PP vs Dividend Growth Investing

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jalanlong
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Re: PP vs Dividend Growth Investing

Post by jalanlong » Thu Feb 06, 2020 7:26 pm

mathjak107 wrote:
Thu Feb 06, 2020 7:01 pm
The stock still needs to see appreciation to see a positive return at all ..a 4% dividend needs at least 4% appreciation to see a 4% return.. so a rising dividend in a down market only means the stock needs more appreciation to see that payout amount as a positive return ...that person is financially ignorant
Why would he care about the return of the market price of the stock if the dividend rises? He told me how one of his holdings BP has lost like $20 in market price over the last 10 years but he doesn’t care because he has made more than $20 in dividends. He is the owner of a company paying him rising dividends. The price of what someone on the market will pay for the company is irrelevant to him because he is not selling it.
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Re: PP vs Dividend Growth Investing

Post by dualstow » Thu Feb 06, 2020 8:04 pm

Smith1776 wrote:
Thu Feb 06, 2020 3:49 pm
For what it's worth, I am intellectually sympathetic to dividend investing. I think Graham's thinking that I mentioned above still has real validity to it. The behavioural benefits are also perfectly legit.
Where Graham says that money in the treasury would still belong to the shareholder, I think, well, yes and no.
The argument is made by some that you can judge the financial health of a company by its dividend. You can’t do that with a company like Twitter, obviously, but if a company has been paying for a long time, you can watch for warnings.

Exxon is being watched pretty closely. They have really sunk in value. If the dividend goes, everyone will bail.

Board members often feel inclined to raise or at least maintain a dividend so they themselves can collect it. Maybe they don’t feel the same way as Graham about the value being given away?

jalanlong, I wonder how many different firms your friend (relative) invests in, when he decides to cut and run, and why.
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Re: PP vs Dividend Growth Investing

Post by jalanlong » Thu Feb 06, 2020 8:26 pm

dualstow wrote:
Thu Feb 06, 2020 8:04 pm
jalanlong, I wonder how many different firms your friend (relative) invests in, when he decides to cut and run, and why.
He is an in-law so we have these discussions at family gatherings. According to him he never, ever sells. He is an owner in 3M, Mcdonalds, JNJ etc. and he will never sell. Of course I never looked at his statements nor did I know him in 2008 to be able to discern if he is telling the truth. I guess we will find out in the next major correction. If he truly only looks at the dividends coming in each month and not the market prices of his companies then maybe psychologically he can make it thru a correction.
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Re: PP vs Dividend Growth Investing

Post by dualstow » Thu Feb 06, 2020 8:50 pm

I mean, sometimes a company just stops paying a dividend. When Chevron stalled on the dividend raise I thought about dumping them, but they have since resumed a regular raise. BAC slashed their dividend big time. Your in-law must be aware of some of these. Maybe you can find out more at the next dinner. O0
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 07, 2020 3:40 am

jalanlong wrote:
Thu Feb 06, 2020 7:26 pm
mathjak107 wrote:
Thu Feb 06, 2020 7:01 pm
The stock still needs to see appreciation to see a positive return at all ..a 4% dividend needs at least 4% appreciation to see a 4% return.. so a rising dividend in a down market only means the stock needs more appreciation to see that payout amount as a positive return ...that person is financially ignorant
Why would he care about the return of the market price of the stock if the dividend rises? He told me how one of his holdings BP has lost like $20 in market price over the last 10 years but he doesn’t care because he has made more than $20 in dividends. He is the owner of a company paying him rising dividends. The price of what someone on the market will pay for the company is irrelevant to him because he is not selling it.
tell him i will gladly pay him a bit more than the dividend , only i keep the invested money since he does not care what it's value is
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 07, 2020 3:42 am

