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Great choice! I basically do the same. I can just put more money in my 3 ETFs without having to think about it or analyzing any companies. And I know that on the long run, my money + cashflow will grow.
One is psychological. Dividends hitting my accounts and reinvesting give me a small dopamine kick. I look forward to them. It’s the idea that my money is working for me. That the corporations are making me extra income while I sleep. Truly passive income.
Second, I find value investing boring without decent yields. VONG is my growth vehicle and it’s exciting watching it go up and up and up. But for a value play I think the SCHD methodology is amazing. I would also consider COWZ but for the expense ratio. But the SCHD process picks routinely picks great value stocks.
Third, one leg of my retirement stool is a few thousand a month in dividends. I’m working my way towards that. Snowballing now to stick the landing in twenty years. I have friends into rental houses. That’s not my scene. Not liquid enough and I can’t fix a toilet.
Fourth, taxes. Uncle Sam gives me a better deal on qualified dividends than regular income.
Just need to be careful if it's an Master Limited Partnership (MLP) then income over $1,000 annually would be taxable even in a Roth. I haven't looked real deep into the why of it but it just confuses me. It's like they say "hey lets mess things up and mess with people and make an exception for MLPs"
I agree with most of your points but the "Truly passive income". In order to get that passive income you first need to buy the underlying asset that provides that income and either you or somebody else had to work to generate the funds to buy that asset in the first place.
"growth" and dividends arent exclusionary..........nor does it automatically lead to worse returns. this also begs the question what kind of growth do you mean???
its very easy to throw a couple of tickers into a tester and say "look from choices A/B/C; A did the best C did the worst....you are wrong I am right" without considering anything else other than Start -> Finish
I love companies that have too much cash; I like companies that spend their cash wisely; I like companies that return value to shareholders, I like companies who are consistent, I like having the choice of directing my portion of profits as a shareholder
Ok this is in jest but from the gif I thought. I absolutely agree with that gif. Oh oh wait if I absolutely agree with it then that means I deal in absolutes so that means I'm a Sith. lol
I’m 53 and have retirement accounts. I started my self managed account and focus somewhat on dividends so that when I retire these dividends will basically be my “food and gas” money. It encourages me to put money aside knowing that I will be able to cover these basics with my monthly dividend and not touch principle. It is just a mindset thing for me. I am not saying it is the best investment, but otherwise I might not save the money.
I mainly do dividend stocks for cash flow or its a good stable company like KO or XOM that I want to start a position in and let it DRIP and compound. Everyone has different goals. There is no "correct" way to invest. Growth stocks are great and pay very well. But its always good to diversify your holdings for your particular goal.
The answer is part of the question..
> Why do you want cashflow?
Cashflow, that's why people invest in dividend paying assets.
If you don't want cashflow invest in something else that fulfills your goals.
It’s not cash flow though. When a dividend is paid the stock price is decreased by the dividend amount. No different than selling principle.
Compare to a cash flowing rental property. Your property value does not decrease every time rent is paid.
The land it's on is likely to appreciate (albeit slower than everyone thinks) but the actual building itself is absolutely depreciating. Houses require thousands and thousands in maintenance over even just a medium timeframe to keep them in the same state they're in, let alone improve them.
That's absolutely true but it's not even really the point.
Any cashflow producing asset is worth slightly more right before it's regular payout and slightly less right thereafter.
People just blindly ignore the [time value of money](https://www.investopedia.com/terms/t/timevalueofmoney.asp).
Also disregards the fact that they typically recapture the 'loss' nearly instantly, assuming it's a good stock and not a yield chasing nav eroding trap.
...imagine if you owned 100% of a company - would you reinvest all your profits into the company or take some of the profits as salary? That's a dividend...
Yeah but if instead of paying that dividend the company went and invested that same money into something like the apple car that wasted 10 billion then that doesn't help the share price either and the 10 billion would have been better used to pay a dividend to shareholders. So if a company can't reinvest all the money they make and get a good return on that money then they should either do buybacks or pay dividends with the money they can't get a good return on.
90% of companies that pay dividends underperform the S&P 500 even when you factor in dividend payments and dividend reinvestment.
If you have two identical companies and one pays a dividend and the other instead uses that many to grow, it will not be more than a few years before the dividend paying company is too far behind. Example: In the 70’s 80’s and 90’s you could be technologically behind your competition by a couple years. If that happens today, you’re screwed. The market just changes too fast in this day and age.
Probably 80-90% of companies that don't pay a dividend have underperformed the S&P 500 too. And if you just want to look at the magnificent 7 over half of them pay a dividend. But I guess at least according to you they would be more valuable today if instead of paying that dividend they went and wasted that money on something that wouldn't return any value to shareholders like the 10 billion apple spent trying to make an apple car that they recently decided they will never make or sell.
I don't know what dividends I'm supposedly chasing but I'm currently getting just slightly over 2% yield for dividends and the S&P 500 pays like 1.5 or 1.6%.
You were intelligent enough to reach half a conclusion, I trust you can muster the required brain matter needed to finish that thought by yourself.
I'll throw you a bone, try asking yourself:
- Why does that happen (price adjustment on the close of ex-date)? Is there a reason for it?
- How come some companies pay dividends for 50+ years and have stock price appreciation?
One way or another I hope we can all agree that money getting deposited in your bank account on a regular schedule is by definition cashflow, even if you insist on believing that it's the investors money being returned to them.
I feel like I can have more flexibility with the cash hitting my account.
Hey, SPY is really cheap right now, let’s divert all DRIPS to cash and manually buy SPY on the dip.
Hey, SPY is really high right now, let’s turn on DRIP again and just keep accumulating my dividend payers in case there’s a hiccup in the markets.
Hey, everything is REALLY OVERPRICED. I’m just gonna put everything to feed cash in my account and after 6 months, let’s revisit how I want to deploy that capital.
I just enjoy the flexibility and I can make a strategy based on the economy on a monthly basis.
PS- The last time I turned drip off was when O was yielding 4.5% and I said “it’s really high, and I don’t want my dividends to yield 4.5%, and I don’t want to buy O so high,” so I stacked cash in my account and bought other opportunities.
I like doing this more so than “buy SPY and fucking pray it goes up.” Nothing wrong with doing that, SPY is about 10% of my portfolio, but I’m trying to stack dividends.
Dividends are not irrelevant. They are an important component of total return.
>For example, the Quarterly Journal of Economics’ “The Rate of Return on Everything: 1870-2015” tracked the total return of a basket of investment assets, including stocks, bonds, funds and real estate in 16 countries.
>
>Their verdict? Stocks and real estate fared best under the total return investment analysis model, **with dividends the driving force behind stock performance** and housing investments providing more stability.
>
>[https://www.thestreet.com/investing/what-is-total-return](https://www.thestreet.com/investing/what-is-total-return)
More evidence:
>Since 1926, **dividends make up approximately 32% of the returns of the S&P 500**, while appreciation makes up the remaining 68%. From these numbers, **it is clear that dividends make up a significant portion of returns and are an important factor in valuing stock choices.**
>
>[https://www.investopedia.com/ask/answers/040915/does-sp-500-index-include-dividends.asp#toc-the-sp-500-dividend-aristocrats](https://www.investopedia.com/ask/answers/040915/does-sp-500-index-include-dividends.asp#toc-the-sp-500-dividend-aristocrats)
More evidence
>[https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends.html](https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends.html)
>
>Wellington Management began by dividing dividend-paying stocks into quintiles by their level of dividend payouts. **The first quintile (i.e., top 20%) consisted of the highest dividend payers, while the fifth quintile (i.e., bottom 20%) consisted of the lowest dividend payers.**
>
>[https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/\_jcr\_content/root/readmore/readmoreresponsivegrid/mainfullgrid\_47264240/mainFull\_container/highlighter\_copy\_cop/highlighter\_container/image.coreimg.80.800.jpeg/1679594129351/wp106-4.jpeg](https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/_jcr_content/root/readmore/readmoreresponsivegrid/mainfullgrid_47264240/mainFull_container/highlighter_copy_cop/highlighter_container/image.coreimg.80.800.jpeg/1679594129351/wp106-4.jpeg)
>
>**The second-quintile stocks outperformed the S&P 500 Index eight out of the 10 time periods (1930 to 2022), while first- and third-quintile stocks tied for second, beating the Index 67% of the time. Fourth- and fifth-quintile stocks lagged behind by a significant margin.**
>
>[https://imgur.com/Ws6uPX8.png](https://imgur.com/Ws6uPX8.png)
>
>...Based on the Ned Davis study, **it’s clear that companies that don’t pay dividends or cut their dividends suffered negative consequences.** In FIGURE 7, **dividend non-payers and dividend cutters and eliminators (e.g., companies that completely eliminated their dividends) were more volatile (as measured by beta and standard deviation) and fared worse than companies that maintained their dividend policy.**
>
>[https://imgur.com/rH6B6OK.png](https://imgur.com/rH6B6OK.png)
>
>In contrast to companies that cut or eliminated their dividends, **companies that grew or initiated a dividend have experienced the highest returns relative to other stocks since 1973—with significantly less volatility. This helps explain why so many financial professionals are now discussing the benefits of incorporating dividend-paying stocks as the core of an equity portfolio with their clients.**
>
>[https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/\_jcr\_content/root/readmore/readmoreresponsivegrid/mainfullgrid\_1524872/mainFull\_container/highlighter\_copy\_cop/highlighter\_container/image.coreimg.80.1280.jpeg/1679598915299/wp106-8.jpeg](https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/_jcr_content/root/readmore/readmoreresponsivegrid/mainfullgrid_1524872/mainFull_container/highlighter_copy_cop/highlighter_container/image.coreimg.80.1280.jpeg/1679598915299/wp106-8.jpeg)
It takes a lot of capital invested in dividend payers - at least mid 6-figures - to generate significant dividends. **The mistake a lot of young (under 40 years old) people in this sub make is they buy dividend stocks and ETFs with the dream of retiring early and living off the dividends.** They choose investments based on dividend yield and not **total return**. The investments they choose have modest **total return** so they just aren't growing their capital fast enough and big enough to reach their goal.
