Why Dividends? A Review Of The Literature [View article]
Jon –
I’m not arguing for or against dividend payers. I’m largely a fan of the dividend “concept” (other than the tax inefficiency) and believe equity dividends should be the cornerstone for most investors who need a relatively predictable (and growing) stream of income. I also believe that dividend policy and history are pretty good proxies to help identify quality companies.
My issue is with the observation that X% of the total return of equities comes from dividends -- and more so with the associated inferences. Those seemingly logical inferences are misleading, albeit probably harmless.
With respect to your statement that, “Numbers are numbers and compounding of dividends is pure mathematics plain and simple” – it addresses one of the inferences to which I am referring. That is, that reinvested dividends compound more efficiently than reinvested (retained) earnings. That may or may not be true, depending on the company. Unfortunately, we cannot compare the scenarios because only one plays out.
With respect to all of KO's and JNJ's money going out the door -- no disrespect but that is simply not true -- payout ratios are well below 100%.
Why Dividends? A Review Of The Literature [View article]
I applaud your efforts and diligent research but continue to be amazed by how many investors, including professionals as you reference, continue to perpetuate the "dividend contribution to total return" nonsense. The implication is that if dividends were not paid, then the return would be lower. There is simply no way to know what the total return would have been had any company (or collection of companies) not paid any dividends and simply reinvested them into the operations of the company.
Why Dividend Investing Will Always Be Better Than Buying The Entire Stock Market [View article]
In fact roughly 50% of the total stock market return comes from dividend payouts . . .
I've always had issue with this "metric". IMO it is not only meaningless but misleading. Not only as retailinvestor stated above but because there is no true comparison. How would those same companies / equities have performed had they not paid any dividends? Maybe worse, maybe better, maybe the same.
The 401(k) State Of The Union: Moving In The Right Direction [View article]
IMO retirement savings will always appear underfunded when excluding the present value of one's social security income stream. That said, I also believe the retirement funding solution lies largely with SS. It should be broken into a privatized component and a welfare component. The employee would own and control the privatized funds (potentially comingled with 401(k) assets). The welfare piece would be aggregated for the greater good and means tested. Our fine leaders can argue about what percentage goes each direction.
Last comment on this . . . The PCGS holders are smaller and thicker which definitely makes them more difficult to tamper with. I also expect it's tougher to counterfeit a coin than a sports card (anyone with a high-end printer can get pretty close). If you are at all interested, simply Bing or Google "fake PSA holder" and you'll find a lot of educational info. Lastly, I'm not trying to bash PSA, I believe they are the best third-party grader. I'm just pointing out a real risk to them and others in that business.
dbtunr - Not to get too far away from the author's work but counterfeiters are becoming skilled with replicating exactly what PSA does (encapsulating a card into a plastic holder that represents a bona fide certification number). This happens in two distinct ways. The fraudster simply opens the holder and replaces the card with a reproduction then reseals it. While this results in varying levels of damage to the holder, PSA's is the easiest to compromise and can be opened with minimal damage. One needs to essentially destroy a Beckett or SGC holder to remove the card -- not true with a PSA holder. The second way is to fabricate a counterfeit holder and flip (the paper inside that describes the card and shows the cert #) and encapsulate the reproduction. While this is expensive and difficult, it is happening -- usually with very high end expensive cards. These fabricated holders are becoming more and more difficult to spot vs. a genuine PSA holder.
As a long-term and regular customer of PSA, I agree that the company does a pretty good job; however, service levels are very inconsistent and customer communication is poor. There is much room for improvement in both areas that would strengthen the brand. With respect to risks, I'm less familiar with PCGS but counterfeits are a real issue in the sports card hobby and are a huge risk to the company. PSA's card holder is known to be the easiest to replicate and tamper with and therefore the most prone to fraud.
I understand that this is an investment site and in that context the author's points are relevent but everything we do is a tradeoff of time and resources (money). If we relegate managing one's wealth to a basic, commodity-like task then the same case can be made for changing your own oil, mowing your own grass, or growing your own food. When compared to health care, education, or other professional services a different conclusion may be drawn. IMO most financial services lie somewhere in the middle and their "value" may only be assessed by each individual.
Austerity Is Bad For The Economy (And The Sequester Is Even Worse) [View article]
Equating the sequester with austerity is laughable -- done by the author to support his political bias and confirm his opinions. Put another way, this is simply another SA author with "no positions" offering potentially harmful advice.
2012 Review: Why Stocks Rose, Where I Was Wrong And What I Would Do Different [View article]
AnonymousGuest - I've watched (first hand) thousands of investment professionals and tens of thousands of individual investors apply countless strategies. I have evolved to a point where I believe there is only one sensible strategy; the one you described in your last paragraph.
