The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: kylemoney on August 03, 2016, 07:02:18 AM
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Thought I would throw this out there for encouragement purposes.
I am young and starting out and have a brokerage account with 8 different stocks/CEF's earning me $32 each month currently. I'm reinvesting and diversifying as I go and the goal is after getting all debt paid off (student/car) is to have this pay for the wife to be a SAHM. :) long ways to go!
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I also have a brokerage account with some individual stocks, and most of them do not pay dividends, and not all pay monthly.
I have a single mutual fund that on the 1st of every month gives me about $19-$22, and I have about $4k invested in it. I have had it for years and it has been riding at -8% for a while until recently it has gone up to -3.5%, but always delivering about 5.5% dividends for the year. Even though it shows -3.5% the reinvested dividends over the years have been significant, I believe I started with $2.5-$3k initially and just let it ride. It is PREMX, and I believe it is a Developed Countries Bonds Fund.
Although I have a brokerage account with individual stocks, I do not put any new money in there, and all my new investments are in my TSP/401K, and Vanguard ETF Funds.
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Is there an easy way to find this information out? I'm curious how much my portfolio produces in dividends per month/quarter/year. I have all of my investment accounts tracked inside of Personal Capital but it doesn't seem to tell me the total yield of my portfolio.
A rough guesstimate would be that the average dividend on all my investments is around 2.5%, which would be ~$1,562/month.
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I get $0 in dividends each month as my ETFs pay out quarterly...on average I'm getting ~2% overall in dividends. So if I want a 4% WR that's 50% dividends and 50% capital appreciation.
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Is there an easy way to find this information out? I'm curious how much my portfolio produces in dividends per month/quarter/year. I have all of my investment accounts tracked inside of Personal Capital but it doesn't seem to tell me the total yield of my portfolio.
A rough guesstimate would be that the average dividend on all my investments is around 2.5%, which would be ~$1,562/month.
I use Mint and it doesn't show taxable account investment dividends, but maybe that's because mine are set to reinvest instead of deposit into a money market account.
To view dividends, I have to login to Vanguard and check the Dividend & Capital Gains tab. Maybe someone knows an easier way?
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My overall yield is roughly 4%, as quite a few of the good values I have found recently had high yields.
I'm pretty dividend agnostic, but my preference for predictable earnings/cash flows that grow regularly is obviously leading me to many companies that pay dividends more often than not.
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I get $0 in dividends each month as my ETFs pay out quarterly...on average I'm getting ~2% overall in dividends. So if I want a 4% WR that's 50% dividends and 50% capital appreciation.
It's great you guys can pay zero taxes. Here in Italy regardless of your income level all dividends are taxed 26% flat.
I also get zero monthly dividends, but on a yearly basis I'm around 3.8% before taxes (lots of euro stocks)
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It's great you guys can pay zero taxes.
I lose 15% withholding tax on most of my US dividends. A big chunk of my other dividends are tax free until withdrawal at which point I pay normal income tax on them so in the case of my US dividends in that account I essentially get taxed twice.
I only have one truly tax free account and its value is less than 10% of my portfolio.
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I get ~$175/month when you average it out evenly across the year.
I'm 29 and have been investing since I was 23. I didn't really start hammering large amounts of cash in until about 3 years ago though.
The younger the better! Do not be discouraged by the small amounts you get at first it will definitely snowball if you give it time.
I'm hoping to be getting ~$1500-1800/month when I'm close to 40 years old just from dividends.
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I guess we get about $1000 a month in dividends.
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Chasing dividends with your primary investment for fire is typically a losing scenario compared to the alternative of index investing.
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I don't chase dividends explicitly, but the yield on my portfolio is fairly high due to a significant bias to the Australian market (ASX300 average yield is about 6.5%. I hold a mix of local and international ETFs, some closed end funds and some direct stock.
My dividends range between $200 and $12000 a month, which makes "monthly dividends" a pretty poor metric. Annual dividends are about $95k pre tax of a ~$1.9m portfolio.
I don't believe this dividend payout is sustainable or able to grow in the long term, hence I intend on living off about two thirds of my dividend income and reinvest one third once in FIRE.
I'm 34 and have been at this 10 years, with a bit of leverage and a bit of timing luck (accumulation through GFC). Its pretty amazing how quickly it can grow as an income stream.
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Very small amount compared to my portfolio size.
I'm in Total Stock/Total International Stock/ Total Bond funds from Vanguard.
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I am up to 12... just finally did my last swing trade and going to slowly buy into dividend stocks and hold.
Got my first small around of KO. Need to wait for funds settle to get some more :D
Going to be just putting only around 10% of my total FI funds into dividends stocks.
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Chasing dividends with your primary investment for fire is typically a losing scenario compared to the alternative of index investing.
i agree . it is all about total return at the end of the day . dividends in tough times can be reduced or suspended and if you are living off that money you can end up selling things at a loss to make up the income shortfall .
lots of that went on in 2008-2009 .
at the end of the day except for possibly trading costs and taxes there is no difference between the company handing you back 2% of your investment value as a dividend or you selling off the same dollars (not percentage ) from your total portfolio .
assuming the same total returns on both the results will be similar .
many folks do not realize that whenever a stock goes ex div the exchange computers have to reduce the price by an equal amount at the ring of the bell . this is mandatory . so if you are not reinvesting the dividends but are spending them , you will have less dollars compounding for you at the ring of the bell over the next quarter compared to what you had the night before .
it is dollars being compounded over each quarter that count .
if you reinvest the dividends then you have the exact same dollar value compounding at the ring of the bell over the next quarter as you had the night before .
the dividend is not like interest . interest has no price reduction .
there is a reason you want both interest paying investments and either dividend or growth vehicles . they serve different purposes .
i reinvest all dividends from my retirement accounts and basically pull from the portfolio over all . it helps keep the income non dependent each year on any dividend cuts or changes . i use the dividends to refill next years money for spending .
According to John Bogle in The Little Book of Common Sense Investing (Exhibit 7.1), over the past 100 years capital gains (represented in his numbers by earnings growth) have accounted for:
53% of stock market returns while
dividends have accounted for 47%.
But over the past 25 years:
65% of returns have come from capital gains
while only 35% have come from dividends.
Not only that, but the actual return from dividends has fallen, from 4.5% per year over the past 100 years to 3.4% per year over the past 25. Today, the overall US stock market has a 2% dividend yield.
ever look at how hard it would be to try to plan living off the dividends from the so called dividend aristocrat's ?
you keep seeing just invest in this group and call it a day .
however what constitutes this group changes all the time so get ready for lots of selling trying to keep up as they get bumped and replaced AFTER THE FACT THEY DID NOT LIVE UP TO EXPECTATIONS . you could be behind the curve here very easily .
these dividend aristocrats are not somehow immune to all the things that effect company's and stocks . Just like other companies, their outcomes change.
in 2009 there were 52 stocks that met the group’s strict criteria.
As of 2012, there were 51.