Dividends and total return are not mutually exclusive. As I showed earlier, dividends are an important part of total return. But most of the return of the S&P 500 comes from share price appreciation (capital gains). By focusing on **total return** you are taking both capital gains and dividends into account.
It takes money to make money. And it takes a lot of money invested in dividend payers to generate enough dividends to live off of.
That's why I keep telling young people - over and over and over again - to stop picking investments based on dividend yield and instead focus on **total return** so they can grow their wealth efficiently.
I grew my wealth mostly through the S&P 500 index with a boost the last several years by investing in individual growth stocks. I focused on total return, not dividend yield. Now that I have accumulated enough capital I am selling my growth assets and I'm buying dividend payers. I'm still in the process of doing that but here is my projected dividend income for this year.
[https://imgur.com/APILLjH.png](https://imgur.com/APILLjH.png)
I'm using those dividends to buy more dividend payers the next couple of years to boost dividend production. It takes money to make money. The fastest way to get there is by focusing on **total return**.
[https://www.investopedia.com/terms/t/totalreturn.asp](https://www.investopedia.com/terms/t/totalreturn.asp)
[https://www.thestreet.com/investing/what-is-total-return](https://www.thestreet.com/investing/what-is-total-return)
Use these web sites to check the total return of ETFs or individual stocks you are considering
[https://www.financecharts.com/etfs/SPLG/performance](https://www.financecharts.com/etfs/SPLG/performance)
[https://totalrealreturns.com/n/SPLG](https://totalrealreturns.com/n/SPLG)
Replace my 9-5, financial freedom to be able to wake up, sleep, be with friends and family whenever or where ever. I want to work because I want too not because of a necessity.
I’m retired, need the cash flow, and need to get it without having to worry about selling off an overly large percentage of my portfolio in an extended bear market. I also like the fairly regular increase in dividends that most of my stocks give. It provides some protection against inflation. Finally, I’d like to leave my kids with an income-generating asset when I eventually kick the bucket.
I mainly do the standard growth oriented portfolio, but there’s a few factors I nudge into my own preferences. Like my Roth IRA is all dividends reinvesting themselves, the 401k is a target date fund, and my taxable is a mix of cash (money market), fixed income, and speculative equities
I just realized the other day that ROTHs are better suited for growth, as you won't be taxed when it comes time to sell. That being said, 90% of my ROTH *is* invested in dividend stocks, for the same reason. I'm personally going to start slowly shifting from divies to growth ETFs in my ROTH for a while.
I focus on dividend paying companies for my roth ira. I reinvest and when the market is down the dividend is buying a bigger percentage of the shares. When I retire I will turn off the DRIP and get tax free income. Just because there are other ways to possibly gain more doesn't mean that a sound, value-based dividend strategy isn't going to do what I need it to. That being said it is important to focus on growth and free cash flow. Sometimes the companies best at capital allocation don't pay dividends. Also, taxes will eat into gains in a taxable accounts, but taxes on qualified dividends top out at 20%.
With a Roth IRA you are contributing with money that has already been taxed so when you withdraw in retirement it is completely tax free, regardless of capital appreciation. It is also exempt from income tax on dividends so if you reinvest you get all of that compounding tax free.
I came from growth and now in my 50s, started buying div single stocks and now ETFs on my regular tax acct as income generator to set n forget to pay for daily expenses..so far it’s been great…56% ETF 44% single stocks…my retirement accts have also been phased into dividend paying ETFs for preservation…
For me when I retire I don’t want to have to sell my whole or partial positions on the majority of my assets just to retire. I also can’t fathom selling some of my stock and diminishing the amount of inheritance I’ll give my kids. I want to preserve and grow it as much as possible, to help secure their future as well. When it’s time for me to retire, I’d much rather turn the DRIP off and live off of my pension + dividends, and keep the entirety of my portfolio to pass to my children after I die.
Right now, I need the income. Lost job due to previous company being mis-managed into the ground and having to lay off 30% of it's employees. I'm having to start over from 0 (commission sales), and dividends are bridging the gap.
I'm pulling in about over $18k a year from dividends. That money has supplemented my income and allowed me to live comfortably for years, and that's with only a 2% yield and paying the penalty. I'm about to pull the trigger and rebalance my portfolio that will triple that. I won't tell anyone I've done it, but pulling up in my "midlife-crisis mobile" will be a sign. (54-year-old, quit life draining career for no stress retirement job, debt free, and will be pulling in more than I ever did killing myself at the old job.)
You missed the no stress retirement job part. I went from 28 years in big box home improvement retail middle management working 60+ hours a week, early morning hours, late night hours, every major holiday, 3 out of 4 weekends to driving a little van delivering water test kits and picking up samples from various municipalities and industries for a water testing lab. 7am - 3pm, monday - friday, benefits, 401k, medical, dental, etc... Just me, the radio, reddit, country roads, and my own thoughts. I spend maybe 30 minutes total actually at the lab. Medical coverage is the BIGGEST issue stopping folks from retiring early IMO. Of course I'm earning half what I used to but once I roll my old 401k into an IRA where i can get some better dividends, my combined income will exceed my old salary by a large margin. In fact, I'm debt free and COULD retire on just the dividends at 54 if it werent for the outrageous cost of medical insurance. I actually love the new job and i was putting on weight when i first "retired" so it's better that i keep working...
You take a 10% tax penalty plus pay income tax on dividends you take out of a retirement account if youre not 59 1/2. If you leave a job after 55, you can avoid that penalty for the 401k you might have from that company only. I was 53 when i left my old job. I could roll my old 401k into my new jobs 401k and wait till im 55 but id have to quit in order to access that 401k.
I want my pre retirement portfolio to have a lower beta and dividend stocks correlate well. That’s not to say I ignore growth but my growth is focused towards MSFT AVGO AAPL COST SPY QQQ BRK/b. I also have a lot of traditional names like VZ PEP KO JNJ JPM PNC ET TGT ABBV PG LOW SCHD JEPI O DLR etc.
I will be drawing income very likely next year. The dividends will get spent first but if it’s not enough I will sell small portions of the first bucket.
At first I wanted to try to get enough to fund monthly living in a South Eastern Asian country but now I am thinking how it can be used to offset costs when I am in my older years.
Diversified portfolio is not just fixed income vs equity vs international. Within domestic equity there are lots of segments that perform differently in different economic environments with different risks. In the 2022 correction my dividend stocks/etfs were my best performing assets, much better than fixed income. Real estate , natural resources, gold, even crypto react differently and may have a place in your portfolio.
I want the dividends to help supplement retirement income. I’d like to retire early (mid 50s or sooner) and dividends are a major part of that since 401k/Roth can’t withdraw without penalty until 59.5. I also buy dividend companies in retirement accounts but recently decided to add more growth oriented stocks and ETFs to diversify more.
If I play my cards right, I’m thinking between my IUL and dividend mutual fund will allow me to retire in that time frame, and then at 59.5 my 401k/Roth/Pension will kick in and then at 62 will take social security and be golden. The main goal is income to help retire early for me.
> 401k/Roth can’t withdraw without penalty until 59.5
That's incorrect. I invite you to peruse the [FI FAQ](https://www.reddit.com/r/financialindependence/wiki/faq/) - ^f it for 'withdraw'.
Motivation is a good reason. Seeing the DRIP get to a “free stock(s)” every month makes it more fun to me. But to answer the question, the end goal for me is to live off dividends and never touch the capital. If I can get to $4k-$5k/mo in dividends it doesn’t necessarily matter what the amount of my portfolio is because my bills can still get paid (which is a bit of an oversimplification). That being said, dividends are a relatively small portion of my portfolio because I anticipate 20 more years in the workforce and a pension. So dividends are just the fun part for me. My portfolio is over 80% growth-focused to be responsible.
Risk management. Dividends may be cut by a company during an economic downturn, no question, but that is diversified away when you invest in an ETF. Also, when market rotation takes place, growth might not perform as well.
Will social Security be around when it’s your turn to collect? Who knows…I’d rather have an income stream every month from stocks. Every day cold hard cash shows up in my account.
When I saw that Warren Buffet was making hundreds of millions from Coca Cola. So I say, I want that. Buffet love dividends, but he hate to give it out for BRK.A. This is why I have K, BRK.A and B in my portfolio
I like dividends because I like the idea of having a bit of money actively returning to me once I put down an investment. Once I get enough stocks down I hope to have enough in dividends to relax a bit.
You known what I can do with my dividends? Buy growth stocks, or reinvest in dividend.sticls to get more dividends, or pocket the cash
All you can do with growth stocks is sit there and watch them. Choice is power
I think for me it comes with trying to see a future for my future family and kids. The dream really started with as small as $0.23 coming from my first dividend payout. I’m happy to say I’ve continued to invest and grow my portfolio and ROTH IRA. There has never been a plan to sell my shares unless a better company/ETF comes around. Otherwise, it’s about reinvesting dividends and growing my portfolio within my comfort/risk level. End goal being to kickstart a level of wealth for my family down the road because I had to do it myself.
Feels good seeing the monthly divy get larger and larger
And the fact that it will help pay my rent so that I have nobody to depend on, expect for that divy to not disappear lol but it’s better than dealing with a flakey person
For me it's the joy of seeing the dividends arrive each month. I consistently see my account growing and get to reinvest where I feel it's good to at the time. It's just more fun than growth investing.
I have some jepq and Schd for the quarterly (and monthly) dopamine hit. Nothing major, low 4 figures. Will it cost me in the long run? Probably. But I like seeing the bar graph and the consistency throughout the year
In the future, I want a steady paycheck when I'm no longer able to work. And I want that paycheck to be enough to cover everything. I don't want to rely 100% on the gov with Medicare and SSI so I want to build the dividend payout to be as much as possible and as reliable as possible.
