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Dividend Math Guy

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  • The Only 20 Companies That Matter [View article]
    Nice article. I think one of the lessons here is buy companies that can keep their earnings steady during recessions. Also, I just looked at the 10-year margin histories for several blue chips and many of them were quite steady.
    Mar 26 10:15 PM | 3 Likes Like |Link to Comment
  • Why The Highest-Yielding Dividend Stocks Deliver The Best Capital Gains [View article]
    $500K At this point the future looks brighter.
    $1M Wow we made it! The future is brighter. Early retirement here we come.
    $2M+ Holy Cow! New opportunities abound, everywhere.<<<

    And the nice thing is that 500k to 1m will take, on average, less time than 100k to 250k does.

    The first million's the hardest part. Heh. Looking forward to my first million.
    Mar 26 06:57 PM | 1 Like Like |Link to Comment
  • Visa: High Price Should Not Prevent Exceptional Returns [View article]
    I've bought V 3 times in the last year, most recently at 222. It's pricey, sure, but I agree with the article that it's probably worth it. It's the kind of position that, I think, would be very hard to lose money on in 5 years, and to me it looks outstanding looking 20-25 years out.

    With that said, I've restricted the position to 5% of my holdings (to start with), and I'll just let it grow from here however it goes. I have maybe 25% of my portfolio in low-div, high-growth things like V right now. Diversification is key. If I didn't already have a full position I'd be a buyer at these levels (currently 215).
    Mar 26 06:31 PM | Likes Like |Link to Comment
  • Visa: High Price Should Not Prevent Exceptional Returns [View article]
    Roth. A purchase today in V will likely build up a similar yield on cost 20-25 years from now as a purchase in KO would with much higher capital gains, and I think you would want to give yourself the option of harvesting those gains tax-free at that point.

    I'm long V (in my Roth!) as one of my largest holdings in my growth-focused DG portfolio.
    Mar 26 12:11 PM | Likes Like |Link to Comment
  • Debunking The 'Dividends Don't Add Shareholder Value' Myth [View article]
    >>>I can refute DMG. What if one of your DG stocks tanks and loses 50% of its value?<<<

    It depends on why. If it's because of a market crash I buy more or ignore it. If it's company-specific and I need to sell then that sucks, but as a small consolation at least I have a larger cost basis (from the reinvested dividends) to take a capital loss against.

    >>>Also, in order to get the income you believe doesn't exist in a growth stock, what if I sold some of that growth stock? How's that not exactly the same as a DG stock? <<<

    What happens when one of your growth stocks or the whole market tanks 50% and you need to sell some shares to generate income? I simply refuse to put myself in this position. If you hold onto growth-only stocks for long enough you will be *guaranteed* to be put in that position eventually.

    >>>If the company pays you $10 but you only need $5 to live, you still pay taxes on the whole $10, including the $5 you didn't need. Using the total return approach in that instance, I'd only pay taxes on the $5 I needed, by my own choice.<<<

    If selling shares works for income works for you that's great. Personally I'm not worried about having too much income during retirement. I'm worried about having too little. If I end up with more income than I need I think I'll manage somehow.
    Mar 20 06:33 PM | Likes Like |Link to Comment
  • Debunking The 'Dividends Don't Add Shareholder Value' Myth [View article]
    Briar and Lakers, you're shifting the goalposts. All I'm doing is comparing buying a DG stock now versus flipping a capital gains stock to buy a DG stock later.

    >>>What, pray tell, is the result if you don't sell B and the cost basis is stepped up in your estate?<<<

    Then the growth stock is better. I never said it wasn't.

    >>>DMG....if I hold stock B forever, I'd pay ZERO capital gains tax. Wow, I just eliminated my tax bill!! See how that rubbery math works both ways.<<<

    Sure, but (unlike a DG stock) you can't get any income out of it if you never sell it.

    >>>If you allow yourself the slight of hand of ignoring the accrued deferred tax because "you intend to hold A forever and sell B at the end of the same period", you will easily come to your desired conclusion<<<

    It's not sleight of hand. Let me explain further. I invest for future income. I invest in both growth stocks that I intend to flip later and DG stocks that I intend to hold forever. I am going to retire in 20 years or so with a 100% DG portfolio because I hate the idea of being subject to Mr. Market's irrationalities when it comes to selling shares to generate income.

    My conclusion is practical and correct for my approach. I hold my buy-and-hold forever DG stocks in my taxable account and my high-growth capital gains plays in my IRA. In this way I get to hold my DG shares into retirement while never paying cap gains taxes on them, and I come out ahead in total portfolio value versus where I'd be if I'd done things the other way around. Can either of you refute this?
    Mar 20 11:34 AM | 2 Likes Like |Link to Comment
  • Finding Alpha With Dividend Growth: The Stocks [View article]
    You know why high yield low payout wins in the long run? Because that combination implies low p/e = deep value.

