Dividend Investing: Why It Is Dumb Logic

Jun. 04, 2023 6:44 AM ETAAPL, T219 Comments
Cavenagh Research
9.47K Followers

Summary

  • If a stock pays a dividend or not doesn't tell you anything about the underlying company's quality.
  • Dividends are only the distribution of value, and not the generation of value.
  • Moreover, due to tax considerations and retained earnings opportunity cost, dividends are also quite ineffective in distributing value.
  • In this article, I would like to provide investors with a concise argument on why I believe dividends are dumb.

A US Dollar symbol made of wood with leaves growing from it.

Richard Drury

Investors seem to love dividends, especially readers on Seeking Alpha. But here is the thing: If a stock pays a dividend or not, it doesn't tell you anything about the underlying company's quality; and the magnitude of the dividend doesn't tell you anything

This article was written by

9.47K Followers
Experience as an investment analyst for a major BB-Bank, as well as private equity consultant for MBB. Currently working towards the CFA charter, having completed I&II. Passion for risk-assets (Growth, Contrarian, Emerging Market). Ex-colleague and close friend of Investor Express.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not financial advice

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