I love dividend stocks.
Quote: Archvaldor1Quote: billryanAn investor who needs income should pay no attention to the dividend a stock pays. Are you kidding?
When the company pays you a dividend the value of your stock becomes less by the same amount. It is mathematically equivalent to withdrawing the equivalent amount in shares.
If you don't have confidence that the company can do better with the money you've given it than you can do yourself, don't give it to them. You should not be seeking dividends for that reason.
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What part of seeking dividends for income are we not understanding? I'm not looking for value, or growth, just income.
My portfolio is quite diverse, and I am very happy to dedicate a portion of it to income-producing stocks. If you can show me how to get a 20% or more return, deposited into my account each month, I'm happy to learn.
If I were reinvesting my dividends, I'd be way ahead of the market this year. If I were selling falling stocks every month to generate needed income, I'd be in deep trouble. Today, I'd have many fewer shares, and each share would be worth less. Instead, I still have all my shares and the cash I needed, as well .
AIPI is down 10% from its peak, but paid out almost double that amount.
Quote: lilredrooster.
Quote: billryanIf my portfolio never appreciates a dime, it will produce the income I need.
it would be helpful if you proposed alternative income devices
most dividend stocks yield between 1 and 4% - there are a few that yield slightly more
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Offhand AIPI is paying over 30%,FEPI is paying around 23%, QYLD is in the midteens, as are dozens of other ETF.
A few years ago, JP Morgan figured out how to jumpstart their numbers with covered calls and others have adopted that stratregy on steroids There are entire classes of ETFs paying out over 10% annual returns
As he passed the 80th floor, his cellphone rang
He answered it as he passed the 60th floor
Hello, he sez as he passes the 50th floor.
"How is it going?", goes the voice on the phone as they pass the fortieth floor
As the man passes the twentieth floor, he responds
So far, So good.
Quote: billryanOffhand AIPI is paying over 30%,FEPI is paying around 23%, QYLD is in the midteens, as are dozens of other ETF.
A few years ago, JP Morgan figured out how to jumpstart their numbers with covered calls and others have adopted that stratregy on steroids There are entire classes of ETFs paying out over 10% annual returns
okay -
you learned me something there
I didn't know that
my strategy which is carved in stone won't change because of it -
but it's always interesting to learn something that you didn't know about in a subject you're interested in
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Quote: billryan
What part of seeking dividends for income are we not understanding? I'm not looking for value, or growth, just income.
My portfolio is quite diverse, and I am very happy to dedicate a portion of it to income-producing stocks. If you can show me how to get a 20% or more return, deposited into my account each month, I'm happy to learn.
If a company pays me 4% of the net worth of my stocks it is the same as if I sell 4% of my stock.
You seem to think there is a fundamental difference. There isn't for most practical purposes. Your "income-producing" concept is purely psychological.
I am not sure where you are getting the 20% number from. A 240% return per year would be tough to produce. I don't think many people get that from stock, dividends or not.
Quote: Archvaldor1Quote: billryan
What part of seeking dividends for income are we not understanding? I'm not looking for value, or growth, just income.
My portfolio is quite diverse, and I am very happy to dedicate a portion of it to income-producing stocks. If you can show me how to get a 20% or more return, deposited into my account each month, I'm happy to learn.
If a company pays me 4% of the net worth of my stocks it is the same as if I sell 4% of my stock.
You seem to think there is a fundamental difference. There isn't for most practical purposes.
I am not sure where you are getting the 20% number from. A 240% return per year would be tough to produce. I don't think many people get that from stocks.
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If you're thinking of it just in terms of common stocks as the basis, that is generally so. However there are many ETFs out there that are doing something other than common stocks, and because they are ETFs we call what they pay "dividends" even though what they are actually generating is often something else. They're involved with derivatives, buywrite funds are very popular. Then there are bond funds, preferred stock funds, short funds, commodities, cryptocurrency etc. and they don't really have anything to sell, they're just generating cash with whatever they have and they transfer the cash alone to the shareholders.
Being they are dealing with things that have expiration dates and call dates simply buying more to increase the value of their shares becomes impractical and can lead to deceptive accounting so they are better off just sticking to their investment plan and handing over the proceeds.
Quote: Archvaldor1Quote: billryan
What part of seeking dividends for income are we not understanding? I'm not looking for value or growth, just income.
