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.
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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
e + 1 = 0
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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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