Jeffreyalan wrote: ↑
Tue Feb 06, 2018 8:05 am
The main reason to own stocks that pay dividends is management accountability since the commitment to paying a dividend forces efficient capital deployment decision making.
Also, Shareholders like optionality and the payment of a dividend gives the shareholder the option to increase or decrease their exposure to that entity accross time.
Beyond that there are the usual reasons such as dividend stocks surviving market falls better and the majority of stock returns over the last century coming from dividends.
if only that were really true about better responsibility to shareholders .....
case in point .
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.
as far as performance ----you keep seeing just invest in the so called dividend aristocrats 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.
dividends can be the worst way tax wise to generate income ... a 4% dividend is taxed on 100% of the dividend .. the same dollars as a portfolio draw is taxed only on the gain portion ...
there is zero difference puling the same dollars as the dividend from a portfolio of non div payers as long as the total returns are the same or greater ..your balance will be identical in both cases . it is all only about total return at the end of the day ....
in both cases the investments need to see at least as much appreciation as the draw or they gained nothing or are behind . every payout by exchange rules has to be subtracted off the value of the investment before it can trade again .... if you don't reinvest the dividend then you have less dollars for markets to compound at the ring of the bell .... if you do reinvest then you have the same dollars back as you had pre ex div .... it is merely them handing you a piece of your value and you putting it back via a lower price and more shares not much different then a mutual fund pay out or a stock split