My portfolio is quite diverse, and I am very happy to dedicate a portion of it to income-producing stocks. If you can show me how to get a 20% or more return, deposited into my account each month, I'm happy to learn.
If a company pays me 4% of its net worth it is the same as if I sell 4% of my stock.
You seem to think there is a fundamental difference. There isn't for most practical purposes.
I am not sure where you are getting the 20% number from. A 240% return per year would be tough to produce. I don't think many people get that from stocks.
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" For most practical purposes"
Selling a portion of your portfolio each month means your holdings go down If you own 100 shares and sell one share a month, eventually you will have no shares, so any growth is irrelevant. Over time, you'll run out of stock to sell
If you own 100 shares and cash the dividends each month, you'll always have 100 shares and potentially enjoy growth.
One method means tapping your equity, the other doesn't. If you are taking out more than you earn, eventually you'll go broke, but long before that, your revenue will dwindle to the point of no longer being a significant source of income. When your stocks are rising, your method works great. Not so much when the stock is flat or declining.
Quote: AutomaticMonkeyQuote: Archvaldor1Quote: billryan
What part of seeking dividends for income are we not understanding? I'm not looking for value, or growth, just income.
My portfolio is quite diverse, and I am very happy to dedicate a portion of it to income-producing stocks. If you can show me how to get a 20% or more return, deposited into my account each month, I'm happy to learn.
If a company pays me 4% of the net worth of my stocks it is the same as if I sell 4% of my stock.
You seem to think there is a fundamental difference. There isn't for most practical purposes.
I am not sure where you are getting the 20% number from. A 240% return per year would be tough to produce. I don't think many people get that from stocks.
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If you're thinking of it just in terms of common stocks as the basis, that is generally so. However there are many ETFs out there that are doing something other than common stocks, and because they are ETFs we call what they pay "dividends" even though what they are actually generating is often something else. They're involved with derivatives, buywrite funds are very popular. Then there are bond funds, preferred stock funds, short funds, commodities, cryptocurrency etc. and they don't really have anything to sell, they're just generating cash with whatever they have and they transfer the cash alone to the shareholders.
Being they are dealing with things that have expiration dates and call dates simply buying more to increase the value of their shares becomes impractical and can lead to deceptive accounting so they are better off just sticking to their investment plan and handing over the proceeds.
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Some of these funds hold prominent positions in a dozen or so of the leading tech companies so the last few years were magical. This year exposed a lot of warts , and I'm sure a lot of investors bailed when the stocks were down 30% and cutting dividends. No different than the people who buy into the newest bitcoin rush and sell when it drops 15%.
I'm not greedy. A 20% annual return is good enough for me, especially if it is paid out monthly.
Quote: billryan
Some of these funds hold prominent positions in a dozen or so of the leading tech companies so the last few years were magical. This year exposed a lot of warts , and I'm sure a lot of investors bailed when the stocks were down 30% and cutting dividends. No different than the people who buy into the newest bitcoin rush and sell when it drops 15%.
I'm not greedy. A 20% annual return is good enough for me, especially if it is paid out monthly.
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I'm locked in around the 12% range, which is where I tend to live as an investor. You can go with the super low risk stuff where they are all creditworthy investments, or the super high risk stuff where any of them can be bad and they tend to be worse then they look. Nobody has to think much to invest on either end. But right in the middle where there is a mix of good and bad products your own discernment skills in your due diligence can become maximally effective.
Quote: AutomaticMonkeyQuote: Archvaldor1Quote: billryan
What part of seeking dividends for income are we not understanding? I'm not looking for value, or growth, just income.
My portfolio is quite diverse, and I am very happy to dedicate a portion of it to income-producing stocks. If you can show me how to get a 20% or more return, deposited into my account each month, I'm happy to learn.
If a company pays me 4% of the net worth of my stocks it is the same as if I sell 4% of my stock.
You seem to think there is a fundamental difference. There isn't for most practical purposes.
I am not sure where you are getting the 20% number from. A 240% return per year would be tough to produce. I don't think many people get that from stocks.
link to original post
If you're thinking of it just in terms of common stocks as the basis, that is generally so. However there are many ETFs out there that are doing something other than common stocks, and because they are ETFs we call what they pay "dividends" even though what they are actually generating is often something else. They're involved with derivatives, buywrite funds are very popular. Then there are bond funds, preferred stock funds, short funds, commodities, cryptocurrency etc. and they don't really have anything to sell, they're just generating cash with whatever they have and they transfer the cash alone to the shareholders.