But of those 51, 13 were different than the original set. So over the course of just 3 years, there was a 27% change in the group’s composition.
in fact going back to 1989's list :
Of those 26, seven are still on the list today, ten were removed because they either cut or froze their dividend, four were removed for an unknown reason, and the remainder were acquired at some point and dividends were altered . So at least ten of the 26 had an outcome that is different from the assumption of dividend growth every year through thick and thin.
dividend stocks an be a fine investment vehicle, but one needs to practice reasonable diversification and not chase yield or get to fixated on that dividend .
today the fact i can't control the dividends and distributions from my funds hurts me a bit . my yearly distributions can run from 29k to 69k a year depending on markets . that means i may or may not get an aca subsidy on my medical insurance costs . had i had a more efficient portfolio of non div payers it would be easier to control since i would not have money forced upon me at those times i did not want it.
but at this point it is what it is , but if it was decades ago i would have structured things differently .
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for those who never knew a price drop is mandatory here are the finra rules .
5330. Adjustment of Orders
(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:
(1) Cash Dividends: Unless marked "Do Not Reduce," open order prices shall be first reduced by the dollar amount of the dividend, and the resulting price will then be rounded down to the next lower minimum quotation variation
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Technically dividends are less tax efficient as well. While ever so slightly they are less efficient
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...Annual dividends are about $95k pre tax of a ~$1.9m portfolio.
I'm 34 and have been at this 10 years, with a bit of leverage and a bit of timing luck (accumulation through GFC). Its pretty amazing how quickly it can grow as an income stream.
Awesome! I would FIRE with that amount :)
Wish I started at 23 :/, I started last year and I am 30. Maybe in 15 years I'll have a nice stash, but I just wish for my family to be healthy.
On Dividends, it's definitely a mental cushion seeing that $20 trickle in every month, I can actually say and see that I am making money.... but yeah.. index funds... long term.
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Technically dividends are less tax efficient as well. While ever so slightly they are less efficient
In a brokerage account this is true. In a 401k or IRA there is no difference.
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
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In my taxable account, my forward estimated 12 month dividend, distributions, and bond interest comes to 26,276. It covers my budget with a little wiggle room. I sell options around my existing positions for a kicker.
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I get about $160/month in CAD dollars (some of my dividends are in US dollars), but of course since most stocks pay quarterly, it varies from month to month. I also don't chase dividends and in fact my biggest investment don't pay a dividend.
My monthly living expenses is about $700/month. So I hope to get to that level at some point.
Be careful not to chase the dividend yield. Some stocks have a high yield due to the fact that their stock price is falling due to poor performance. Also, higher dividend paying funds (like a lot of income funds) could be giving you that dividend because of Return of Capital. That'll decrease your ACB which will cost you higher capital gains taxes down the road, so be aware of that.
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My wife and I take in about $1k/ month in dividends from our common stocks and her small business equity. We also get about $300/month from our stake in an LLC that owns a commercial building, promissory notes to start-up breweries, and some common stock.
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
perhaps you are not selling it , but the company is in effect selling off a piece of your share price and handing it to you .
like i said , there are few differences between say a 2% dividend and you pulling the same dollars by selling a piece of your total portfolio assuming same total returns .
in the end how you get the cash flow amounts to just about the same thing .
there are advantages to the dividends as a way but there are disadvantages too but dollar wise it is all the same effect
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$3000 divs /month on average. I dont care about the tax inefficiencies. I want to have the flexibility to stay or leave my job at a moment's notice, guess I watched HEAT too many times;
A guy told me one time, 'Don't let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you feel the heat around the corner.'
I am leaving plenty of wiggle room, living costs are under $1000 / month. I have most of funds in a dividend based ETF, only marketed to professional investors (i - share class). I want carnage in the markets, I am always ready to buy more.
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
perhaps you are not selling it , but the company is in effect selling off a piece of your share price and handing it to you .
like i said , there are few differences between say a 2% dividend and you pulling the same dollars by selling a piece of your total portfolio assuming same total returns .
in the end how you get the cash flow amounts to just about the same thing .
there are advantages to the dividends as a way but there are disadvantages too but dollar wise it is all the same effect
Except chasing dividends historically equates to lower overall market returns. Since you're limiting yourself to dividend producing stocks.
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Approx. $620 per month. Great source of fun money !
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I get $0 in dividends each month as my ETFs pay out quarterly...on average I'm getting ~2% overall in dividends. So if I want a 4% WR that's 50% dividends and 50% capital appreciation.
It's great you guys can pay zero taxes. Here in Italy regardless of your income level all dividends are taxed 26% flat.
I also get zero monthly dividends, but on a yearly basis I'm around 3.8% before taxes (lots of euro stocks)
I feel for you Seppia.
The flat tax is the single thing that stopped us moving to Italy. (And it looks like Brexit may close the door forever!)
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
perhaps you are not selling it , but the company is in effect selling off a piece of your share price and handing it to you .
like i said , there are few differences between say a 2% dividend and you pulling the same dollars by selling a piece of your total portfolio assuming same total returns .
in the end how you get the cash flow amounts to just about the same thing .
there are advantages to the dividends as a way but there are disadvantages too but dollar wise it is all the same effect
Yes, if a company pays you a dividend equivalent to 2% of its share price that company's stock price is subtracted by that same amount on the ex-dividend date. Thus, there is really no difference at that specific point in time whether they sell off the 2% or keep it in the share prices.
The second and often less discussed point is what happens to said companies over time.
Would an investment in a mature company that just hoards cash because they generate far more than they can use to grow in an efficient manner generate the same return as an investment that returns some of that money to shareholders over time? In the case of most individuals here said dividend would be invested back into the market as a whole and not invested specifically back into the same company?
Chasing dividends and yield in general is clearly a poor decision, but to say that from an investment standpoint over time dividends vs. no dividends for a company will result in the exact same return over time is much more of a stretch.
Bottom line is I doubt many people would be ok with Apple continuing to hoard cash. At a certain point investors will want Apple to do something with all the money they have. I think they have been more patient given the tax implications, but if Apple had all that cash in the US and was doing nothing with it if there is really no difference between the two from a return perspective investors shouldn't care whether Apple just continues to grow its cash position for no reason other than to have more cash or if they decide to return that cash to shareholders.
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MadFientist's lab/fi tracker thing gives you a monthly yield based on your assumed total return figure and your portfolio balance.
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To answer the question: Right now I average about $25 a month. I am sure it is more than that but because of how my 401k is administered I do not know the dividends on those funds.
Chasing dividends and yield in general is clearly a poor decision, but to say that from an investment standpoint over time dividends vs. no dividends for a company will result in the exact same return over time is much more of a stretch.
I agree that chasing dividends and yield is generally a poor decision. I think the returns over time for dividend/no dividend companies would vary depending on the the phase the company is in as well as what you did with the dividends. You would prefer a young company to not pay a dividend so they can reinvest in their growth so the earnings could grow exponentially. For a mature company with less opportunity for rapid growth, say JNJ, I would guess you would have a higher return if you reinvested the dividends versus if they did not pay a dividend.
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
perhaps you are not selling it , but the company is in effect selling off a piece of your share price and handing it to you .
like i said , there are few differences between say a 2% dividend and you pulling the same dollars by selling a piece of your total portfolio assuming same total returns .
in the end how you get the cash flow amounts to just about the same thing .
there are advantages to the dividends as a way but there are disadvantages too but dollar wise it is all the same effect
Except chasing dividends historically equates to lower overall market returns. Since you're limiting yourself to dividend producing stocks.
Chasing yield generally does, but everything I've read says that historically dividend paying stocks have returned more than non paying stocks.