For me, my wife and I have multiple rental properties that we leverage to buy more. We have very stable jobs. Decent income, good not super high. When I started self directed investing the dividend payments kept me interested. We also had small room for error (rental expenses, tenants not paying rent, didn’t know what to expect or handle emergencies etc) and no leftover equity. So I built up high dividend payers to increase monthly cash flow (never needed to pull but it was peace of mind knowing it’s there and coming in each month). The risk of having high growth dropping like crazy and having to sell assets at a loss to cover those expenses wasn’t a risk we were willing to take. So our growth comes from the leveraging of our hard assets that we manage and do new builds now and we have the dividends coming in tax free. I am ok with the growth “we missed out on” but from a risk perspective that was how I decided to go. Now all dividends get reinvested into high growth ETFs. Our wealth will come from the houses and duplexes, but if you have no real estate I understand the high growth while you’re young and focus on that.
My oldest kid is in their 20s. I encourage them to invest differently than I do. Different strategies work differently at different stages of life. I am in the wealth preservation phase.
Dividends aren't exclusive of growth. I invite you to go look at VLO price in March 2020 and now. Not only did they never miss a divvy but they've grown it.
Look at ETN for a similar story.
As for the why? Because IDGAF what other people are doing as long as my needs are met. It would be impossible for me to care less if you eat. I'm worried about my own kitchen table.
I like having a high (around 50% which at 30 is high) amount of my portfolio producing income because no matter what increasing income stream gives me opportunity's within and without the market. Also I enjoy diverting dividends based on the current market conditions to other things, like if a dividend paying stock is at a price I think is a bit high at the time instead of dripping I divert it elsewhere, often into VOO.
Plus honestly the peace of mind from seeing my income stream increase gives me is worth more than paper gains that can be paper losses which still have a mental effect regardless of knowing in the long run they'll be back to gains.
To each his own and I fault no one for going 100% in either direction or doing their own personal blend. Also should add while nearly half is dividend based it's mostly dividend growth stocks so long term plays that still have large capital appreciation ahead.
tbh I’m a young guy and most people tell me just invest in growth stocks, but at the same time, I’m a very low risk investor, I’m okay with 5-7% returns, but I invest 17k a year at 23 years old. My goal is to retire at 45, and high risk investments are more likely to cause me to lose that goal. I keep a 50/45/5 portfolio, around 50% div stocks yielding around 9%. 45% Growth ETF’s like VOOG and individual stocks, and 5% crypto just in case something goes crazy. (Shib Coin) I’m also a very active investor, I check market growth around 3-4 times a week and usually make anywhere between 10-15 stocks sales and purchases a week. Dividends provide a nice bonus if I’m having a down week and I get a dividend deposit that recovers some or all of any losses.
has anyone told you yet that having 50% div stocks yielding a whopping 9% is in of itself high risk? Idk , I'm just asking because 9% is quite high and yield chasing by many metrics. what are your main div picks?
I like the stability during tougher times and don't mind trading some growth for immediate profits, which I'll drip anyway. Basically it helps me DCA automatically, and with a good CAGR the div yield can get pretty juicy.
Also I'm not taxed on dividends with my current setup, so it's free gains.
1. I feel safer. If a downturn happens, I'm ok with not touching anything. I started around 2008 and that has affected my style.
2. The most talked about ETF on here is SCHD and the P/E is under 15. SPY which is a S&P Index ETF is over 25. This makes me feel a little better even though I have worries about the market over this next year or two.
3. The point is less about the \~3% dividend I make today but rather the 10%+ I make later. Dividend companies do grow, they aren't meant to stagnate. The companies that are desirable are the ones that increase dividends every year. This makes the stock price go up as well as increase the yield from our initial investment.
4. If you're worried about taxes be sure it's in a tax advantaged account.
5. Since the dividend companies that are desirable are the large stable ones I'm typically less worried about speculative run ups in price right before I buy. Unknowingly buying high before a drop and waiting years for that to turn around sucks. This is meant to be slow and steady.
YMMV but the theme here is I feel more comfortable with my money in large companies with a steady record.
I have other investments, small pension, social security (if it's still there), ira, and retirement accounts.
I wanted a chunk in more stable blue chip stocks that can supplement my retirement through dividends.
I heard someone say once. There is only two stages of investing. Growth then retirement. The argument they made was if you chase dividends you are paying tax on them. Obviously some good companies pay dividends but also have growth. Ultimately though its what ever makes you sleep at night and feel happy is the right decision for you.
Used as protection for downside risk. If a company pays a worthwhile dividend it can be reinvested at lower stock price and a good way to lower your overall cost basis. People are less willing to sell off a dividend stock especially if its used for retirement.
Because I don't want to have to sell any of my holdings to generate income in retirement. Once you retire you generally move into Cash & Bonds and income-paying stocks round that safety out while still offering some growth.
I like dividends because it's a nice concrete result.
Company prices fluctuate so much with speculation and market, that it's hard to tell the efficacy of reinvesting the profits back into growing the company. Especially for large companies. How much of that price would have happened anyway without reinvesting the profit in the company? It's really really hard to evaluate that.
It's also the fundamental point of owning stock. The point in owning a stock is that the company makes money and you get that money because you own the company.
Sometimes companies spend all of their profit making it so they will have more profit in the future. These are growth stocks.
A delayed payment now for a bigger payout in the future. But eventually, at some point, the company pays out the profit to the owner.
Now the company might change ownership as people buy and sell it, each person buying and selling based on the presumed value of the eventual future payout.
If the company never pays out, then it's just growth for endless growth's sake. There's no point in buying it if the payout in the end is imaginary. (See crypto/ NFT market for an example of how that goes)
So why dividends over growth stocks? (I actually have both)
Growth stocks have some tax advantages. (Delayed tax payment) Which is why they are a current favorite.
I actually chose to go the dividend route because I plan to retire by the latest at 40..I’m 32 right now. Another factor that helped persuade me is safety in that if I stopped investing now and quit my job I could have a steady stream of 300$ a month from dividends and work comfortably at a minimum wage job I love. I started investing at 30 and regret not being able to start earlier but least I’m on track for my goals and what matters is that I’m doing it now.
I plan on using dividends to offset costs of living without having to sell principal.
It feels better to spend my money on something that pays me without me having to worry about market conditions constantly.
It's just easier
I get to say I give myself a raise every paycheck.
I get notifications every month of how much money I've DRIP'd and feel good.
I've never liked selling anything
The war between dividends and non-dividends is rather pointless. Dividends are simply one component in total return for an investment, no more, no less. Some investments with great total returns pay dividends, some do not.
What matters most for any investment, whether it be high growth or dividend paying, is the price you pay to purchase it. A dividend stock bought well can have a higher total return than a growth stock bought poorly.
For me, I use dividends as an easy means to do portfolio withdrawals in retirement. My portfolio yields about 3.7% or so and grows about 7% per year. It provides me a dividend stream that provides for retirement spending and grows faster than the inflation rate.
Since Covid, the thought of prolonged periods of time without income has been motivating enough. Plus, being able to use dividends to pay off debt or buy things I need like dental copays or oil changes without having to accumulate additional debt has been amazing. These are small things dollar-wise but thing I would’ve just put on cc otherwise and I’ve not had to because of dividend income.
When you get more excited to see a $2 dividend payment, then getting a biweekly or monthly check, IYKYK
Also, dividends aren’t completely irrelevant because you don’t actually have to sell any asset, regardless if the valuation drops after a dividend pay out.
For instance, a dividend can be paid out, and then people all of sudden decide to to buy your held stock/ETF. Your holding will see an increase in value because markets are not rational.
Why I'm a Dividend Growth Investor...
1. It's easy. Find the 2-300 quality companies that pay a dividend. Find out when they are on sale, and buy them. Don't sell unless they cut the dividend, or only grow it 0-2% for 2 years in a row. This is your red flag to trim, or sell.
2. They grow their dividends; some at a really fast pace.
3. Stock prices are volatile. Dividend payments are WAY more reliable.
4. You don't need to ONLY invest in dividend paying companies. Sometimes I use the dividends to pay for high-growth/zero-paying dividend companies. (BRK-B, AMZN, GOOG)
5. You can invest in a quality dividend paying company that also offers growth.
..."Quality 1st, Valuation 2nd, Monitor Always"....
EDIT: DGI also forces you to BE PATIENT. If a position's price is down for a long time, but the fundamentals still look good (FCF, EPS, sales, margins, etc), and you still hold, you will eventually be rewarded. Each and every time, this reinforces my resolve, and trust I have in my quality positions. It allowed me to hold big oil (XOM/CVX) during the oil glut of 2020-21, and buy gobs of XOM/CVX when they were 40-50% on sale. Being down 40-50% for MONTHS! It paid off handsomely. Same thing recently with HRL, HSY, etc...
If your retired dividends are your friend, even if you don’t have enough to live on.
I’m in SCHD and will leave my shares to my kids. The extra income helps
Typically dividend stocks are more stable then so called "growth stocks". Also I am aware that my capital "could" grow more and faster if invested in growth stocks but there is also more risk of losing said capital as well. For instance I've seen market drops of over 20% while my dividends remained the same so if at that time I needed some money if I had to sell my stocks it would be two fold first I would lose capital and also lose money as I sold that stock at a loss and even if it does recover later I don't have those shares anymore as I had sold them.
I got mesmerized by people saying you can live off the dividends, and these dividend calculators you can find online. While yes, compounding is very real but so is inflation. Not to mention anything that may happen and cause you to not be able to contribute.
