividend stock article
« Reply #4 on: September 05, 2014, 10:37:56 AM »
I "love" the way the article's author doesn't have one good thing to say about dividend-paying stocks. LOL!

An unbiased source of information, that article is not.

The other interpretation is that reality is biased, if one's own bias is that dividend paying stocks present a unique advantage over non dividend paying stocks.

waltworks

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Re: Dividend stock article
« Reply #5 on: September 05, 2014, 12:33:37 PM »
If you just read back through this forum you can find people who are above-average in most ways (ie intelligence/curiosity, financial resources, etc) asking how they can possibly do a 4% SWR retirement when they'd have to *sell stock* to do it.

Won't I run out of shares?
I thought I was just going to live on the dividends!
etc, etc.

People value dividends above capital gains because people are stupid (and yes, I have lots of cognitive biases that make me do stupid things too, I'm not trying to be a dick) and don't really understand how mutual funds and stocks work. That means there should be a (small) comparative advantage in ignoring dividends completely. There are also some tax advantages, of course.

So if it makes you feel warm and fuzzy to buy only dividend stocks, by all means do it. Just don't expect your returns to match what you'd get just throwing money randomly into index funds.

-W