According to Fama & French, from 1917-2014, if you held only all the dividend paying stocks in SP index, you would have an annualized return of 10.4%, while holding only non-payers returned 8.5%.
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
perhaps you are not selling it , but the company is in effect selling off a piece of your share price and handing it to you .
like i said , there are few differences between say a 2% dividend and you pulling the same dollars by selling a piece of your total portfolio assuming same total returns .
in the end how you get the cash flow amounts to just about the same thing .
there are advantages to the dividends as a way but there are disadvantages too but dollar wise it is all the same effect
Except chasing dividends historically equates to lower overall market returns. Since you're limiting yourself to dividend producing stocks.
Chasing yield generally does, but everything I've read says that historically dividend paying stocks have returned more than non paying stocks.
According to Fama & French, from 1917-2014, if you held only all the dividend paying stocks in SP index, you would have an annualized return of 10.4%, while holding only non-payers returned 8.5%.
that analysis is only of the large cap sector of the stock market. very small sample size to infer all of that from. i doubt much of the S&P 500 doesnt pay some sort of dividend.
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I feel so miniscule with my <$200/ month dividend stream in this thread. We got lot of people here well beyond able to FIRE it seems.
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I do like some bit of dividend. A company that hoards cash can end up granting excessive stock and option bonuses or make irrational purchases because they feel they are under pressure to do something with the cash. Besides, if you owned your own business, you would expect to eventually get some profit and spending money from it without having to sell it.
perhaps you are not selling it , but the company is in effect selling off a piece of your share price and handing it to you .
like i said , there are few differences between say a 2% dividend and you pulling the same dollars by selling a piece of your total portfolio assuming same total returns .
in the end how you get the cash flow amounts to just about the same thing .
there are advantages to the dividends as a way but there are disadvantages too but dollar wise it is all the same effect
Except chasing dividends historically equates to lower overall market returns. Since you're limiting yourself to dividend producing stocks.
Chasing yield generally does, but everything I've read says that historically dividend paying stocks have returned more than non paying stocks.
According to Fama & French, from 1917-2014, if you held only all the dividend paying stocks in SP index, you would have an annualized return of 10.4%, while holding only non-payers returned 8.5%.
that is true in the past . more recently non dividend payers have out performed the dividend payers .
what is interesting is dividends have increased to the highest levels since 1998 with a record increase of 17.8 billion dollars in increased dividends payed out just 1st quarter. the 2nd quarter may be even bigger.
all dow stocks pay dividends and 84% of the s&p 500 does too.
but according to a study done by howard silverblatt at s&p those dividends have been coming at a price as they go up and up..
a good part of that capital from free cash flow is gone forever and no longer available for compounding.
mid-caps and small caps who pay little in dividends have been far and away providing far better compounding and use of investor money for much greater returns..
in fact one of the least efficiant ways to grow investor money now is paying it out as a dividend.
as chuck akre said ,free cash flow in a company can be used to compound by buying back its own stock, investing in its own company or buying other companies . cash flow paid out as dividends loses its compounding ability and much of it is gone forever and can no longer compound.
many of the great companies in the s&p 500 have lagged behind their non dividend payers in the midcap and small cap markets who now seem to be much more efficient at generating compounding on investor money.
midcaps and small caps have compounded the last few years with few exceptions at a rate of 5-6% higher then their dividend paying cousins.
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My E trade statement has an estimated annual income column for each of my holding. In the non-IRA account it should be around $14k this year so averaging $1,100 per month. The big chunk of our IRA $ is not in E-trade but the dividends are around $1,500 per month.
My husband loves telling me about every dividend payment. "Coca-Cola paid us $7.62 today" or "Con Edison paid us $146 today". Of course, everything is reinvested but it's nice to know it there if we need it.
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the truth is he should be saying coca cola gave us back 7.62 of our own money today ha ha ha . like i explained it is not over and above what you had the day prior .
it is a return of your own invested money right off the value of the investment .
it is all about your total return -period!
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About £4000 per year on the FTSE. Less on the ASX as I have a smaller holding on the ASX.
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I'm not trying to start an argument here, just trying to further educate myself. From what I've seen though total return ultimately is better in the accumulation phase.
However, it seems to me that a dividend approach would be better in the draw down phase because you never sell off your shares.
Also, from what I've read many companies use buy-backs and such to manipulate their numbers, which is why people trust dividend paying companies more. Personally, I like to see the cash coming out for that reason, because I don't trust the majority of people running these companies. Having to display exactly what your balance sheet entails keeps them honest, or at least as honest as possible.
Now I'm just regurgitating what I've read previously, but I'd definitely like to hear opinions on this.
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you need the same amount of gains in either case to survive .
a dividend payer that hypothetically stays flat would in theory constantly be reduced by the payout . in theory if they did not stop the dividend you would have all your shares left worth zero .
taking the same amount of dollars from your portfolio if the growth stayed flat , you would still have shares worth money but you would have sold off all your shares
in both cases you need enough capial appreciation to offset the payout ..
so in either case given the same growth on the funds or stock the portfolio or the shares as long as it is more then you took out it can sustain themselves forever .
remember as the portfolio grows from appreciation you need less and less shares to equal the dividend .
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you need the same amount of gains in either case to survive .
a dividend payer that hypothetically stays flat would in theory constantly be reduced by the payout . in theory if they did not stop the dividend you would have all your shares left worth zero .
taking the same amount of dollars from your portfolio if the growth stayed flat , you would still have shares worth money but you would have sold off all your shares
in both cases you need enough capial appreciation to offset the payout ..
so in either case given the same growth on the funds or stock the portfolio or the shares as long as it is more then you took out it can sustain themselves forever
Wrong
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right!!!!!!!!!!!!!! 100% correct . there is no difference between you pulling equal amounts of dollars out of a non dividend paying portfolio vs getting that amount in dividends . you may have some transactional costs or tax difference's but it is the same ending result . if total returns are the same results will be pretty much the same .
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right!!!!!!!!!!!!!! 100% correct . there is no difference between you pulling equal amounts of dollars out of a non dividend paying portfolio vs getting that amount in dividends . you may have some transactional costs or tax difference's but it is the same ending result . if total returns are the same results will be pretty much the same .
It's not the same. Dividends do not come from the equity of the stock. They don't. Sure hypothetically you could have the same total cash in your account using both methods but I'm not talking hypothetical. A dividend is not an equity sell period
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BOOM!
(http://i820.photobucket.com/albums/zz124/azwolf25/Mobile%20Uploads/DD525993-4BC6-4393-AE20-92807FA89753.png) (http://s820.photobucket.com/user/azwolf25/media/Mobile%20Uploads/DD525993-4BC6-4393-AE20-92807FA89753.png.html)
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Mr. P is back!
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Mr. P is back!
Only because the Olympics have water polo on. ✌️😉
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right!!!!!!!!!!!!!! 100% correct . there is no difference between you pulling equal amounts of dollars out of a non dividend paying portfolio vs getting that amount in dividends . you may have some transactional costs or tax difference's but it is the same ending result . if total returns are the same results will be pretty much the same .
It's not the same. Dividends do not come from the equity of the stock. They don't. Sure hypothetically you could have the same total cash in your account using both methods but I'm not talking hypothetical. A dividend is not an equity sell period
absolutely wrong . it is a requirement that the exchanges reduce the share price by the amount of the payout . it is mandatory at the open .
here are finra regulations .