jalanlong wrote:
Thu Feb 06, 2020 7:26 pm
mathjak107 wrote:
Thu Feb 06, 2020 7:01 pm
The stock still needs to see appreciation to see a positive return at all ..a 4% dividend needs at least 4% appreciation to see a 4% return.. so a rising dividend in a down market only means the stock needs more appreciation to see that payout amount as a positive return ...that person is financially ignorant
Why would he care about the return of the market price of the stock if the dividend rises? He told me how one of his holdings BP has lost like $20 in market price over the last 10 years but he doesn’t care because he has made more than $20 in dividends. He is the owner of a company paying him rising dividends. The price of what someone on the market will pay for the company is irrelevant to him because he is not selling it.
a stock that keeps paying a dividend with zero appreciation eventually would in theory go to zero ...each payment is automatically subtracted off the stocks value ... without appreciation it would eventually hit zero
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 07, 2020 6:51 am

mathjak107 wrote:
Fri Feb 07, 2020 3:40 am
jalanlong wrote:
Thu Feb 06, 2020 7:26 pm
mathjak107 wrote:
Thu Feb 06, 2020 7:01 pm
The stock still needs to see appreciation to see a positive return at all ..a 4% dividend needs at least 4% appreciation to see a 4% return.. so a rising dividend in a down market only means the stock needs more appreciation to see that payout amount as a positive return ...that person is financially ignorant
Why would he care about the return of the market price of the stock if the dividend rises? He told me how one of his holdings BP has lost like $20 in market price over the last 10 years but he doesn’t care because he has made more than $20 in dividends. He is the owner of a company paying him rising dividends. The price of what someone on the market will pay for the company is irrelevant to him because he is not selling it.
tell him i will gladly pay him a bit more than the dividend , only i keep the invested money since he does not care what it's value is
O0 That would be a sweet deal if you were younger. Put it in the contract that your grandkids have to continue the payments, in perpetuity. With a 5% raise every fourth quarter.
a stock that keeps paying a dividend with zero appreciation eventually would in theory go to zero ...each payment is automatically subtracted off the stocks value ... without appreciation it would eventually hit zero
I wonder if that makes a point in support of dividend investing. A company that is able to keep its payments up must have value behind it.
RIP Marcello Gandini
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 07, 2020 8:16 am

the company must see at least as much as was paid in appreciation or you keep going backwards in dollars

it is no different from drawing 4% from a portfolio of non div payers ... you need to see at least 4% to see a 4% total return ...otherwise each payout has the share price going more and more negative , hypothetically to zero value or perhaps a penny .

if anyone feels they don't care what the share price does i will gladly pay more then that dividend but i keep the invested dollars or i will give you a penny
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 07, 2020 8:27 am

mathjak107 wrote:
Fri Feb 07, 2020 8:16 am
the company must see at least as much as was paid in appreciation or you keep going backwards in dollars
I look at it more from the standpoint of my personal cost. I didn’t create all of Chevron with my own money. If I put in $10K, I expect to get it back, plus the rising dividend payments.

Unlike OP’s in-law, I absolutely look at share price, but I don’t expect it to keep up with the total market. Unless they are preternatural stock pickers, dividend investors are limiting their upside compared to just buying an S&P fund. (I’m sure they were happier than S&P investors in 2009, though O0 )

The yield on cost is impressive. I also look at yield on holdings. Sometimes it makes sense to leave one dividend for another. Never for an obscenely high, unsustainable payout ratio, but for a company that continues to give a healthy raise each year.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 07, 2020 8:36 am

dualstow wrote:
Fri Feb 07, 2020 8:27 am
mathjak107 wrote:
Fri Feb 07, 2020 8:16 am
the company must see at least as much as was paid in appreciation or you keep going backwards in dollars
I look at it more from the standpoint of my personal cost. I didn’t create all of Chevron with my own money. If I put in $10K, I expect to get it back, plus the rising dividend payments.