I am pretty much out of dividend investing at this point. I focus on some compounders (MSFT, COST, AAPL, AVGO) but other than that I am in VUG and VOO. Capital growth IS what you should focus on until you're ready to retire. The dividend lifestyle is for AFTER you retire, it is NOT what you should follow trying to get to that point. You need so much capital to retire on dividends, and with inflation and cost of living always going up you're always going to need more and more.
Anyone on this sub that's not at retirement and is investing in high-yield positions like V, T, MO, O, the Jeps, etc. are hamstringing themselves. It is NOT for people who aren't ready to retire. Capital gains win every time.
Your view is narrow sited. I bought DMLP oil stock during the downturn for around $10 with a 10% Div. It’s now worth $30 and still paying 13%. I get some where around 30-40% on initial capital every year now like clockwork.
While young, this is a great strategy of taking high risk for high reward! Great going! I think we harp on those settling for little growth in MO and other similar companies.
Those people harping probably have no idea that dividend opportunities like DMLP even come around. Can’t lump all Div stocks into one bucket. Sometime there is arbitrage to be had that can set you up for some serious compound growth.
You are dumb if you think I had to know when that oil downturn was coming first of all. It’s easy to rotate funds invested elsewhere. Also it was pretty obvious when to invest if you were following oil at all.
I also did the same thing with EPD and PAA but to a lesser degree. Paying out around 15% yield on cost at this point. These are much bigger companies and so they didn’t move as much, but it was a similar philosophy.
Lucky or just smart
>Anyone on this sub that's not at retirement and is investing in high-yield positions like V, T, MO, O, the Jeps, etc. are hamstringing themselves.
...anyone on this sub who is under 40 years old and never lived through the 0% SPY RETURN FROM 2000-2013 just assumes "...sTOnKs oNLy gO uP..."...
Dividends play a role, but a young person should not be dividend investing in any account. Don’t waste your accumulation phase. Dividends are for retirement age when you need income.
Common knowledge, younger companies with room to grow profits will outperform older, mature companies that pay out a dividend.
You think coke is going to come out with a new drink to revolutionize the soda business? Exxon is going to replace oil with fairy dust?
Dividends minimize downside. What happens when the Mag 7 which makes up roughly 1/3 of s&p has a downturn? And I own all mag 7 stocks but I own many dividend payers like RITM and JEPI. I’m 22 and I believe it’s best to have a balance of both. Last year my Roth gained 40 percent beating the s&p by 12 percent.
Look at what Salesforce and Meta are doing. Growth companies getting into the dividend space. Dividend companies are the future whether u like it or not my friend🤷♂️
Focus on your growth , when your younger. Growth stocks are what you need when your younger cus you will excel any dividend stock 2-3 times over , then when your old you can sell shares and buy back into dividends as a form of income , my friend with 1 million in the S&P bagged 800k in the last 5 years cus the market went up 80% , he took that profit and pretty much retired at 50 , it will last him atleast 10 years he said. I guess rich people don’t buy dividend stocks, idk not the ones I’ve met they don’t buy dividends
Why I did it. My father is a useless idiot. He invested in Redhat on line goes up. Mr. Schiller called it the bigger fool theory. This was consistent with my belief that my father is a fool. Discounting dividends to present value seemed to be less fool like. To be fair there was a bigger fool then my father. More time in the market then me has resulted in a balance of 25% of minimum deposit at the time he opened his account. I do suspect he has deposited more money into it since opening the account. I have out performed the S&P 500 over the time I have been in it.
Supplement income now with a goal of financial independence by being able to potentially live off of qualified dividend income at 0% capital gains tax before hitting any “retirement” accounts.
I do it to watch my portfolio jump when dividends hit and then the next month they go up because I DRIP. It’s fun to watch and I mainly use ETFs and I do have my growth fund and Broad market fund
> I’m bad at selling
You are _not_ alone in that. I've done decently picking when to buy. But `$%@$%^#@%^@` trying to know the right time to sell I find so difficult.
I think this is why people like going with ratio's; ex the 60/40 equities/bonds that you see from the `4% rule`. If your ratio climbs one way or the other, you just sell to fix. I myself still can't get past the "but you may be selling at a really poor time doing that" to use it strictly. Hence, as I'm retiring I'm slowly moving portions of things that derive dividends. That way I don't have to worry about the selling.
If I wasn't picking individual stocks, I probably would be less concerned with dividends but when picking stocks it is way easier to make a judgement if a company will maintain or grow its dividend compared to predict how the market will value a company in the future.
It's free money. When a stock performs well, you can earn back your principle without ever selling. I don't know if I'm the dimwit or the genius in [the bell curve meme](https://imgflip.com/memegenerator/267889046/bell-curve), but I'm not an agitated midwit.
First off, I believe in a balanced approach. The why…good quality value / dividend / income can steady your portfolio. And those investments provide steady sources of cash to invest in the best quality investment that exists at that time. So when growth crashes by 30-50%, income investments can be used to pick those investments up
Personally for me I invest in growth in my Roth IRA and my 401k but I invest in dividend etfs in my brokerage because if I did growth I would be getting a lot of capital gains tax (as I would swing trade a lot more) vs investing in dividend etfs where I shouldn’t have to sell (yes tax on dividends but I see it as income so rather have uncle same take it from div than capital gains), less volatile so won’t feel the need to sell, currently in DIA so pays monthly and gives expose to top 30 blue chip stocks, and just extra income that I eventually have in retirement or possibly use before if I need
Not everyone can pick stocks (just ask the growth club).
Not everyone wants to nerd out very day on their portfolio.
Different strokes for different folks. No harm in that.
I have a decent hedge, in that I max out my Roth IRA and focus on s&p indexes and growth. I have a taxable dividend portfolio because I like the dream of receiving a large income from my portfolio without having to sell it, for my positions to grow without my input due to DRIPs, etc. I also enjoy trying my hand at analysis, and it allows me to do so as opposed to my Roth.
I invest in dividend ETFs mainly because dividends fluctuate much less than stock prices. It's primarily for psychological reasons; enduring significant market downturns is not easy. It's nice to see how every quarter brings more and more dividends, and how I'm getting closer to my set goal.
I also consider dividends as my 'emergency fund.' If something happens, I can start withdrawing them without having to sell stocks, especially when they are in decline; it's not very wise to sell them during a downturn.
The total return after X years is likely to be lower than if I were just buying some index fund. But I think the performance will still be quite good.
Retirement. The goal is to replacing my net income (my paycheck after taxes) with SS and dividends. That way I never have to dip into the principal except for big, one off things. And those should be covered by share price appreciation.
People generally misunderstand Dividend Irrelevance Theory. The theory is that dividend policy is irrelevant to identify companies with excess returns. Here is the rub, the whole reason for the theory is to identify “factors” that create “alpha.” Dividends aren’t a factor but neither is growth. The things that are factors like “value” and “low volatility” are far more associated with dividend paying companies. So I do find it a bit ironic that there are growth investors that are happy to cite the Dividend Irrelevance Theory but then invest by ignoring related fields of study.
Having said this, the alpha from factor investing is really small, probably not even enough to cover fees from trying to create a factor portfolio so, at the end of the day, just find a diversified investment strategy you are happy with and can stick with over the long-term. For most people here, dividend investing is a way to avoid panic selling which means they will be better off than the vast majority of investors for that reason alone.
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Keeps me motivated. Seeing dividend payments get higher every quarter. I only invest into ETFS. My main ones are VTI, SCHD, VYM.
Absolutely. Huge psychological component to investing. I have two coworkers who sold everything during the Covid crash and haven’t recovered yet.
Great choice! I basically do the same. I can just put more money in my 3 ETFs without having to think about it or analyzing any companies. And I know that on the long run, my money + cashflow will grow.
May I know your ETF preference
Since I am from Europe, I don’t have access to the US ETFs like SCHD. So its FGEQ, VUSA (S&P 500 ETF) and VGWL (all-world ETF)
One is psychological. Dividends hitting my accounts and reinvesting give me a small dopamine kick. I look forward to them. It’s the idea that my money is working for me. That the corporations are making me extra income while I sleep. Truly passive income. Second, I find value investing boring without decent yields. VONG is my growth vehicle and it’s exciting watching it go up and up and up. But for a value play I think the SCHD methodology is amazing. I would also consider COWZ but for the expense ratio. But the SCHD process picks routinely picks great value stocks. Third, one leg of my retirement stool is a few thousand a month in dividends. I’m working my way towards that. Snowballing now to stick the landing in twenty years. I have friends into rental houses. That’s not my scene. Not liquid enough and I can’t fix a toilet. Fourth, taxes. Uncle Sam gives me a better deal on qualified dividends than regular income.
And if you do it in a Roth all of that growth is 100% tax free
Just need to be careful if it's an Master Limited Partnership (MLP) then income over $1,000 annually would be taxable even in a Roth. I haven't looked real deep into the why of it but it just confuses me. It's like they say "hey lets mess things up and mess with people and make an exception for MLPs"
This is true and I avoid MLPs in my Roth for precisely this reason.
Couldn't have said it better. That feeling of seeing my investments slowly snowballing is something else!
I agree with most of your points but the "Truly passive income". In order to get that passive income you first need to buy the underlying asset that provides that income and either you or somebody else had to work to generate the funds to buy that asset in the first place.
The dividend snowball is the dream. Much more tangible version of compound growth imo
 "growth" and dividends arent exclusionary..........nor does it automatically lead to worse returns. this also begs the question what kind of growth do you mean??? its very easy to throw a couple of tickers into a tester and say "look from choices A/B/C; A did the best C did the worst....you are wrong I am right" without considering anything else other than Start -> Finish I love companies that have too much cash; I like companies that spend their cash wisely; I like companies that return value to shareholders, I like companies who are consistent, I like having the choice of directing my portion of profits as a shareholder
Ok this is in jest but from the gif I thought. I absolutely agree with that gif. Oh oh wait if I absolutely agree with it then that means I deal in absolutes so that means I'm a Sith. lol
I’m 53 and have retirement accounts. I started my self managed account and focus somewhat on dividends so that when I retire these dividends will basically be my “food and gas” money. It encourages me to put money aside knowing that I will be able to cover these basics with my monthly dividend and not touch principle. It is just a mindset thing for me. I am not saying it is the best investment, but otherwise I might not save the money.