TVIX: A Reverse Split Of Shares On This Volatility Product - What Does It Mean For You? [View article]
You're correct Traveler -- I didn't finish my thought before hitting "publish" -- nearly everyone will have a fractional share they will be required to liquidate. My comment was intended to address the tax consequences, which, I believe, will be immaterial. Worst case you will be liquidating 0.9 shares of an $8 security (at today's price).
How Much Do You Want To Bet On That Dividend? [View article]
Against my better judgment, I offer this to the dialogue . . .
Say you're the sole owner of a small business. The business is doing well and you, as the owner, decide to withdraw some cash from the business. Does that increase your wealth? Of course not. It does, however, monetize your wealth, making it potentially more useful in any number of ways. No different than when a company pays a dividend to shareholders (tax issues notwithstanding).
Why Dividends? A Review Of The Literature [View article]
Why Dividends? A Review Of The Literature [View article]
I’m not arguing for or against dividend payers. I’m largely a fan of the dividend “concept” (other than the tax inefficiency) and believe equity dividends should be the cornerstone for most investors who need a relatively predictable (and growing) stream of income. I also believe that dividend policy and history are pretty good proxies to help identify quality companies.
My issue is with the observation that X% of the total return of equities comes from dividends -- and more so with the associated inferences. Those seemingly logical inferences are misleading, albeit probably harmless.
With respect to your statement that, “Numbers are numbers and compounding of dividends is pure mathematics plain and simple” – it addresses one of the inferences to which I am referring. That is, that reinvested dividends compound more efficiently than reinvested (retained) earnings. That may or may not be true, depending on the company. Unfortunately, we cannot compare the scenarios because only one plays out.
With respect to all of KO's and JNJ's money going out the door -- no disrespect but that is simply not true -- payout ratios are well below 100%.
Why Dividends? A Review Of The Literature [View article]
Why Dividend Investing Will Always Be Better Than Buying The Entire Stock Market [View article]
I've always had issue with this "metric". IMO it is not only meaningless but misleading. Not only as retailinvestor stated above but because there is no true comparison. How would those same companies / equities have performed had they not paid any dividends? Maybe worse, maybe better, maybe the same.
The 401(k) State Of The Union: Moving In The Right Direction [View article]
Collectors Universe: Great Future [View article]
The PCGS holders are smaller and thicker which definitely makes them more difficult to tamper with. I also expect it's tougher to counterfeit a coin than a sports card (anyone with a high-end printer can get pretty close). If you are at all interested, simply Bing or Google "fake PSA holder" and you'll find a lot of educational info. Lastly, I'm not trying to bash PSA, I believe they are the best third-party grader. I'm just pointing out a real risk to them and others in that business.
Collectors Universe: Great Future [View article]
Not to get too far away from the author's work but counterfeiters are becoming skilled with replicating exactly what PSA does (encapsulating a card into a plastic holder that represents a bona fide certification number). This happens in two distinct ways. The fraudster simply opens the holder and replaces the card with a reproduction then reseals it. While this results in varying levels of damage to the holder, PSA's is the easiest to compromise and can be opened with minimal damage. One needs to essentially destroy a Beckett or SGC holder to remove the card -- not true with a PSA holder. The second way is to fabricate a counterfeit holder and flip (the paper inside that describes the card and shows the cert #) and encapsulate the reproduction. While this is expensive and difficult, it is happening -- usually with very high end expensive cards. These fabricated holders are becoming more and more difficult to spot vs. a genuine PSA holder.
Collectors Universe: Great Future [View article]
You Are Poorer Than You Think [View article]
Austerity Is Bad For The Economy (And The Sequester Is Even Worse) [View article]
2012 Review: Why Stocks Rose, Where I Was Wrong And What I Would Do Different [View article]
I've watched (first hand) thousands of investment professionals and tens of thousands of individual investors apply countless strategies. I have evolved to a point where I believe there is only one sensible strategy; the one you described in your last paragraph.
Wall Street Breakfast: Must-Know News [View article]
I'm curious where you found that data. Are you speaking of all types of government assistance or specifically to welfare? Thanks.
TVIX: A Reverse Split Of Shares On This Volatility Product - What Does It Mean For You? [View article]
TVIX: A Reverse Split Of Shares On This Volatility Product - What Does It Mean For You? [View article]
How Much Do You Want To Bet On That Dividend? [View article]
Say you're the sole owner of a small business. The business is doing well and you, as the owner, decide to withdraw some cash from the business. Does that increase your wealth? Of course not. It does, however, monetize your wealth, making it potentially more useful in any number of ways. No different than when a company pays a dividend to shareholders (tax issues notwithstanding).