Unlike OP’s in-law, I absolutely look at share price, but I don’t expect it to keep up with the total market. Unless they are preternatural stock pickers, dividend investors are limiting their upside compared to just buying an S&P fund. (I’m sure they were happier than S&P investors in 2009, though O0 )

The yield on cost is impressive. I also look at yield on holdings. Sometimes it makes sense to leave one dividend for another. Never for an obscenely high, unsustainable payout ratio, but for a company that continues to give a healthy raise each year.
dividend payers got hammered in 2008 ... even AT&T the stock of widows and orphans was smashed .

the failed blue chip graveyard is full of the bluest of blue chips who were dividend aristocrats who failed to hold up and were buried ....

stocks are stocks and that is important to remember.

the dividend aristocrats are supposedly the cream of the crop .

you keep seeing just invest in this group and call it a day .

however what constitutes this group changes all the time so get ready for lots of selling trying to keep up as they get bumped and replaced AFTER THE FACT THEY DID NOT LIVE UP TO EXPECTATIONS . you could be behind the curve here very easily .

these dividend aristocrats are not somehow immune to all the things that effect company's and stocks . Just like other companies, their outcomes change.

in 2009 there were 52 stocks that met the group’s strict criteria.

As of 2012, there were 51.

But of those 51, 13 were different than the original set. So over the course of just 3 years, there was a 27% change in the group’s composition.

in fact going back to 1989's list :

Of those 26, seven are still on the list today, ten were removed because they either cut or froze their dividend, four were removed for an unknown reason, and the remainder were aquired at some point. So at least ten of the 26 had an outcome that is different from the assumption of dividend growth every year through thick and thin.
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Re: PP vs Dividend Growth Investing

Post by Smith1776 » Fri Feb 07, 2020 2:14 pm

dualstow wrote:
Fri Feb 07, 2020 8:27 am
mathjak107 wrote:
Fri Feb 07, 2020 8:16 am
the company must see at least as much as was paid in appreciation or you keep going backwards in dollars
I look at it more from the standpoint of my personal cost. I didn’t create all of Chevron with my own money. If I put in $10K, I expect to get it back, plus the rising dividend payments.

Unlike OP’s in-law, I absolutely look at share price, but I don’t expect it to keep up with the total market. Unless they are preternatural stock pickers, dividend investors are limiting their upside compared to just buying an S&P fund. (I’m sure they were happier than S&P investors in 2009, though O0 )

The yield on cost is impressive. I also look at yield on holdings. Sometimes it makes sense to leave one dividend for another. Never for an obscenely high, unsustainable payout ratio, but for a company that continues to give a healthy raise each year.
Yup, there it is! The thing about dividends is that they allow the owner to think like a real business owner.

People like to say that dividend stock outperformance is subsumed by value and quality factors. Well, that may be so... but honestly who cares? Just because it's a tax inefficient way to get the tilt? Even that might not be true.

https://papers.ssrn.com/sol3/papers.cfm ... id=3402622
I still find the James Rickards portfolio fascinating.
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 07, 2020 3:04 pm

I haven't responded to all your posts, Smithers, but just assume I'm giving a thumbs up and a "you say it better than I do" to each one in this thread so far. I mean that sincerely.
mathjak107 wrote:
Fri Feb 07, 2020 8:36 am
dividend payers got hammered in 2008 ... even AT&T the stock of widows and orphans was smashed .
I'm glad you mentioned AT&T, but be careful here. AT&T is a good example of a widow and orphan stock indeed, but this is a pitfall into which most anti-dividend Bogleheads fall into as well. It is only barely/technically a dividend raiser. I should know, I held it for years. It raises the div by a penny a year, no more. I held it because I wanted some telecom in my stable of indy stocks and of course the dividend was large, but by no means did I consider it a dividend raiser.