5330. Adjustment of Orders
(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:
(1) Cash Dividends: Unless marked "Do Not Reduce," open order prices shall be first reduced by the dollar amount of the dividend, and the resulting price will then be rounded down to the next lower minimum quotation variation.
Price Changes on the Ex-Dividend Date
When a company issues a dividend, the cash that makes up the dividend payment no longer belongs to the company. Because this is transferred to shareholders, the company’s share price is reduced by the amount of the dividend payment on the ex-dividend date.
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all compounding is based on the opening balance each quarter . if you have 100k and a 5% div is paid you have 5k in pocket and 95k left compounding by the market action .
if you reinvest that 5k then you have your original 100k back working for you again .
a portfolio worth 100k would not have a reduction so assuming same total returns the portfolio would be worth 5k more with no dividend payment reset . . if you pull the 5k out of the portfolio you have the same balance working for you in either case .
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right!!!!!!!!!!!!!! 100% correct . there is no difference between you pulling equal amounts of dollars out of a non dividend paying portfolio vs getting that amount in dividends . you may have some transactional costs or tax difference's but it is the same ending result . if total returns are the same results will be pretty much the same .
It's not the same. Dividends do not come from the equity of the stock. They don't. Sure hypothetically you could have the same total cash in your account using both methods but I'm not talking hypothetical. A dividend is not an equity sell period
absolutely wrong . it is a requirement that the exchanges reduce the share price by the amount of the payout . it is mandatory at the open .
here are finra regulations .
5330. Adjustment of Orders
(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:
(1) Cash Dividends: Unless marked "Do Not Reduce," open order prices shall be first reduced by the dollar amount of the dividend, and the resulting price will then be rounded down to the next lower minimum quotation variation.
Price Changes on the Ex-Dividend Date
When a company issues a dividend, the cash that makes up the dividend payment no longer belongs to the company. Because this is transferred to shareholders, the company’s share price is reduced by the amount of the dividend payment on the ex-dividend date.
First, that is to help combat dividend captures.
Second, artificially changing the price at the open does not change the natural demand the will bring the price quickly right where it belongs
Look. Not paying a dividend or having a smaller payout has some advantages. However, selling equity is not the same as a dividend.
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all compounding is based on the opening balance each quarter .
False. Compounding can be measured by opening and closing share prices. I'm not picking on you. I'm just trying to show precisely where you are wrong. I have been wrong on here a few times myself
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nope . market action still only compounds on the opening balance .
if you had a 100k in stock and it paid a 5% dividend you will have 95k at the opening bell working for you and 5k in pocket .
if that 95k at the opening bell grows by 4% because of market action regardless over what time frame you have 98,800
if you reinvested that 5k you would have the same 100k compounding and would have 104k .
the 100,000 dollar portfolio with no dividend resets would be 104,000 if it grew by the same 4% .
money does not just materialize out of the air . equal total returns always yield similar results
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regardless it is the same thing .
the starting point will always be the compounding on the opening balance and the opening balance will be the same as you had the night before if you reinvest the dividend or less if you don't .
it can't happen any other way . you may get a little variance if you reinvest but basically if you don't and you take the div then this is exactly what happens .
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nope . market action still only compounds over the quarter on the opening balance .
if you had a 100k in stock and it paid a 5% dividend you will have 95k at the opening bell working for you and 5k in pocket .
if that 95k at the opening bell grows by 4% because of market action that end of the next quarter you have 98,800
if you reinvested that 5k you would have the same 100k compounding and would have 104k .
the 100,000 dollar portfolio with no dividend resets would be 104,000 if it grew by the same 4% .
you can pull the 5k from that portfolio and be
You are getting stuck on this.
Compounding is measurable growth over time and is not dependent on any one point other than interest over time.
You can say that my car is worth ten thousand but when I don't sell to you because I believe it's worth ten thousand five hundred--- you will still have to pay ten thousand five hundred to get it.
Now if you jump in the stock and want to jump out right after they distribute then you will sell at that lower price. Nobody else is doing that so the sellers are still selling at the original price bring the price back to where it belongs. See how reality, not theory, works?
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you do not grow money out of the air .
if your investment is 100k there is no disputing you only have 95k left invested at the ring of the bell once exchange computers reset you .
you have the other 5k in pocket , if you spend it , that money is no longer there . what ever markets do from the ring of the bell is on your 95k . this is not hard to follow , it is a pretty straight forward concept yet so many do not understand the math that happens.
had that opening balance not paid a dividend that action would have been on 100k not 95k . at days end your investment would have been worth more based on 100k as a starting point instead of the 95k after the reset .
think about this very carefully .
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you do not grow money out of the air .
if your investment is 100k there is no disputing you only have 95k left invested at the ring of the bell once exchange computers reset you .
you have the other 5k in pocket , if you spend it , that money is no longer there . what ever markets do from the ring of the bell is on your 95k . this is not hard to follow , it is a pretty straight forward concept yet so many do not understand the math that happens.
had that opening balance not paid a dividend that action would have been on 100k .
You are still stuck. Understand this:
The stock price is what people are willing to pay or sell it for. The exchange can artificially set the price but it can't make anyone sell it for that. There is probably someone willing to buy it for a price artifically set lower.
Divined come from a companies earnings. Not attached to the share equity at all. The dividends come from the companies actual cash not stock demand. The two are not directly related but are often correlated because people like buying companies that earn lots of cash.
I'm sorry but I'm going back to the olympics. Investopedia dividends for further debate
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market action has nothing to do with the starting balance you have . you are confusing yourself . the market action is the market action over any given period of time .
but that compounding is applied on top of a starting value .
companys pay dividends even when they lose money . the dividend is just an amount the board votes on and approves .
if you suck money out of the company exchange laws say you have to reduce the share price by dropping all offers by the same amount . all prices are adjusted downward so your 100k is now 95k invested and 5k in pocket to reflect the fact that money is gone .
it is very simple , you now have only 95k invested regardless what markets do on it . you are confusing the amount you have invested vs the market action compounding on that amount . all market action is plus or minus a percentage up or down on your balance ..
it could be a day , an hour or a year . compounding is all on your opening amount .
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motley fool explains it well
Why the ex-dividend date for stocks matters
When a company pays a dividend, the market may account for that dividend in the days preceding the ex-div date by a rise in the price of the stock. This is because buyers are willing to pay a premium to receive the dividend. However, on the ex-div date, the exchange automatically reduces the price of the stock by the amount of the dividend. If the dividend is $1, and the stock had been offered at $40 and bid at $39.50 the day before, on the ex-div date the offer price and bid price will be adjusted to $39 and the bid to $38.50 to account for the fact that the dividend is not included. When this happens, the stock is said to have gone ex-dividend and is often marked with an "x" in the quote systems and newspaper stock price listings.
Most exchanges also adjust limit orders to account for the stock price going ex-dividend. If you have an order to buy stock at $39, it will be adjusted to be an order to buy at $38 to account for the fact that you had placed the order to buy when it would have included the dividend. Adjusting the limit price prevents the accidental triggering of the order when the stock price is changed on the ex-div date.