    What did Credit Suisse consider high/low payout and high/low yield, by the way? What were their thresholds?
    Mar 19 09:49 PM | Likes Like |Link to Comment
  • Debunking The 'Dividends Don't Add Shareholder Value' Myth [View article]

    Where were you taught math? The present value of a tax paid today is considerably higher than the same tax paid 20-30 years from now.<<<

    They're not the same tax. That's the whole point. With the cap gains play you have to pay taxes on the ENTIRE gain, while with the DG stock (bought and held forever) you only have to pay tax on the part of the gain that comes from the dividend.
    Mar 19 06:40 PM | 1 Like Like |Link to Comment
  • Debunking The 'Dividends Don't Add Shareholder Value' Myth [View article]
    >>>How's that work Math Guy?<<<

    Say you invest $1000 in

    A) 3% yield, 7% dividend- and earnings-growth stock
    B) 10% price-growth non-dividend stock

    held for 20 years, where you intend to hold A forever and sell B at the end of the time period. Work it out. You'll see

    A, with reinvested dividends and after 15% tax on the dividends (but NO tax on the capital gains - remember, the point here is to buy now and hold forever), ends up at $6403.07.

    B, after selling and paying 15% cap gains tax, ends up at $5868.37.

    For more read my latest article.

    >>>You sure you're a math guy? <<<

    Pretty sure, yeah.
    Mar 19 06:37 PM | Likes Like |Link to Comment
  • U.S. Real Estate - Are We Out Of The Woods Yet? [View article]
    While I agree with much of the article, you can't extrapolate a trend from a best fit line on 50 years of financial data on linear axes. You need to fit an exponential or fit a line to the log of the data.

    Do you know what the trend in rent increases has been? I agree that in the long run rent will not rise faster than the income of the lower 50% or so of earners.
    Mar 19 12:20 AM | 1 Like Like |Link to Comment
  • Debunking The 'Dividends Don't Add Shareholder Value' Myth [View article]
    Or if you're investing in a taxable account and you buy DG stocks you never sell, you never have to pay cap gains tax on them. You have to pay tax on the dividends each year, but the effective tax rate on the total return over 20-30 years ends up being less than the effective tax rate on a non-dividend stock with the same pre-tax total return sold for a capital gain at the end of the same time frame.
    Mar 18 11:46 PM | 1 Like Like |Link to Comment
  • Debunking The 'Dividends Don't Add Shareholder Value' Myth [View article]
    >>>Clearly, if the ex-dividend adjustment had a permanent impact, as some people contend, then the black stock price line should be significantly below the orange line (earnings) for the entire time that the company paid a dividend. Obviously, that is not the case.<<<

    Actually the contention is that the future growth of the orange line is what is reduced by the dividend. To some extent and with lots of disclaimers this is true.

    Price will continue to track the orange line in the long term whether or not the company pays a dividend, at least according to over a century of statistical evidence.
    Mar 13 06:12 PM | 13 Likes Like |Link to Comment
  • How To Get The Most Out Of Dividend Growth [View article]
    >>>Of course all that matters in the accumulation phase is total return. In the end it will all be about how much money do you have to go shopping for dividends and income<<<

    You know, I've seen several people make similar statements lately and I'd like to disagree to some extent.

    I would say that in the accumulation phase all that matters is total return *with the following exceptions.*

    1-If you have no previous experience with dividend growth investing you're likely to make some mistakes when you first try it. It's better to make those mistakes when you're first starting out and have little to lose. A seasoned dividend growth investor with a portfolio market value of $2m at retirement is going to end up doing better with DGI than someone who retires with $2m in SPY

    2-If you are doing ANY of your investing in a taxable account, it's frequently better to buy your income now (so you never have to pay taxes on your large unrealized capital gains) rather than going for total return now and having to pay taxes on all of your gains before you go shopping for income. I wrote an article on this recently.

    3-You never know when you might need some extra income. For many people job layoffs correlate with stock market crashes, which are the worst times to have to sell shares to raise cash. Wouldn't it be nice if you had some dividend champs you could rely on during down times for some extra income if you lost your job or had a large unexpected expense?

    Other than that I agree and I aim for maximum risk-adjusted total return, where I define risk as the probability that my strategy will fail to achieve my retirement goals within my desired time frame.
    Mar 13 01:41 AM | 5 Likes Like |Link to Comment
  • The Perfect Retirement Stock: 7% Yield And Growing [View article]
    I'm curious about this. What are the implications of buying AMIGF versus AMIGY at a U.S. brokerage?
    Mar 6 11:23 PM | Likes Like |Link to Comment
  • The Perfect Retirement Stock: 7% Yield And Growing [View article]
    I was referring to AMIGF. I see the main London issue is up about 7.5% so I guess this price movement isn't unexpected.
    Mar 5 12:22 PM | Likes Like |Link to Comment