Note that OP's thread title is PP vs Dividend Growth Investing. Not merely chasing large dividends. Otherwise we'd be talking about REITs.
This also addresses your assertion that it's the same as some other investment that pays 4%. No. I have 30-year treasurys that do that, but they don't give me an annual raise.
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Re: PP vs Dividend Growth Investing

Post by Smith1776 » Fri Feb 07, 2020 3:07 pm

Decades and decades ago when Ben Graham shut down his investment partnership (what today would be called a hedge fund), he simply advised people to "buy AT&T" in place of investing in his fund.

The fact that they're still around and doing as well as they are... one hell of a call on Graham's part.
I still find the James Rickards portfolio fascinating.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 07, 2020 3:16 pm

actually they have been a horrible stock to own for a long time now ... not even 5% as an average return with dividends the last 5 years
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Re: PP vs Dividend Growth Investing

Post by Smith1776 » Fri Feb 07, 2020 3:55 pm

mathjak107 wrote:
Fri Feb 07, 2020 3:16 pm
actually they have been a horrible stock to own for a long time now ... not even 5% as an average return with dividends the last 5 years
Right, I wouldn't quarrel with that.

What I mean to illustrate is that Graham made that stock call over half a century ago. There were many other prominent companies around in that era such as General Motors, General Electric, or Lehman Brothers that he just as easily could have picked. But he didn't. And we know how those companies turned out. No index funds in that era too of course. A mighty impressive call in my book.
I still find the James Rickards portfolio fascinating.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 07, 2020 5:28 pm

Actually the biggest blunder in the business world in history was them ..

They were prohibited in the communications act in 1934 from being in the computer business....they were allowed to use but not sell any technology being developed relating to the computers of that age ....

Well they saw themselves as being the next Microsoft in the 1980’s by marketing Unix and developing a line of home computers .

the govt was trying to break up the phone company and of course the battle was long and hard ....so they came to the decision that if the govt would revise the act and allow them in to enter the computer business they would break themselves up .

What a disaster for them ...Unix never made it like Microsoft dos and the line of AT&T home computers failed
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 07, 2020 5:46 pm

mathjak107 wrote:
Fri Feb 07, 2020 5:28 pm
What a disaster for them ...Unix never made it like Microsoft dos and the line of AT&T home computers failed
That's kind of sad. We have Bell Labs largely to thank for GNU Linux and OSX and MacOS, not that AT&T got anything out of it.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Sat Feb 08, 2020 3:03 am

also , if anyone thinks that dividend payers are some how immune to squandering investor money AT&T is a prime example of why that would be a poor assumption .

AT&T paid $100 billion to enter the cable business

AT&T thought it would be a good idea to diversify by paying $100 billion to take on cable company TCI. It was wrong! AT&T broke itself up a few years later and sold off the cable assets.

AT&T tried to elbow its way into the personal computer business with a hostile $7 billion takeover of NCR. It didn't work, and AT&T later spun the company back out at a $4 billion valuation.
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Re: PP vs Dividend Growth Investing

Post by shekels » Sat Feb 08, 2020 8:43 am

Smith1776 wrote:
Fri Feb 07, 2020 3:07 pm
Decades and decades ago when Ben Graham shut down his investment partnership (what today would be called a hedge fund), he simply advised people to "buy AT&T" in place of investing in his fund.

The fact that they're still around and doing as well as they are... one hell of a call on Graham's part.
Att was bought and taken over by SBC in 2005
The former Att is gone.
But SWBT/SBC took Att as it's new name for the Global Recognition the Att brand name had.
Ed Whitacre of SWBT/SBC had been buying up the baby bells before the Att purchase.
After the purchase of Att, Big Ed retired and Randall Stephenson became the CEO of the new " ATT"
Since Randall became CEO of ATT the Silo Mentality has become more of a issue.
¯\_(ツ)_/¯
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 14, 2020 7:54 am

T Rowe Price raised its dividend more than 18%
‘Byoo-tee-ful.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 8:40 am

now the stock needs the appreciation to match ...without matching appreciation your balance invested will shrink.

no different than increasing draw on a portfolio from 4 to 5% but the portfolio appreciates less than 5%
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Re: PP vs Dividend Growth Investing

Post by Xan » Fri Feb 14, 2020 9:03 am

Dividends keep a company's collective mind and priorities on the right thing: making money for stockholders. It's easy for a company that doesn't pay dividends to get wrapped up it itself. Dividends keep a company humble. Dividend companies remember the whole point of being in business: to make money.