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so you see how your 100k you had in stock becomes 95k once the div is paid out .
now all market compounding percentage wise up or down is on 95k not 100k .. got it? which is more ? if the stock rose 4% in trading ; 95k going up 4% or 100k going up 4% ?
that is why a portfolio with no dividends that goes up the same 4% and has 5% drawn off will be no different then your 5% dividend . same total returns will give similar results
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I give up. Believe what you want to. Numbers are a discription of reality-- not THE reality. Growth funds, Google, Amazon, Netflix, and Salesforce sound right for you. Too-da-loo
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it is just simple math .
it can't work any other way .
if i have a 100k in non dividend payers and my portfolio is up 6% as an example i can pull the same dollars out as your dividend and have the same balance as your stock if it has the same 6% total return consisting of a 2% dividend and 4% appreciation .
a 6% total return is a 6% total return regardless if it is all appreciation or appreciation and dividend . the draw does not care how the total return is made up .
this is an important concept to understand . it is also why reinvesting dividends in down markets is neutral . you get no added benefit from lower prices like you do when adding new money or rebalancing .
the value of the investment is the same both before and after reinvesting so the dollars compounded on by the markets are the same as you had .
new money or rebalancing changes the value compounded on so that benefits when markets fall .
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some arbitrators like to play a little game where they buy before the dividend and they hope after the reset back in price the markets over do the upside going up more then they typically would under the same market demand . so they hope to capture a little piece more of the dividend .
study's show that playing the dividend recapture game is about as reliable as a coin toss . investors lose as many times as they gain from arbitraging . certainly nothing i would ever want to do .
if that was the case we would not own the stock . we would buy right before the payout and sell right after and keep the free money .
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Oh for Gods sake. The exchange doesn't get to determine the price the traders do. The exchange gets to set up rules to discourage malicious trading and they do. Dividends and share price are not related. Your little numbers do not change the precieved value of a company to traders. Dividends come from a companies actual cash and the drop from distribution comes from rules intended to curb malicious trading. I get elementary math. I also get the process it's trying to describe. Math is only a precisely measured discription of a process. You think the math is the process and you are wrong. I have looked through a telescope and never discovered a number 1 floating around in space.
You know there was a perfect earth centered universe model that would predict exactly what the planets would do. It was right on prediction. It was wrong on what actually was. The wrong assumptions are in your model
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do you know what you are talking about ? the exchanges do not set the price , they take the opening prices and reduce your investment value by the same amount paid out . they don't set the price but they do take the price from the last close and reduce it at the open so it has a new reduced value along with the dollars you have invested in it .
you do know the difference between setting the opening price and reducing the markets already established price i hope . by resetting the markets price they reestablish the opening prices .
i don't know why you argue this . this is nothing new . your investment is always worth less starting out after the dividend then it would have been with the dividend reinvested if you keep the dividend and do not reinvest it . that diofference starting out is the amount of the dividend and your balance will always reflect that fact . .
if you believe it works any other way then just keep believing the wrong thing and arguing . but i am done here with this .
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Dividends come from the share price: true or false?
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dividends come from the company bank accounts and are part of the company value . once they are paid out they are subtracted off your share price . if you had a 100k in the investment and got 5% you got a 95k investment left and 5k in your pocket .
the company is worth that much less now and the exchange computers reflect that fact .
what investors think the company is worth after that is going to be decided by market action how much up or down in value they bid that stock . what ever percentage it goes up will be applied to your 95k left .
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(http://i820.photobucket.com/albums/zz124/azwolf25/Mobile%20Uploads/06F6712B-DB15-4776-88D2-F7020A4279E3.png) (http://s820.photobucket.com/user/azwolf25/media/Mobile%20Uploads/06F6712B-DB15-4776-88D2-F7020A4279E3.png.html)
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there is more to that . look up ex div date for the rest of the story or just read the simple explanation i posted from motley fool .
what you posted is correct . declaring a dividend has no effect on the share price . but going ex div sure does .
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here let me get that from the source you posted : INVESTOPEDIA
Ex-Dividend
What is an 'Ex-Dividend'
Ex-dividend is a classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.
A stock trades ex-dividend on or after the ex-dividend date (ex-date). At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend.
Read more: Ex-Dividend Definition | Investopedia http://www.investopedia.com/terms/e/ex-dividend.asp#ixzz4Ga71c11v
Follow us: Investopedia on Facebook
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You think 95 is left. You are wrong. That is a suggestion by the exchange. If you choose to sell someone might buy it. But most will not and the price will go to where the sellers actually accept. The exchange opening doesn't decide that. The traders do. Your opening number is not an accurate discription of the real demand in the market. The price will go to the real demand-- not related to an artificial opening number. AKA it didn't lose value because of a distribution
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of course investors act on the price but if the stock rises 4% that day it rises 4% from the lower opening price . that lower opening price reflects the fact you now have 95k as a starting point and not 100k .
the days action gave you a 4% gain based on the lower opening price and value of 95k . if it wasn't for the reset the 4% rise would have given you 4% on 100k and the closing price would have been 5% higher . your investment at the end of the day with a 4% gain is worth 5% less then had it not paid a div and was based on the higher opening price .
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here let me get that from the source you posted : INVESTOPEDIA
Ex-Dividend
What is an 'Ex-Dividend'
Ex-dividend is a classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.
A stock trades ex-dividend on or after the ex-dividend date (ex-date). At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend.
Read more: Ex-Dividend Definition | Investopedia http://www.investopedia.com/terms/e/ex-dividend.asp#ixzz4Ga71c11v
Follow us: Investopedia on Facebook
There is nothing absolute I that (about that) statement. Traders determine the actual price and when no one sells it will go back up. End of story
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then we just have to agree to disagree , the math is what it is . you do see why your posting from investopedia was incomplete i hope . declaration of dividend is different then when a stock goes ex-div .
ex div means all gains or losses percentage wise stated for the day are on a lower opening value . you either are starting out with the same dollars as the night before if you reinvest or you are starting out with less dollars then the night before if you don't .
none of the above has anything to do with where markets take your starting balance that day in dollars . it will always be greater if you were not reset back or reinvested the money back in then if you pocket the dividend , for any given percentage up or down .
your dollars invested for a 10 buck stock going up 4% in a day will always be at a higher price then a stock starting at 9.50 and going up 4% for the day .
all future appreciation will be better on the higher price
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dividends come from the company bank accounts and are part of the company value . once they are paid out they are subtracted off your share price . if you had a 100k in the investment and got 5% you got a 95k investment left and 5k in your pocket .
the company is worth that much less now and the exchange computers reflect that fact .
what investors think the company is worth after that is going to be decided by market action how much up or down in value they bid that stock . what ever percentage it goes up will be applied to your 95k left .
But company cash is not valued the same as normal cash. A few years ago I was posting about Gencore, who had 95mil in cash, no debt, and positive earnings, but were trading at a market cap of $80mil.
How do you explain that?
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irrelevant . whatever the payout is the exchange rules say the share price has to be dropped by the amount paid out as a starting point . all bids are lowered from what they were entered as automatically
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Can you say limit orders? Not to mention no one has to do anything.
The point is: price at any given time is not necessarily the value. So the value of a company doesn't change due to a temporary opening price. The market is still only going to sell it for what they deem worthy. Sure there might be a few market sell orders out there but not a never ending pool of them. As soon as those market sells are gone the price is right where it was. Demand value-- not opening price.
and did you see that guy break his leg on the vault... F&@#!!!