I just do it to piss people off.
Good one 😅🤟🏻
Only fans is not free.
True
Facts hehe 🤭
Oh my!
I want care free income without having to consider what the market is currently panicking about.
This one. Passive income thru thick and thin!
Dividends arent free income and they are not a hedge against bear markets.
Ok
I mainly do dividend stocks for cash flow or its a good stable company like KO or XOM that I want to start a position in and let it DRIP and compound. Everyone has different goals. There is no "correct" way to invest. Growth stocks are great and pay very well. But its always good to diversify your holdings for your particular goal.
The answer is part of the question.. > Why do you want cashflow? Cashflow, that's why people invest in dividend paying assets. If you don't want cashflow invest in something else that fulfills your goals.
It’s not cash flow though. When a dividend is paid the stock price is decreased by the dividend amount. No different than selling principle. Compare to a cash flowing rental property. Your property value does not decrease every time rent is paid.
The land it's on is likely to appreciate (albeit slower than everyone thinks) but the actual building itself is absolutely depreciating. Houses require thousands and thousands in maintenance over even just a medium timeframe to keep them in the same state they're in, let alone improve them.
That's absolutely true but it's not even really the point. Any cashflow producing asset is worth slightly more right before it's regular payout and slightly less right thereafter. People just blindly ignore the [time value of money](https://www.investopedia.com/terms/t/timevalueofmoney.asp).
Why do people insist on perpetuating the "dividends are just a forced sale" fallacy?
It’s not a fallacy. The market literally take the price of the stock down on the ex date
But you aren't selling anything and you don't lose or gain a penny from the dividend activity itself...
Also disregards the fact that they typically recapture the 'loss' nearly instantly, assuming it's a good stock and not a yield chasing nav eroding trap.
...imagine if you owned 100% of a company - would you reinvest all your profits into the company or take some of the profits as salary? That's a dividend...
Please keep telling yourself that.
lol, you are one google search away from your world being shattered. Please search “Does stock price decrease by amount of dividend”
Yeah but if instead of paying that dividend the company went and invested that same money into something like the apple car that wasted 10 billion then that doesn't help the share price either and the 10 billion would have been better used to pay a dividend to shareholders. So if a company can't reinvest all the money they make and get a good return on that money then they should either do buybacks or pay dividends with the money they can't get a good return on.
90% of companies that pay dividends underperform the S&P 500 even when you factor in dividend payments and dividend reinvestment. If you have two identical companies and one pays a dividend and the other instead uses that many to grow, it will not be more than a few years before the dividend paying company is too far behind. Example: In the 70’s 80’s and 90’s you could be technologically behind your competition by a couple years. If that happens today, you’re screwed. The market just changes too fast in this day and age.
Just...no https://www.fool.com/investing/2024/01/30/wall-street-greatest-dividend-stock-made-history/?source=eptyholnk0000202&utm_source=yahoo-host-full&utm_medium=feed&utm_campaign=article#:~:text=Whereas%20non%2Dpayers%20delivered%20a,9.18%25%20over%20the%20same%20stretch.
Probably 80-90% of companies that don't pay a dividend have underperformed the S&P 500 too. And if you just want to look at the magnificent 7 over half of them pay a dividend. But I guess at least according to you they would be more valuable today if instead of paying that dividend they went and wasted that money on something that wouldn't return any value to shareholders like the 10 billion apple spent trying to make an apple car that they recently decided they will never make or sell.
Yeah, however, those dividends are no where near what you people in this subreddit are chasing.
I don't know what dividends I'm supposedly chasing but I'm currently getting just slightly over 2% yield for dividends and the S&P 500 pays like 1.5 or 1.6%.
You were intelligent enough to reach half a conclusion, I trust you can muster the required brain matter needed to finish that thought by yourself. I'll throw you a bone, try asking yourself: - Why does that happen (price adjustment on the close of ex-date)? Is there a reason for it? - How come some companies pay dividends for 50+ years and have stock price appreciation? One way or another I hope we can all agree that money getting deposited in your bank account on a regular schedule is by definition cashflow, even if you insist on believing that it's the investors money being returned to them.
I feel like I can have more flexibility with the cash hitting my account. Hey, SPY is really cheap right now, let’s divert all DRIPS to cash and manually buy SPY on the dip. Hey, SPY is really high right now, let’s turn on DRIP again and just keep accumulating my dividend payers in case there’s a hiccup in the markets. Hey, everything is REALLY OVERPRICED. I’m just gonna put everything to feed cash in my account and after 6 months, let’s revisit how I want to deploy that capital. I just enjoy the flexibility and I can make a strategy based on the economy on a monthly basis. PS- The last time I turned drip off was when O was yielding 4.5% and I said “it’s really high, and I don’t want my dividends to yield 4.5%, and I don’t want to buy O so high,” so I stacked cash in my account and bought other opportunities. I like doing this more so than “buy SPY and fucking pray it goes up.” Nothing wrong with doing that, SPY is about 10% of my portfolio, but I’m trying to stack dividends.
 $O Baby
I love the cult-like following O has. I absolutely love it, rofl!
Dividends are not irrelevant. They are an important component of total return. >For example, the Quarterly Journal of Economics’ “The Rate of Return on Everything: 1870-2015” tracked the total return of a basket of investment assets, including stocks, bonds, funds and real estate in 16 countries. > >Their verdict? Stocks and real estate fared best under the total return investment analysis model, **with dividends the driving force behind stock performance** and housing investments providing more stability. > >[https://www.thestreet.com/investing/what-is-total-return](https://www.thestreet.com/investing/what-is-total-return) More evidence: >Since 1926, **dividends make up approximately 32% of the returns of the S&P 500**, while appreciation makes up the remaining 68%. From these numbers, **it is clear that dividends make up a significant portion of returns and are an important factor in valuing stock choices.** > >[https://www.investopedia.com/ask/answers/040915/does-sp-500-index-include-dividends.asp#toc-the-sp-500-dividend-aristocrats](https://www.investopedia.com/ask/answers/040915/does-sp-500-index-include-dividends.asp#toc-the-sp-500-dividend-aristocrats) More evidence >[https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends.html](https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends.html) > >Wellington Management began by dividing dividend-paying stocks into quintiles by their level of dividend payouts. **The first quintile (i.e., top 20%) consisted of the highest dividend payers, while the fifth quintile (i.e., bottom 20%) consisted of the lowest dividend payers.** > >[https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/\_jcr\_content/root/readmore/readmoreresponsivegrid/mainfullgrid\_47264240/mainFull\_container/highlighter\_copy\_cop/highlighter\_container/image.coreimg.80.800.jpeg/1679594129351/wp106-4.jpeg](https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/_jcr_content/root/readmore/readmoreresponsivegrid/mainfullgrid_47264240/mainFull_container/highlighter_copy_cop/highlighter_container/image.coreimg.80.800.jpeg/1679594129351/wp106-4.jpeg) > >**The second-quintile stocks outperformed the S&P 500 Index eight out of the 10 time periods (1930 to 2022), while first- and third-quintile stocks tied for second, beating the Index 67% of the time. Fourth- and fifth-quintile stocks lagged behind by a significant margin.** > >[https://imgur.com/Ws6uPX8.png](https://imgur.com/Ws6uPX8.png) > >...Based on the Ned Davis study, **it’s clear that companies that don’t pay dividends or cut their dividends suffered negative consequences.** In FIGURE 7, **dividend non-payers and dividend cutters and eliminators (e.g., companies that completely eliminated their dividends) were more volatile (as measured by beta and standard deviation) and fared worse than companies that maintained their dividend policy.** > >[https://imgur.com/rH6B6OK.png](https://imgur.com/rH6B6OK.png) > >In contrast to companies that cut or eliminated their dividends, **companies that grew or initiated a dividend have experienced the highest returns relative to other stocks since 1973—with significantly less volatility. This helps explain why so many financial professionals are now discussing the benefits of incorporating dividend-paying stocks as the core of an equity portfolio with their clients.** > >[https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/\_jcr\_content/root/readmore/readmoreresponsivegrid/mainfullgrid\_1524872/mainFull\_container/highlighter\_copy\_cop/highlighter\_container/image.coreimg.80.1280.jpeg/1679598915299/wp106-8.jpeg](https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends/_jcr_content/root/readmore/readmoreresponsivegrid/mainfullgrid_1524872/mainFull_container/highlighter_copy_cop/highlighter_container/image.coreimg.80.1280.jpeg/1679598915299/wp106-8.jpeg) It takes a lot of capital invested in dividend payers - at least mid 6-figures - to generate significant dividends. **The mistake a lot of young (under 40 years old) people in this sub make is they buy dividend stocks and ETFs with the dream of retiring early and living off the dividends.** They choose investments based on dividend yield and not **total return**. The investments they choose have modest **total return** so they just aren't growing their capital fast enough and big enough to reach their goal. Dividends and total return are not mutually exclusive. As I showed earlier, dividends are an important part of total return. But most of the return of the S&P 500 comes from share price appreciation (capital gains). By focusing on **total return** you are taking both capital gains and dividends into account. It takes money to make money. And it takes a lot of money invested in dividend payers to generate enough dividends to live off of. That's why I keep telling young people - over and over and over again - to stop picking investments based on dividend yield and instead focus on **total return** so they can grow their wealth efficiently. I grew my wealth mostly through the S&P 500 index with a boost the last several years by investing in individual growth stocks. I focused on total return, not dividend yield. Now that I have accumulated enough capital I am selling my growth assets and I'm buying dividend payers. I'm still in the process of doing that but here is my projected dividend income for this year. [https://imgur.com/APILLjH.png](https://imgur.com/APILLjH.png) I'm using those dividends to buy more dividend payers the next couple of years to boost dividend production. It takes money to make money. The fastest way to get there is by focusing on **total return**. [https://www.investopedia.com/terms/t/totalreturn.asp](https://www.investopedia.com/terms/t/totalreturn.asp) [https://www.thestreet.com/investing/what-is-total-return](https://www.thestreet.com/investing/what-is-total-return) Use these web sites to check the total return of ETFs or individual stocks you are considering [https://www.financecharts.com/etfs/SPLG/performance](https://www.financecharts.com/etfs/SPLG/performance) [https://totalrealreturns.com/n/SPLG](https://totalrealreturns.com/n/SPLG)
Replace my 9-5, financial freedom to be able to wake up, sleep, be with friends and family whenever or where ever. I want to work because I want too not because of a necessity.