Being they are dealing with things that have expiration dates and call dates simply buying more to increase the value of their shares becomes impractical and can lead to deceptive accounting so they are better off just sticking to their investment plan and handing over the proceeds.
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Yeah I'm aware this is a complex issue which is why I said "for most practical purposes". The exceptions, of course, as you point out can be very interesting especially from an AP perspective.
I'm really addressing a fundamental point about the mathematics involved here.
Quote: billryan
Selling a portion of your portfolio each month means your holdings go down If you own 100 shares and sell one share a month, eventually you will have no shares, so any growth is irrelevant. Over time, you'll run out of stock to sell
If you own 100 shares and cash the dividends each month, you'll always have 100 shares and potentially enjoy growth.
If the company gives away a dividend equivalent to a share each month it will eventually have no money and be worthless. From the investor perspective it would be the same outcome as selling all your shares.
Dividends may have psychological/accounting benefits, I'm not understating the importance of that,
Personally if I think a company can do better with my money than I can I'd rather they kept my money until I retire.
Quote: lilredrooster.
This is because companies that prioritize dividend payouts may be less likely to reinvest heavily in their own growth, potentially hindering future price increases.
My thought is that I don't want a company re-investing money if they don't believe it can outperform the market. Most companies are still in growth phases so in that case you would want it to re-invest, but if they believe that re-investment wouldn't grow the business more than would it could get by investing elsewhere then don't do it.
JEPI is an ETF that invests in stocks. It collects the dividends that its stocks pay out. It has a separate revenue stream from selling options on the stocks it owns. That revenue is distributed to shareholders every month.
McDonald's is a stock that pays quarterly dividends. Each quarter, a portion of the profit is distributed to the shareholders.
Two very different business models, and the JEPI payouts are treated as ordinary income, while the McDonald's funds are taxed as personal income. It is why one stock is suited for most investors, while the ETF works best in a retirement account
Quote: billryan
JEPI is an ETF that invests in stocks. It collects the dividends that its stocks pay out. It has a separate revenue stream from selling options on the stocks it owns. That revenue is distributed to shareholders every month.
McDonald's is a stock that pays quarterly dividends. Each quarter, a portion of the profit is distributed to the shareholders
I'm assuming you either like or own those 2 investments
if I'm assuming wrong then disregard
anyway, the total return including dividends of both of those investments have underperformed the S&P 500 (a benchmark many investors use to measure their performance) by a lot
Jepi looking at the last 4 years and McDonald's looking at the last 5 years
Mcd has a dividend yield of 2.41%
the index fund that I own that tracks the S&P 500 has a dividend yield of 1.20% - if for any reason I need more I can just sell of some of the principal
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Options traditionally have been a way for industrial investors to hedge their bets as a small part of their portfolio
In the 2000s, a typical option was for a month or more. Changing investment patterns reduced it to weeks, but in May of this year, the majority of options were taken by individuals and were single day.
This is not investing; this is gambling. People are betting that a stock will go up or down that particular day. The risks seem worthwhile, as a win can be pretty rewarding, while a loss is a low-cost setback.
While not the same thing, this is very much like betting a single number on roulette. Lots of small losses with an occasional win, except that the win is subject to transaction fees and taxes. Wall St appears very happy to be selling these options to people, but isn't buying them for themselves. By far, the most single-day options are being taken on the S&P 500 going up.
It reminds me of a game of musical chairs. It's fun to play, but the chances of winning aren't good
re diversification
Vanguard has an investment which I own which is offered as an ETF or a fund that covers virtually all publicly traded stocks in the U.S.
"The Vanguard Total Stock Market Index Fund (VTSAX, VTSMX, and VTI) seeks to replicate the performance of the CRSP US Total Market Index. This index covers virtually all publicly traded stocks in the United States, providing investors with a comprehensive representation of the US equity market. The fund's broad diversification across market capitalizations (large, mid, and small-cap) and investment styles (growth and value) helps to mitigate risk and potentially enhance returns."
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Quote: lilredrooster.
re diversification
Vanguard has an investment which I own which is offered as an ETF or a fund that covers virtually all publicly traded stocks in the U.S.