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irrelevant . whatever the payout is the exchange rules say the share price has to be dropped by the amount paid out as a starting point . all bids are lowered from what they were entered as automatically
That is meaningless. The stock will follow the news and trend. I rarely have seen a stock trade ex div for the exact difference longer than a few seconds. Quite often I have seen stocks climb higher ex div than they were.
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This has been discussed a billion times, jeez.
Dividends aren't free money. As long as you're not stock picking, though, going for some kind of dividend-focused index fund won't hurt you enough to matter, so by all means go for it if you sleep better at night.
Your total return is what matters in the end, and determines what you have to live on if you're retired. It doesn't matter if it's all capital appreciation, or all dividends. The end result is the same, and it doesn't matter if you "dip into the principle" if that principle is growing faster than you're dipping.
-W
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yep , you get it ....
this has to be one of the most mis-understood areas of investing and it is such a simple concept . it is just about compounding of gains on your total dollars .
dividends give you nothing in dollars you didn't already have the night before you received them stored in the stock price . .
actually study's have found that depending on tax situation you can do slightly better just reinvesting the dividends and spending equal amounts from cash and bonds which have less growth potential in your portfolio , while leaving the reinvested dividends to maintain the same level of investment in the equity's .
that creates a bit of a rising glide path where cash and bonds are reducing while equity allocation is growing .
this goes back to what i said before some one yelled wrong . you can create your own dividend equivalent merely selling the same dollars from your portfolio . it is all the same for the most part . all you need is the same total returns and things will be pretty close to equal .
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It is fun watching two people argue two different points though.
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that is how we all learn.
through the years i have learned the biggest obstacle to being successful is believing your own bull-sh*t and not sleeping with the enemy .
most folks tend to hang out with ,read , support and hi five only those who support their own views .
so they only learn the other side from those who support their own view .
but when you sleep with the enemy and really learn their side you can learn things that you never knew , or even find that your view was flawed .
my opinions on so many things have changed once i switched hats . opinions on things like annuity's ,whole life , roth vs traditional , delaying ss are just some of the things where today i have different views on them as opposed to before i really learned the ins and outs .
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Mathjak you're arguing with a guy who made a post about the market crashing in may " bc it always happens" and " the market is overvalued". You can't win with him. And this stance he's taking is much more ambiguous than his market collapsing stance which I made tens of thousands on during the run up.
Perfect path to extra working years trying to time markets and chasing a dividend. If he isn't in the pay off your house side of the camp for a perfect trifecta of inefficient investin ideas I'd be surprised
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that is how we all learn.
through the years i have learned the biggest obstacle to being successful is believing your own bull-sh*t and not sleeping with the enemy .
most folks tend to hang out with ,read , support and hi five only those who support their own views .
so they only learn the other side from those who support their own view .
Yep why I love this place. But when math is involved one stance quickly becomes inferior. I used to be a pay off my house faster guy but numbers spoke for themselves. Now I'm completely annoyed by people pissing money and increasing risk by paying it down.
Disclaimer I never paid more than my mortgage just refi to decrease length. But still worse
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i am pretty far away from living the mmm way of life . but so far i do enjoy the discussions and the group here .
as far as paying off the house , tell me which side you want me to argue . i can argue equally strong on both sides . but i hate to hijack the thread .
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i am pretty far away from living the mmm way of life . but so far i do enjoy the discussions and the group here .
as far as paying off the house , tell me which side you want me to argue . i can argue equally strong on both sides . but i hate to hijack the thread .
We are as well but I wouldn't waste my words on mr percentage as stated above and it's also quite impossible to argue both sides if you plan to live on a 4% or some similar rule.
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there are definitely pro's and cons . the problem with most american's is they suck at investing . morningstar's investor returns vs the funds returns show poor investor behavior is a major problem .
we get blinded by that fact when we are in financial forums where folks make investing a hobby or interest .
so most American' s even if they had the discipline to actually invest the money they did not tie up in the house , which is another problem , they still may not actually beat the risk free return of the mortgage even though they should have .
while they certainly could have done better leaving the house as is and investing elsewhere , left to their own devices many will fail at it . so the paid off house can be a 2nd place prize for them .
i actually sold our homes , rented and invested elsewhere and we did very well . in fact we could not have done the deals we did if the money was still tied up in the house .
today those investments can buy multiple homes like we had even after subtracting out 15 years of rent .
but today we are interested again in buying a co-op to live in next year . i am no longer the aggressive investor i was , i don't have to be and cutting costs down the road as well as cutting dependency on markets is my focus .
remember , if you are retired and drawing down from your portfolio , any increase in expenses like having a mortgage vs not , increases sequence risk . so unlike when you are not spending down you just need to invest and beat an average return , now you have the added factor of not only beating that average return but it has to be in the right sequence of gains and losses .
so now you have two parameters that have to go right , not just one .
for us , the catch 22 is that by delaying social security , even though we have multiple 7 figures in investments the banks we tried said it is a toss up as to whether we will be approved because they sell the mortgages and the guidelines about the constitution of the income stream is very strict .
so we may have to end up paying cash . if we do we cut 6k a year in expenses compared to our renting now . but conservatively we will give up 12k income on the money we will use . so a side from the much nicer living situation in the co-op with all the amenity's we are hoping that the rents will eventually eclipse the co-op maintenance and the appreciation will put us ahead .
in either case our draw will still hold below 4% with or without a mortgage .
we still own investment co-ops and as an example back in 1987 we rented it out for 850 a month and maintenance was 475 .
well today it gets 1800 a month to rent and maintenance is only 600 . so there is a big savings there .
my ex wife is living there now and for only 600 a month she has an 1800 dollar a month apartment .
so we are hoping our housing costs will escalate less over time owning instead of renting .
if we can get the mortgage i rather do it that way .
when it comes to this stuff everyone's own unique situation will be very different .
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one last point is we are all very different when it comes to debt and or investing .
i was always very goal oriented . if one of my goals was to have a paid off house , then when i finally accumulated that money i paid off the house . that money was very aggressively invested up to that point .
but once i had the money , what i did not do is put the old carrot on a stick and leave that money in the risk pool .
nope , that money met its goal and off it went to fulfill that goal .
the rest of the money that had not met its goal was still pedal to the metal as i tried to grow it .
so that is why i say everyone is different in what they want , their goals , ability , resources and their pucker factor always play a big part . .
you can't rule all that out and only look at a dollars and cents calculation .
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How much in dividends do you make a month?
Not enough.... yet.
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Mathjak you're arguing with a guy who made a post about the market crashing in may " bc it always happens" and " the market is overvalued". You can't win with him. And this stance he's taking is much more ambiguous than his market collapsing stance which I made tens of thousands on during the run up.
Perfect path to extra working years trying to time markets and chasing a dividend. If he isn't in the pay off your house side of the camp for a perfect trifecta of inefficient investin ideas I'd be surprised
What exactly does this have to do with a dividend? Jack shit.
You are something trolling forums to learn how to index when a monkey could do that. Frugal and investing doesn't always mean index. I guess I should ignore the tech bubble, ignore the great recession, and ignore it when the most renowned bond investor says HE DOESN'T LIKE BONDS. There an inherent risk with investing. Anyone who tells you otherwise is a liar. I told you from the get go (even though it was a different thread/different subject/that shouldn't highjack every thread), I told you I might miss out on gains going to cash in my 457. I told you that I had a huge lump some coming. But, missing out on gains is not the same a losing money. A bird in the hand is worth two in the bush. If you are so damn confident leverage your whole account because if you don't and stocks go up you lost so much money.