My opinion, anyway. My stock allocation is a broad market index that includes many dividend and non-dividend companies, so I'm shielded against being wrong!
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 14, 2020 9:22 am

Xan wrote:
Fri Feb 14, 2020 9:03 am
Dividends keep a company's collective mind and priorities on the right thing: making money for stockholders. It's easy for a company that doesn't pay dividends to get wrapped up it itself. Dividends keep a company humble. Dividend companies remember the whole point of being in business: to make money.
...
This is how I feel as well. In the context of this thread, jalanlong's relative putting growth of holdings aside and focusing on payments, you can reap quarterly rewards that far surpass your initial investment if you stick to healthy companies. And a certain kind of dividend can indicate health.

A certain kind of dividend? Well, a healthy payout ratio. Certainly a mortgate REIT paying more than it can afford is going to punish you with a share price that ends lower than your cost. That's where the drum that mathjak keeps beating would come into play.

BGS (B&G Foods) is in this state right now, I think. Used to be a healthy company with both share price increases and dividend hikes. It flew too high too fast, and the share price sank. The dividend did not sink along with it, and is now a tempting 13-14%. Don't, uh, yield to temptation. O0 The dividend is unsustainable, in my opinion.

Compare that with T Rowe's yield. Even with the massive hike mentioned a few posts above, the yield on holdings is only 2.2% It's just keeping up with the company's growth.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 1:19 pm

Xan wrote:
Fri Feb 14, 2020 9:03 am
Dividends keep a company's collective mind and priorities on the right thing: making money for stockholders. It's easy for a company that doesn't pay dividends to get wrapped up it itself. Dividends keep a company humble. Dividend companies remember the whole point of being in business: to make money.

My opinion, anyway. My stock allocation is a broad market index that includes many dividend and non-dividend companies, so I'm shielded against being wrong!
i only wish that was true ..unfortunately it has been the dividend payers that have made some of the worst decision with their money and lost tons for shareholders

AT&T paid $100 billion to enter the cable business

AT&T thought it would be a good idea to diversify by paying $100 billion to take on cable company TCI. It was wrong! AT&T broke itself up a few years later and sold off the cable assets.

AT&T tried to elbow its way into the personal computer business with a hostile $7 billion takeover of NCR. It didn't work, and AT&T later spun the company back out at a $4 billion valuation.

Microsoft paid an estimated $500 million for mobile phone company Danger. It was supposed to be working on new phones for Microsoft, but most of the key employees left the company. The end result of the acquisition was the Kin, a social smartphone from Microsoft that totally bombed.

Cisco probably bought Pure Digital, the company that makes the Flip, right at the peak of its value in 2009. Since then high definition video cameras have been built into just about every smartphone making the Flip pretty much worthless in the long run. Which is probably why Cisco killed the $590 million acquisition earlier this year.

After Google bought DoubleClick, Microsoft tried to keep up by buying ad company aQuantive for $6 billion. The acquisition never really worked out. The aQuantive executives left two years after the deal closed and the technology was discarded.
..
AOL-Time Warner is obviously the worst

i can go on and on... This is another myth that just won’t die and keeps getting repeated while it certainly has not been found to be the case and they are just as prone to bad money decisions as any other stock
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Re: PP vs Dividend Growth Investing

Post by Xan » Fri Feb 14, 2020 2:11 pm

Tremendous amount of confirmation/selection bias there.

Regardless, the only point of being in business is to pay the owners a dividend. Everything else is smoke & mirrors.
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