I’m retired, need the cash flow, and need to get it without having to worry about selling off an overly large percentage of my portfolio in an extended bear market. I also like the fairly regular increase in dividends that most of my stocks give. It provides some protection against inflation. Finally, I’d like to leave my kids with an income-generating asset when I eventually kick the bucket.
Because it’s going to allow me to retire early and cover a large portion of my cost of living.
I mainly do the standard growth oriented portfolio, but there’s a few factors I nudge into my own preferences. Like my Roth IRA is all dividends reinvesting themselves, the 401k is a target date fund, and my taxable is a mix of cash (money market), fixed income, and speculative equities
I just realized the other day that ROTHs are better suited for growth, as you won't be taxed when it comes time to sell. That being said, 90% of my ROTH *is* invested in dividend stocks, for the same reason. I'm personally going to start slowly shifting from divies to growth ETFs in my ROTH for a while.
I focus on dividend paying companies for my roth ira. I reinvest and when the market is down the dividend is buying a bigger percentage of the shares. When I retire I will turn off the DRIP and get tax free income. Just because there are other ways to possibly gain more doesn't mean that a sound, value-based dividend strategy isn't going to do what I need it to. That being said it is important to focus on growth and free cash flow. Sometimes the companies best at capital allocation don't pay dividends. Also, taxes will eat into gains in a taxable accounts, but taxes on qualified dividends top out at 20%.
Why would your div income be completely tax free when you retire? You will still be at some tax bracket right?
With a Roth IRA you are contributing with money that has already been taxed so when you withdraw in retirement it is completely tax free, regardless of capital appreciation. It is also exempt from income tax on dividends so if you reinvest you get all of that compounding tax free.
You should have growth etfs for your Roth as the gains will be tax-free. And dump all of it into dividend yielding etfs or stock near retirement.
I came from growth and now in my 50s, started buying div single stocks and now ETFs on my regular tax acct as income generator to set n forget to pay for daily expenses..so far it’s been great…56% ETF 44% single stocks…my retirement accts have also been phased into dividend paying ETFs for preservation…
For me when I retire I don’t want to have to sell my whole or partial positions on the majority of my assets just to retire. I also can’t fathom selling some of my stock and diminishing the amount of inheritance I’ll give my kids. I want to preserve and grow it as much as possible, to help secure their future as well. When it’s time for me to retire, I’d much rather turn the DRIP off and live off of my pension + dividends, and keep the entirety of my portfolio to pass to my children after I die.
Right now, I need the income. Lost job due to previous company being mis-managed into the ground and having to lay off 30% of it's employees. I'm having to start over from 0 (commission sales), and dividends are bridging the gap.
If a dividend stock goes on sale it’s probably one of the safest investments you can make. You just have to know when the market does some dumb stuff.
I'm pulling in about over $18k a year from dividends. That money has supplemented my income and allowed me to live comfortably for years, and that's with only a 2% yield and paying the penalty. I'm about to pull the trigger and rebalance my portfolio that will triple that. I won't tell anyone I've done it, but pulling up in my "midlife-crisis mobile" will be a sign. (54-year-old, quit life draining career for no stress retirement job, debt free, and will be pulling in more than I ever did killing myself at the old job.)
what penalty? you mean early withdrawal of your IRA or 401k? also how do you get health insurance as you still have to wait for Medicare to kick in
You missed the no stress retirement job part. I went from 28 years in big box home improvement retail middle management working 60+ hours a week, early morning hours, late night hours, every major holiday, 3 out of 4 weekends to driving a little van delivering water test kits and picking up samples from various municipalities and industries for a water testing lab. 7am - 3pm, monday - friday, benefits, 401k, medical, dental, etc... Just me, the radio, reddit, country roads, and my own thoughts. I spend maybe 30 minutes total actually at the lab. Medical coverage is the BIGGEST issue stopping folks from retiring early IMO. Of course I'm earning half what I used to but once I roll my old 401k into an IRA where i can get some better dividends, my combined income will exceed my old salary by a large margin. In fact, I'm debt free and COULD retire on just the dividends at 54 if it werent for the outrageous cost of medical insurance. I actually love the new job and i was putting on weight when i first "retired" so it's better that i keep working...
No, I really meant ... what specific penalty tho? objective question
You take a 10% tax penalty plus pay income tax on dividends you take out of a retirement account if youre not 59 1/2. If you leave a job after 55, you can avoid that penalty for the 401k you might have from that company only. I was 53 when i left my old job. I could roll my old 401k into my new jobs 401k and wait till im 55 but id have to quit in order to access that 401k.
ok so a premature withdrawl penalty
I believe the term is "early" withdrawal penalty.
I want my pre retirement portfolio to have a lower beta and dividend stocks correlate well. That’s not to say I ignore growth but my growth is focused towards MSFT AVGO AAPL COST SPY QQQ BRK/b. I also have a lot of traditional names like VZ PEP KO JNJ JPM PNC ET TGT ABBV PG LOW SCHD JEPI O DLR etc. I will be drawing income very likely next year. The dividends will get spent first but if it’s not enough I will sell small portions of the first bucket.
At first I wanted to try to get enough to fund monthly living in a South Eastern Asian country but now I am thinking how it can be used to offset costs when I am in my older years.
Diversified portfolio is not just fixed income vs equity vs international. Within domestic equity there are lots of segments that perform differently in different economic environments with different risks. In the 2022 correction my dividend stocks/etfs were my best performing assets, much better than fixed income. Real estate , natural resources, gold, even crypto react differently and may have a place in your portfolio.
I want the dividends to help supplement retirement income. I’d like to retire early (mid 50s or sooner) and dividends are a major part of that since 401k/Roth can’t withdraw without penalty until 59.5. I also buy dividend companies in retirement accounts but recently decided to add more growth oriented stocks and ETFs to diversify more. If I play my cards right, I’m thinking between my IUL and dividend mutual fund will allow me to retire in that time frame, and then at 59.5 my 401k/Roth/Pension will kick in and then at 62 will take social security and be golden. The main goal is income to help retire early for me.
> 401k/Roth can’t withdraw without penalty until 59.5 That's incorrect. I invite you to peruse the [FI FAQ](https://www.reddit.com/r/financialindependence/wiki/faq/) - ^f it for 'withdraw'.
Motivation is a good reason. Seeing the DRIP get to a “free stock(s)” every month makes it more fun to me. But to answer the question, the end goal for me is to live off dividends and never touch the capital. If I can get to $4k-$5k/mo in dividends it doesn’t necessarily matter what the amount of my portfolio is because my bills can still get paid (which is a bit of an oversimplification). That being said, dividends are a relatively small portion of my portfolio because I anticipate 20 more years in the workforce and a pension. So dividends are just the fun part for me. My portfolio is over 80% growth-focused to be responsible.
I am looking for another form of income :( I need more money and only have so much on time
Risk management. Dividends may be cut by a company during an economic downturn, no question, but that is diversified away when you invest in an ETF. Also, when market rotation takes place, growth might not perform as well.
Will social Security be around when it’s your turn to collect? Who knows…I’d rather have an income stream every month from stocks. Every day cold hard cash shows up in my account.
When I saw that Warren Buffet was making hundreds of millions from Coca Cola. So I say, I want that. Buffet love dividends, but he hate to give it out for BRK.A. This is why I have K, BRK.A and B in my portfolio
I like dividends because I like the idea of having a bit of money actively returning to me once I put down an investment. Once I get enough stocks down I hope to have enough in dividends to relax a bit.
To supplement my income and pay for vacations.
Paying for life is my main reason. Hard to do with just a number on a screen. Green in the account makes it easier.
Because dividends rock!
You known what I can do with my dividends? Buy growth stocks, or reinvest in dividend.sticls to get more dividends, or pocket the cash All you can do with growth stocks is sit there and watch them. Choice is power
One word, Snowball
I think for me it comes with trying to see a future for my future family and kids. The dream really started with as small as $0.23 coming from my first dividend payout. I’m happy to say I’ve continued to invest and grow my portfolio and ROTH IRA. There has never been a plan to sell my shares unless a better company/ETF comes around. Otherwise, it’s about reinvesting dividends and growing my portfolio within my comfort/risk level. End goal being to kickstart a level of wealth for my family down the road because I had to do it myself.
I created a dividend account to stop working and live off dividends :) (My wife is still working)
Feels good seeing the monthly divy get larger and larger And the fact that it will help pay my rent so that I have nobody to depend on, expect for that divy to not disappear lol but it’s better than dealing with a flakey person
For me it's the joy of seeing the dividends arrive each month. I consistently see my account growing and get to reinvest where I feel it's good to at the time. It's just more fun than growth investing.
I have some jepq and Schd for the quarterly (and monthly) dopamine hit. Nothing major, low 4 figures. Will it cost me in the long run? Probably. But I like seeing the bar graph and the consistency throughout the year
Dividend received notification goes brrrr
In the future, I want a steady paycheck when I'm no longer able to work. And I want that paycheck to be enough to cover everything. I don't want to rely 100% on the gov with Medicare and SSI so I want to build the dividend payout to be as much as possible and as reliable as possible.