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One thing to keep in mind is that if the market spits out 2% dividends every year, the dollar amount will change as that 2% is calculated from the value of the market.
A $1M portfolio yielding 2% would give you $20k. But if the market drops 50%, even if dividends go up 50% to 3% yield, you're only going to get $15k in dividends.
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Are you toying with me Ender?
Payout has nothing to do with market cap. Companies raise or cut dividends. Chances are that if the market took a 50% hit some dividends would be cut. But hypothetically if they didn't cut your payout would be 4% of the market
My picked stocks have a 4.8% yield and I have had 3 dividend cuts. Two at 75% cut and one at 50%
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Payout has nothing to do with market cap. Companies raise or cut dividends. Chances are that if the market took a 50% hit some dividends would be cut. But hypothetically if they didn't cut your payout would be 4% of the market
This just isn't true historically, though. If you look at this chart (http://www.multpl.com/s-p-500-dividend-yield/) you do see some increase in dividend percentages when significant market crashes occur, but otherwise the dividend percentages (as a percentage of the market index) are surprisingly constant, regardless of the actual value itself.
Of course hypothetically they would be 4% if the market got cut in half assuming dividends did not decrease. I'm using the data available to me, though, which suggests they would not be 4%.
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That might be because it references dividends to market cap every year and does not adjust it to the investing entry point showing the dividend growth. Reality Income for example yields 3.5% but if you invested 20 years ago and didn't add anything it's yield for your original investment would be over 15% a year
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That might be because it references dividends to market cap every year and does not adjust it to the investing entry point showing the dividend growth. Reality Income for example yields 3.5% but if you invested 20 years ago and didn't add anything it's yield for your original investment would be over 15% a year
This is basically a meaningless number. It says more about how long you've invested than it does about how much money the company is paying out in dividends.
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That might be because it references dividends to market cap every year and does not adjust it to the investing entry point showing the dividend growth. Reality Income for example yields 3.5% but if you invested 20 years ago and didn't add anything it's yield for your original investment would be over 15% a year
This is basically a meaningless number. It says more about how long you've invested than it does about how much money the company is paying out in dividends.
We are talking about the reliability of dividends vs equity right?
Great site Ender
Here is dividends of the the S&P
(http://i820.photobucket.com/albums/zz124/azwolf25/Mobile%20Uploads/365324D0-A551-405F-A17F-17EE0078D451.png) (http://s820.photobucket.com/user/azwolf25/media/Mobile%20Uploads/365324D0-A551-405F-A17F-17EE0078D451.png.html)
Here is reality income
(http://i820.photobucket.com/albums/zz124/azwolf25/Mobile%20Uploads/0D934E72-C73C-4A97-A6AA-1DB3B8685121.png) (http://s820.photobucket.com/user/azwolf25/media/Mobile%20Uploads/0D934E72-C73C-4A97-A6AA-1DB3B8685121.png.html)
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Yep, the dividends have gone up over time. A higher dividend to cost basis ratio means you invested a while ago. Good for you! It says much more about the company's past than its present or its future.
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exactly . as i mentioned earlier ;
dividends have increased to the highest levels since 1998 with a record increase of 17.8 billion dollars in increased dividends payed out just 1st quarter. the 2nd quarter may be even bigger.
all dow stocks pay dividends and 84% of the s&p 500 does too.
but according to a study done by howard silverblatt at s&p those dividends have been coming at a price as they go up and up..
a good part of that capital from free cash flow is gone forever and no longer available for compounding.
mid-caps and small caps who pay little in dividends have been far and away providing far better compounding and use of investor money for much greater returns..
in fact one of the least efficient ways to grow investor money now is paying it out as a dividend.
as chuck akre said ,free cash flow in a company can be used to compound by buying back its own stock, investing in its own company or buying other companies . cash flow paid out as dividends loses its compounding ability and much of it is gone forever and can no longer compound.
many of the great companies in the s&p 500 have lagged behind their non dividend payers in the midcap and small cap markets who now seem to be much more efficient at generating compounding on investor money.
midcaps and small caps have compounded the last couple of years at rate of 5-6% higher then their dividend paying cousins with few exceptions ..
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Wow Bigchrisb i'm impressed!
Making 95000 in dividends off 1.9million. That looks pretty good in the current market. Are you a stock picker or indexes?
I have a large proportion in VHY but it makes me anxious they only cover 39 companies and most are banks.
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I'm almost hesitant to join in on this discussion, but:
dividends are a real value
capital gains are only a perceived value
You say that dividends are not a free lunch. So I guess that means you think capital gains are? That's just value created out of thin air? You're example of a $100k company that pays a $5k dividend rarely ever drops $5k in value because the value of the $100k usually didn't have much to do with the dividend in the first place. Most companies that pay dividends do so on a predictable schedule, so that $100k value represents the future cash flow of future dividends. There may be a brief period before the ex-dividend date where the stock rises then falls after, but it usually ends in a wash.
Dividends are great and the only option for large mature responsible companies that understand when they've reached saturation for growth. As cash hoarding does not seem to raise stock value by the same amount of cash hoarded.
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Wow Bigchrisb i'm impressed!
Making 95000 in dividends off 1.9million. That looks pretty good in the current market. Are you a stock picker or indexes?
I have a large proportion in VHY but it makes me anxious they only cover 39 companies and most are banks.
I have a mix of stocks (direct and LICs) and ETFs, both domestic an international. I've got a higher than market weight to REITS too.
However, I wouldn't say that getting that yield is unusual in the current Australian market - 95k off $1.9m is bang on 5%. Note that I think in gross dividend terms (i.e. including franking credits), as that is real, pre-tax income. Very roughly, the ASX yields about 6.15% gross (from the RBA's stats, grossed up for franking credits), international non-US stock (VEU) about 2.8% and US stocks (VTS) 1.83%. so a 50/25/25 domestic / international / US blend of indexes gets you 4.23%, and 70/30 Australian/international gets you 5%.
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Thanks a lot Bigchrisb. I have copied your discussion earlier regarding your distribution of various shares/ETFs in low tax or high tax settings. It goes in my file of financial wisdom.
Do you have a SMSF or have you found an APRA fund which allows direct investment in shares/ETFs? I spent weeks looking but have finally settled on sun super which allows 100% investment but not more than 50% in a single share ETF. If we were staying in oz forever we would have a smsf but we cannot run it from overseas. So would have to roll it over into an APRA fund and thus incur capital gains tax. I guess I was surprised with that return in the last financial year where everyone else I know has got 3% or less.
I am too scared to invest much money in REITs with all the doomsayers about bubbles etc.
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We have about $850k in FSTVX and $250k in various international indexes. Assuming Im getting about 2% in dividend payments a year, thats 1.1*.02= 22k a year. Of course, I think most of that is being automatically reinvested.
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One thing to keep in mind is that if the market spits out 2% dividends every year, the dollar amount will change as that 2% is calculated from the value of the market.
A $1M portfolio yielding 2% would give you $20k. But if the market drops 50%, even if dividends go up 50% to 3% yield, you're only going to get $15k in dividends.