"The Vanguard Total Stock Market Index Fund (VTSAX, VTSMX, and VTI) seeks to replicate the performance of the CRSP US Total Market Index. This index covers virtually all publicly traded stocks in the United States, providing investors with a comprehensive representation of the US equity market. The fund's broad diversification across market capitalizations (large, mid, and small-cap) and investment styles (growth and value) helps to mitigate risk and potentially enhance returns."
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If you like to invest like that, and are happy with the returns, go for it. If you think diversification means having all your eggs in US equities, this might be a good place to invest. If you are asking what I think of that fund, I don't own it or anything similar. I prefer stocks on the left side of the bell.
Quote: billryanQuote: lilredrooster.
re diversification
Vanguard has an investment which I own which is offered as an ETF or a fund that covers virtually all publicly traded stocks in the U.S.
"The Vanguard Total Stock Market Index Fund (VTSAX, VTSMX, and VTI) seeks to replicate the performance of the CRSP US Total Market Index. This index covers virtually all publicly traded stocks in the United States, providing investors with a comprehensive representation of the US equity market. The fund's broad diversification across market capitalizations (large, mid, and small-cap) and investment styles (growth and value) helps to mitigate risk and potentially enhance returns."
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I prefer stocks on the left side of the bell.
of course with this an investor will have many dogs
some of those dogs turn around and become highly profitable
you are also guaranteed to cover all of the super performers
over time this investment has about equaled the returns of the S&P 500
if an investor has faith in themself as being a great stock picker they don't need something like this
me personally - I don't wanna be bothered with it when I can do very well, if not spectacularly well, so easily
AI Overview:
"A large majority of stocks underperform the S&P 500. Typically, around 70% to 90% of stocks fail to outperform the S&P 500 over various time horizons. This means that the vast majority of individual stocks don't match the overall performance of the S&P 500
Even active fund managers, who aim to beat the market by picking specific stocks, struggle to consistently outperform the S&P 500. In a recent decade, just 7% of such managers benchmarked to large U.S. stock indexes beat their passive peers"
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If a stock or ETF I love goes public, I can allocate 100% of my portfolio to it. No fund can do that. When I felt Musk was having a breakdown, I unloaded my entire position in Tesla. A fund can't do that.
I believe that someone who invests time in understanding the market can do well. You don't.
I'm a real-life example of someone who invested early and often, made almost all my own decisions and turned out well. Without a pension, I needed to save for retirement. Now I need to generate income and beat inflation, and have confidence in my ability to do so.
Fidelity has several million clients. They often offer webinars that attract less than 2,000 people. Most people are not interested in investing and prefer to leave it to others. I don't. I've always treated it as a hobby/part-time job. As I'm not taking it with me, I might as well enjoy playing with it.
Quote: billryanIf a stock or ETF goes public that I love, I can throw 100% of my portfolio into it.
that's a great deal of risk
I'm not knocking it - if you're comfortable with it - but a strategy like that is not for me
I did recently buy Nvidia which has been touted as a dominant player within AI
I broke my mold there - I almost never buy individual stocks - it's done quite well since I bought it - but the future - who knows?
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Quote: lilredroosterQuote: billryanIf a stock or ETF goes public that I love, I can throw 100% of my portfolio into it.
that's a great deal of risk
I'm not knocking it - if you're comfortable with it - but a strategy like that is not for me.
I recently buy Nvidia which has been touted as a dominant player within AI
I broke my mold there - I almost never buy individual stocks - it's done quite well since I bought it - but the future - who knows?
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I never would do that, but I could. When Marvel went public in the 1990s, I sold over half of each of my stocks and bet it all on Marvel. I made out great, but the stock crashed and burned after Perlmanns raiders raped it. I'd sold long before that.
I used to keep any one stock at 8% or less, but because of share increases, I've two stocks that are each over 15%.
I'll say again that the two Fidelity Managed Funds I own are beating my selections this year, and I'm okay with that. I've no idea how the S&P ranks against my selections, as it is meaningless to me.
Quote: billryanI've no idea how the S&P ranks against my selections, as it is meaningless to me.
I'm quite surprised at a point of view such as that
I need a way to critique what I am doing - I can't just buy stuff and have nothing to compare it to -
but again - you're you - you're not me - so if it works for you and you're comfortable with it - I can't knock it
there are literally millions of people buying funds that consistently underperform the benchmark - when it's so very easy to just match it - I don't get it at all - I guess they have their reasons - whatever - time for me to let it go and move on to something else
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