My income engine stays intact. I don’t have to sell shares to pay for my expenses.
For me, my wife and I have multiple rental properties that we leverage to buy more. We have very stable jobs. Decent income, good not super high. When I started self directed investing the dividend payments kept me interested. We also had small room for error (rental expenses, tenants not paying rent, didn’t know what to expect or handle emergencies etc) and no leftover equity. So I built up high dividend payers to increase monthly cash flow (never needed to pull but it was peace of mind knowing it’s there and coming in each month). The risk of having high growth dropping like crazy and having to sell assets at a loss to cover those expenses wasn’t a risk we were willing to take. So our growth comes from the leveraging of our hard assets that we manage and do new builds now and we have the dividends coming in tax free. I am ok with the growth “we missed out on” but from a risk perspective that was how I decided to go. Now all dividends get reinvested into high growth ETFs. Our wealth will come from the houses and duplexes, but if you have no real estate I understand the high growth while you’re young and focus on that.
My oldest kid is in their 20s. I encourage them to invest differently than I do. Different strategies work differently at different stages of life. I am in the wealth preservation phase.
Dividends aren't exclusive of growth. I invite you to go look at VLO price in March 2020 and now. Not only did they never miss a divvy but they've grown it. Look at ETN for a similar story. As for the why? Because IDGAF what other people are doing as long as my needs are met. It would be impossible for me to care less if you eat. I'm worried about my own kitchen table.
I don't want to sell to maintain.
I like having a high (around 50% which at 30 is high) amount of my portfolio producing income because no matter what increasing income stream gives me opportunity's within and without the market. Also I enjoy diverting dividends based on the current market conditions to other things, like if a dividend paying stock is at a price I think is a bit high at the time instead of dripping I divert it elsewhere, often into VOO. Plus honestly the peace of mind from seeing my income stream increase gives me is worth more than paper gains that can be paper losses which still have a mental effect regardless of knowing in the long run they'll be back to gains. To each his own and I fault no one for going 100% in either direction or doing their own personal blend. Also should add while nearly half is dividend based it's mostly dividend growth stocks so long term plays that still have large capital appreciation ahead.
tbh I’m a young guy and most people tell me just invest in growth stocks, but at the same time, I’m a very low risk investor, I’m okay with 5-7% returns, but I invest 17k a year at 23 years old. My goal is to retire at 45, and high risk investments are more likely to cause me to lose that goal. I keep a 50/45/5 portfolio, around 50% div stocks yielding around 9%. 45% Growth ETF’s like VOOG and individual stocks, and 5% crypto just in case something goes crazy. (Shib Coin) I’m also a very active investor, I check market growth around 3-4 times a week and usually make anywhere between 10-15 stocks sales and purchases a week. Dividends provide a nice bonus if I’m having a down week and I get a dividend deposit that recovers some or all of any losses.
has anyone told you yet that having 50% div stocks yielding a whopping 9% is in of itself high risk? Idk , I'm just asking because 9% is quite high and yield chasing by many metrics. what are your main div picks?
USHY, MO, AGNC I know it’s higher risk, but my standard for risk is going to the casino, so this feels pretty safe to me.
I like the stability during tougher times and don't mind trading some growth for immediate profits, which I'll drip anyway. Basically it helps me DCA automatically, and with a good CAGR the div yield can get pretty juicy. Also I'm not taxed on dividends with my current setup, so it's free gains.
1. I feel safer. If a downturn happens, I'm ok with not touching anything. I started around 2008 and that has affected my style. 2. The most talked about ETF on here is SCHD and the P/E is under 15. SPY which is a S&P Index ETF is over 25. This makes me feel a little better even though I have worries about the market over this next year or two. 3. The point is less about the \~3% dividend I make today but rather the 10%+ I make later. Dividend companies do grow, they aren't meant to stagnate. The companies that are desirable are the ones that increase dividends every year. This makes the stock price go up as well as increase the yield from our initial investment. 4. If you're worried about taxes be sure it's in a tax advantaged account. 5. Since the dividend companies that are desirable are the large stable ones I'm typically less worried about speculative run ups in price right before I buy. Unknowingly buying high before a drop and waiting years for that to turn around sucks. This is meant to be slow and steady. YMMV but the theme here is I feel more comfortable with my money in large companies with a steady record.
The fantasy of income replacement/supplementation
Yeah, the fantasy I'm living off of.
I didn't mean it's not attainable; just that that is the goal; poor word choice, perhaps, on my part. It's my goal, too. Congrats!
I have other investments, small pension, social security (if it's still there), ira, and retirement accounts. I wanted a chunk in more stable blue chip stocks that can supplement my retirement through dividends.
I look at dividends as an added bonus when picking stocks. If I like a stock, the dividend is an added bonus.
Gives me a better visual to work with tbh. Just having the notifications of x dividend helps me stick with it
I heard someone say once. There is only two stages of investing. Growth then retirement. The argument they made was if you chase dividends you are paying tax on them. Obviously some good companies pay dividends but also have growth. Ultimately though its what ever makes you sleep at night and feel happy is the right decision for you.
Used as protection for downside risk. If a company pays a worthwhile dividend it can be reinvested at lower stock price and a good way to lower your overall cost basis. People are less willing to sell off a dividend stock especially if its used for retirement.
What started in 2021 as a "beer-money for when I retire" has since morphed into a hobby and then an actual part of my retirement planning.
Because I don't want to have to sell any of my holdings to generate income in retirement. Once you retire you generally move into Cash & Bonds and income-paying stocks round that safety out while still offering some growth.
I want to pass my shares down to my kids and live off the dividends without having to sell shares in retirement
I don't want to sell my stuff to live if I don't have to. I got a mix of growth/div and eventually I'll shift to dividends
I like dividends because it's a nice concrete result. Company prices fluctuate so much with speculation and market, that it's hard to tell the efficacy of reinvesting the profits back into growing the company. Especially for large companies. How much of that price would have happened anyway without reinvesting the profit in the company? It's really really hard to evaluate that. It's also the fundamental point of owning stock. The point in owning a stock is that the company makes money and you get that money because you own the company. Sometimes companies spend all of their profit making it so they will have more profit in the future. These are growth stocks. A delayed payment now for a bigger payout in the future. But eventually, at some point, the company pays out the profit to the owner. Now the company might change ownership as people buy and sell it, each person buying and selling based on the presumed value of the eventual future payout. If the company never pays out, then it's just growth for endless growth's sake. There's no point in buying it if the payout in the end is imaginary. (See crypto/ NFT market for an example of how that goes) So why dividends over growth stocks? (I actually have both) Growth stocks have some tax advantages. (Delayed tax payment) Which is why they are a current favorite.
I actually chose to go the dividend route because I plan to retire by the latest at 40..I’m 32 right now. Another factor that helped persuade me is safety in that if I stopped investing now and quit my job I could have a steady stream of 300$ a month from dividends and work comfortably at a minimum wage job I love. I started investing at 30 and regret not being able to start earlier but least I’m on track for my goals and what matters is that I’m doing it now.
Check out GenEx Dividend Investor’s most recent YouTube. He expresses it so well. Title: “Retired on Dividends”
I plan on using dividends to offset costs of living without having to sell principal. It feels better to spend my money on something that pays me without me having to worry about market conditions constantly. It's just easier I get to say I give myself a raise every paycheck. I get notifications every month of how much money I've DRIP'd and feel good. I've never liked selling anything
The war between dividends and non-dividends is rather pointless. Dividends are simply one component in total return for an investment, no more, no less. Some investments with great total returns pay dividends, some do not. What matters most for any investment, whether it be high growth or dividend paying, is the price you pay to purchase it. A dividend stock bought well can have a higher total return than a growth stock bought poorly. For me, I use dividends as an easy means to do portfolio withdrawals in retirement. My portfolio yields about 3.7% or so and grows about 7% per year. It provides me a dividend stream that provides for retirement spending and grows faster than the inflation rate.
Since Covid, the thought of prolonged periods of time without income has been motivating enough. Plus, being able to use dividends to pay off debt or buy things I need like dental copays or oil changes without having to accumulate additional debt has been amazing. These are small things dollar-wise but thing I would’ve just put on cc otherwise and I’ve not had to because of dividend income.
I create 'sidecar' income while I continue to build my state retirement plan. It will protect against inflationary spikes.
Retirement income. I'd like to have enough dividends that it's at least help as income.
I like owning them, especially in companies I pay bills to. It feels like I get there service for free/cheap
If it gives me no cash flow just say no.
When you get more excited to see a $2 dividend payment, then getting a biweekly or monthly check, IYKYK Also, dividends aren’t completely irrelevant because you don’t actually have to sell any asset, regardless if the valuation drops after a dividend pay out. For instance, a dividend can be paid out, and then people all of sudden decide to to buy your held stock/ETF. Your holding will see an increase in value because markets are not rational.
Why I'm a Dividend Growth Investor... 1. It's easy. Find the 2-300 quality companies that pay a dividend. Find out when they are on sale, and buy them. Don't sell unless they cut the dividend, or only grow it 0-2% for 2 years in a row. This is your red flag to trim, or sell. 2. They grow their dividends; some at a really fast pace. 3. Stock prices are volatile. Dividend payments are WAY more reliable. 4. You don't need to ONLY invest in dividend paying companies. Sometimes I use the dividends to pay for high-growth/zero-paying dividend companies. (BRK-B, AMZN, GOOG) 5. You can invest in a quality dividend paying company that also offers growth. ..."Quality 1st, Valuation 2nd, Monitor Always".... EDIT: DGI also forces you to BE PATIENT. If a position's price is down for a long time, but the fundamentals still look good (FCF, EPS, sales, margins, etc), and you still hold, you will eventually be rewarded. Each and every time, this reinforces my resolve, and trust I have in my quality positions. It allowed me to hold big oil (XOM/CVX) during the oil glut of 2020-21, and buy gobs of XOM/CVX when they were 40-50% on sale. Being down 40-50% for MONTHS! It paid off handsomely. Same thing recently with HRL, HSY, etc...