This is actually backwards. A Company's Board of Directors declare dividends on a dollar amount per share which is then converted to a percentage of the stock price before the information gets to the end user through a source like Yahoo Finance. So if the stock priced dropped 50% the dividend would go from 2% to 4% of the stock price. This is assuming the Board of Directors does not declare a smaller dividend per share in the future. Typically Companies do not like to decrease their dividend unless it is absolutely needed as investors view this action negatively.
They're saying if the dividends stay at a relatively constant 2%, the amount you will receive will vary with the stock price. Yes, we know that companies set their dividends to a set dollar amount. However, when you look back at an event like the 2008 crash, lots of companies cut their dividends. You can see that the dividend yield briefly shot up to 3% for 2008 (http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm), but reverted to the mean next year as companies reduced their dividends in accordance with their current business outlook (which was also reflected in their stock price, just faster).
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Average annual distributions estimated at $7822. So $651/month. We have ~$2500/month expenses so we are 1/5 of the way there for it to last forever, although catching up quickly now that we are mortgage free.
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I also prepared a graph of dividends in dollars adjusted for consistent inflation of 3.22 (assumption made for simplicity) which shows dividends in dollars are fairly consistent on an upward trend, not dividend yield which varies widely.
This is a really bad assumption. Inflation rates have varied quite widely during the historical period you're graphing. I suspect the graph would look markedly different if you used the actual inflation rates.
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Thanks a lot Bigchrisb. I have copied your discussion earlier regarding your distribution of various shares/ETFs in low tax or high tax settings. It goes in my file of financial wisdom.
Do you have a SMSF or have you found an APRA fund which allows direct investment in shares/ETFs? I spent weeks looking but have finally settled on sun super which allows 100% investment but not more than 50% in a single share ETF. If we were staying in oz forever we would have a smsf but we cannot run it from overseas. So would have to roll it over into an APRA fund and thus incur capital gains tax. I guess I was surprised with that return in the last financial year where everyone else I know has got 3% or less.
I am too scared to invest much money in REITs with all the doomsayers about bubbles etc.
I'll send you a PM. Its probably a bit off topic for this thread.
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exactly . as i mentioned earlier ;
dividends have increased to the highest levels since 1998 with a record increase of 17.8 billion dollars in increased dividends payed out just 1st quarter. the 2nd quarter may be even bigger.
all dow stocks pay dividends and 84% of the s&p 500 does too.
but according to a study done by howard silverblatt at s&p those dividends have been coming at a price as they go up and up..
a good part of that capital from free cash flow is gone forever and no longer available for compounding.
mid-caps and small caps who pay little in dividends have been far and away providing far better compounding and use of investor money for much greater returns..
in fact one of the least efficient ways to grow investor money now is paying it out as a dividend.
as chuck akre said ,free cash flow in a company can be used to compound by buying back its own stock, investing in its own company or buying other companies . cash flow paid out as dividends loses its compounding ability and much of it is gone forever and can no longer compound.
many of the great companies in the s&p 500 have lagged behind their non dividend payers in the midcap and small cap markets who now seem to be much more efficient at generating compounding on investor money.
midcaps and small caps have compounded the last couple of years at rate of 5-6% higher then their dividend paying cousins with few exceptions ..
This analysis really focuses on the dividends as the cause for higher or lower returns; dividends are really only a indicator of the stage of the company which is the cause of the pattern of returns. Companies that are growing typically don't pay out dividends as they are reinvesting there capital. Because your return with these companies is highly correlated with there ability to grow they out perform the market during good times and under perform the market during bad times and are more volatile then the market as a whole.
Large companies that pay a dividend are in a mature stage where the returns an investor receives are based more on the income produce by the entity rather than growth of the company. This produces a lower return to the investor on average but also has lower volatility.
A dividend strategy thus has a lower than market expected return but also lower than market expected volatility.
On a side note; DIVIDENDS ARE NOT THE SAME AS UNREALIZED CAPITAL APPRECIATION!
I agree as a practical note that an investor should focus on total return as apposed to dividends or capital appreciation. However, dividends are different then capital appreciation. These are viewed differently by the IRS, SEC, and GAAP. It is a theory that they result in the same net worth for an investor ignoring taxes; but it is practically impossible to view in the real world as the market price varies. On a practical note they affect the ownership of the company differently. If I own several shares of Target and sell several shares Target has the exact same market capitalization but I own a smaller piece of it as I sold some of my ownership to another investor(Transaction between another investor and me). If Target pays a dividend my ownership % stays the same but the value of what I own decreases(Transaction between Target and me).
What!?!?!?! Someone that actually understands value investing and that returns are more than a function of a ticker symbol growing. Seems to be an anomaly in these parts. Your post will most certainly be ignored, but I wanted to give you kudos.
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Is there an easy way to find this information out? I'm curious how much my portfolio produces in dividends per month/quarter/year. I have all of my investment accounts tracked inside of Personal Capital but it doesn't seem to tell me the total yield of my portfolio.
A rough guesstimate would be that the average dividend on all my investments is around 2.5%, which would be ~$1,562/month.
I use Mint and it doesn't show taxable account investment dividends, but maybe that's because mine are set to reinvest instead of deposit into a money market account.
To view dividends, I have to login to Vanguard and check the Dividend & Capital Gains tab. Maybe someone knows an easier way?
You can actually get this data from Mint. You just need to click on investments and transactions.
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One thing to keep in mind is that if the market spits out 2% dividends every year, the dollar amount will change as that 2% is calculated from the value of the market.
A $1M portfolio yielding 2% would give you $20k. But if the market drops 50%, even if dividends go up 50% to 3% yield, you're only going to get $15k in dividends.
This is actually backwards. A Company's Board of Directors declare dividends on a dollar amount per share which is then converted to a percentage of the stock price before the information gets to the end user through a source like Yahoo Finance. So if the stock priced dropped 50% the dividend would go from 2% to 4% of the stock price. This is assuming the Board of Directors does not declare a smaller dividend per share in the future. Typically Companies do not like to decrease their dividend unless it is absolutely needed as investors view this action negatively.
They're saying if the dividends stay at a relatively constant 2%, the amount you will receive will vary with the stock price. Yes, we know that companies set their dividends to a set dollar amount. However, when you look back at an event like the 2008 crash, lots of companies cut their dividends. You can see that the dividend yield briefly shot up to 3% for 2008 (http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm), but reverted to the mean next year as companies reduced their dividends in accordance with their current business outlook (which was also reflected in their stock price, just faster).
+1
Also this is counterintuitive. It seems likely that what Virtus is saying would be true, but data (such as both you and I linked) suggests it is not.
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Currently only own VTSAX... yield is around 2%
$225,000 * .02 = $4,500 yearly.
So... $375 a month, not too bad...
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Is there an easy way to find this information out? I'm curious how much my portfolio produces in dividends per month/quarter/year. I have all of my investment accounts tracked inside of Personal Capital but it doesn't seem to tell me the total yield of my portfolio.
A rough guesstimate would be that the average dividend on all my investments is around 2.5%, which would be ~$1,562/month.
Sigfig.com is free and show dividends per quarter I believe. No idea how accurate it is tough since I don't care a whole lot
Something like this (google images, not mine):
(https://lh3.googleusercontent.com/WgEd2A8HABvb_Ecw-ltmQJcUjrcFSOohGwUbytZdU5ccUZVQsTaRdqA5qYO3sCdp4i8=h900)
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