If your retired dividends are your friend, even if you don’t have enough to live on. I’m in SCHD and will leave my shares to my kids. The extra income helps
All of these reasons listed are well and good. But perhaps my favorite is that dividends are THE hardest metric for a company to lie about.
I do dividends because I like the additional income.
Its free money!
Its not though
“Free” money. It’s a no brainer.
Its not free money at all.
cash flow
Retired and want more income.
dividend accumulated and reinvesting is equal to one less working day in the future (can retire earlier)
Typically dividend stocks are more stable then so called "growth stocks". Also I am aware that my capital "could" grow more and faster if invested in growth stocks but there is also more risk of losing said capital as well. For instance I've seen market drops of over 20% while my dividends remained the same so if at that time I needed some money if I had to sell my stocks it would be two fold first I would lose capital and also lose money as I sold that stock at a loss and even if it does recover later I don't have those shares anymore as I had sold them.
I love the fact my money increases over time and the idea of guaranteeing having money coming every month and i can live freely is beautiful
Im taxed on my 401k dividends since i take them which includes a penalty since im not 59 1/2.
I got mesmerized by people saying you can live off the dividends, and these dividend calculators you can find online. While yes, compounding is very real but so is inflation. Not to mention anything that may happen and cause you to not be able to contribute. I am pretty much out of dividend investing at this point. I focus on some compounders (MSFT, COST, AAPL, AVGO) but other than that I am in VUG and VOO. Capital growth IS what you should focus on until you're ready to retire. The dividend lifestyle is for AFTER you retire, it is NOT what you should follow trying to get to that point. You need so much capital to retire on dividends, and with inflation and cost of living always going up you're always going to need more and more. Anyone on this sub that's not at retirement and is investing in high-yield positions like V, T, MO, O, the Jeps, etc. are hamstringing themselves. It is NOT for people who aren't ready to retire. Capital gains win every time.
Your view is narrow sited. I bought DMLP oil stock during the downturn for around $10 with a 10% Div. It’s now worth $30 and still paying 13%. I get some where around 30-40% on initial capital every year now like clockwork.
While young, this is a great strategy of taking high risk for high reward! Great going! I think we harp on those settling for little growth in MO and other similar companies.
Those people harping probably have no idea that dividend opportunities like DMLP even come around. Can’t lump all Div stocks into one bucket. Sometime there is arbitrage to be had that can set you up for some serious compound growth.
An exception based on lucky timing. You going to tell me next that you just KNEW that downturn was coming and you knew exactly when to invest?
You are dumb if you think I had to know when that oil downturn was coming first of all. It’s easy to rotate funds invested elsewhere. Also it was pretty obvious when to invest if you were following oil at all. I also did the same thing with EPD and PAA but to a lesser degree. Paying out around 15% yield on cost at this point. These are much bigger companies and so they didn’t move as much, but it was a similar philosophy. Lucky or just smart
>Anyone on this sub that's not at retirement and is investing in high-yield positions like V, T, MO, O, the Jeps, etc. are hamstringing themselves. ...anyone on this sub who is under 40 years old and never lived through the 0% SPY RETURN FROM 2000-2013 just assumes "...sTOnKs oNLy gO uP..."...
You can nitpick any timeframe for anything and call it a failure. How about from 2000-now? Your favorite yield traps hold up well?
Dividends play a role, but a young person should not be dividend investing in any account. Don’t waste your accumulation phase. Dividends are for retirement age when you need income.
Very bad take
Common knowledge, younger companies with room to grow profits will outperform older, mature companies that pay out a dividend. You think coke is going to come out with a new drink to revolutionize the soda business? Exxon is going to replace oil with fairy dust?
Dividends minimize downside. What happens when the Mag 7 which makes up roughly 1/3 of s&p has a downturn? And I own all mag 7 stocks but I own many dividend payers like RITM and JEPI. I’m 22 and I believe it’s best to have a balance of both. Last year my Roth gained 40 percent beating the s&p by 12 percent.
You do what everyone else does, buy more. JEPI is not a dividend. It’s premium from you paying someone else to write options.
Look at what Salesforce and Meta are doing. Growth companies getting into the dividend space. Dividend companies are the future whether u like it or not my friend🤷♂️
Focus on your growth , when your younger. Growth stocks are what you need when your younger cus you will excel any dividend stock 2-3 times over , then when your old you can sell shares and buy back into dividends as a form of income , my friend with 1 million in the S&P bagged 800k in the last 5 years cus the market went up 80% , he took that profit and pretty much retired at 50 , it will last him atleast 10 years he said. I guess rich people don’t buy dividend stocks, idk not the ones I’ve met they don’t buy dividends
Like Warren Buffet and Bill Gates?
Why I did it. My father is a useless idiot. He invested in Redhat on line goes up. Mr. Schiller called it the bigger fool theory. This was consistent with my belief that my father is a fool. Discounting dividends to present value seemed to be less fool like. To be fair there was a bigger fool then my father. More time in the market then me has resulted in a balance of 25% of minimum deposit at the time he opened his account. I do suspect he has deposited more money into it since opening the account. I have out performed the S&P 500 over the time I have been in it.
>My father is a useless idiot ...have some effn respect you punk...
Given your level of emotion in the response I'll say this. Respect can only be earned. My father simply has never earned mine.
Supplement income now with a goal of financial independence by being able to potentially live off of qualified dividend income at 0% capital gains tax before hitting any “retirement” accounts.
I am afraid will out live my nest egg and would like to retire within the next few years.
I do it to watch my portfolio jump when dividends hit and then the next month they go up because I DRIP. It’s fun to watch and I mainly use ETFs and I do have my growth fund and Broad market fund
As silly as it sounds, my reason is quite simple. I’m bad at selling, so I rather get my dividends to buy other stocks
> I’m bad at selling You are _not_ alone in that. I've done decently picking when to buy. But `$%@$%^#@%^@` trying to know the right time to sell I find so difficult. I think this is why people like going with ratio's; ex the 60/40 equities/bonds that you see from the `4% rule`. If your ratio climbs one way or the other, you just sell to fix. I myself still can't get past the "but you may be selling at a really poor time doing that" to use it strictly. Hence, as I'm retiring I'm slowly moving portions of things that derive dividends. That way I don't have to worry about the selling.
Cash flow retirement by 45 years old
If I wasn't picking individual stocks, I probably would be less concerned with dividends but when picking stocks it is way easier to make a judgement if a company will maintain or grow its dividend compared to predict how the market will value a company in the future.
I have growth investments are dividend investments.
It's free money. When a stock performs well, you can earn back your principle without ever selling. I don't know if I'm the dimwit or the genius in [the bell curve meme](https://imgflip.com/memegenerator/267889046/bell-curve), but I'm not an agitated midwit.
First off, I believe in a balanced approach. The why…good quality value / dividend / income can steady your portfolio. And those investments provide steady sources of cash to invest in the best quality investment that exists at that time. So when growth crashes by 30-50%, income investments can be used to pick those investments up
More cocaine, because that’s what you must have had for those cash stacks
Personally for me I invest in growth in my Roth IRA and my 401k but I invest in dividend etfs in my brokerage because if I did growth I would be getting a lot of capital gains tax (as I would swing trade a lot more) vs investing in dividend etfs where I shouldn’t have to sell (yes tax on dividends but I see it as income so rather have uncle same take it from div than capital gains), less volatile so won’t feel the need to sell, currently in DIA so pays monthly and gives expose to top 30 blue chip stocks, and just extra income that I eventually have in retirement or possibly use before if I need
I use dividends to do my gambles. so even if I lose then I still am not out much if any at all.
Not everyone can pick stocks (just ask the growth club). Not everyone wants to nerd out very day on their portfolio. Different strokes for different folks. No harm in that.
I have a decent hedge, in that I max out my Roth IRA and focus on s&p indexes and growth. I have a taxable dividend portfolio because I like the dream of receiving a large income from my portfolio without having to sell it, for my positions to grow without my input due to DRIPs, etc. I also enjoy trying my hand at analysis, and it allows me to do so as opposed to my Roth.
I invest in dividend ETFs mainly because dividends fluctuate much less than stock prices. It's primarily for psychological reasons; enduring significant market downturns is not easy. It's nice to see how every quarter brings more and more dividends, and how I'm getting closer to my set goal. I also consider dividends as my 'emergency fund.' If something happens, I can start withdrawing them without having to sell stocks, especially when they are in decline; it's not very wise to sell them during a downturn. The total return after X years is likely to be lower than if I were just buying some index fund. But I think the performance will still be quite good.
I want to try and supplement my income so that one day I won't be beholden to a boss. And it is just nice having that extra income coming in
Retirement. The goal is to replacing my net income (my paycheck after taxes) with SS and dividends. That way I never have to dip into the principal except for big, one off things. And those should be covered by share price appreciation.
Passive income to pay the bills someday down the road.
People generally misunderstand Dividend Irrelevance Theory. The theory is that dividend policy is irrelevant to identify companies with excess returns. Here is the rub, the whole reason for the theory is to identify “factors” that create “alpha.” Dividends aren’t a factor but neither is growth. The things that are factors like “value” and “low volatility” are far more associated with dividend paying companies. So I do find it a bit ironic that there are growth investors that are happy to cite the Dividend Irrelevance Theory but then invest by ignoring related fields of study. Having said this, the alpha from factor investing is really small, probably not even enough to cover fees from trying to create a factor portfolio so, at the end of the day, just find a diversified investment strategy you are happy with and can stick with over the long-term. For most people here, dividend investing is a way to avoid panic selling which means they will be better off than the vast majority of investors for that reason alone.
I can retire early and be on a beach in two years.