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What's so good about dividend investing?

General discussions about equity high-yield income strategies
hiriskpaul
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Re: What's so good about dividend investing?

#440192

Postby hiriskpaul » September 7th, 2021, 12:40 am

Charlottesquare wrote:May I add one point, this thread appears to suppose the market is valuing a company based on its net assets, such that paying out a dividend reduces said assets . But markets do not tend to value companies this way, they value often looking at P/E with expected P/E growth factored in, if the company earned 70p a share in the year without having that 70p to hand, the 70p was obviously not needed to produce those earnings, the company can ceteris paribus earn the 70p next year without the 70p being invested. The 70p may enhance next year's earnings if the company say uses it to reduce debt (reduced interest cost) or if it can expand and invest profitably using all the 70p divs not paid, but it may not, in reality it all depends what the directors have indicated to the analysts may happen and what the analysts and the market believe is possible from the company. Valuation is rarely a substitution where the 70p div moves the price 70p, it may do, it may not, it may move it 35p, it may move it 90p.

ITs quoted with NAV figures are maybe an exception but for trading companies earnings and earnings growth are far more significant valuation factors than assets, especially given that company accounts often do not reflect accurate values re assets and liabilities anyway, they generally feature accounting convention valuations ,e. g if a compay owes £1,000,000 at say 6% interest it is very unlikely the liability in the accounts will be £1,000,000 anyway( measurement of financial instruments per accounting standards))

I think I agree up to a point, or possibly I completely agree, but only you can tell me that!

The way I think about it is that the market values a company based on future expected returns. When a dividend is declared that may very well move the price if the dividend is not bang on what was expected. An unexpected cut for example is not usually welcomed by the market unless there is a damned good reason for it.

After dividend declaration though the market will value the company as declared dividend + "future expectations". The opening value on XD day will just be "future expectations" as the declared dividend will no longer be paid to buyers of the shares. Provided all else remains the same, or substantially so, "future expectations" at close of business the day before XD date will be the same as at the opening on XD date, so the value of the company will drop by the amount of the declared dividend.

To get really nit-picking, the value of the company will fall slightly less than the amount of the declared dividend because the dividend has not yet been paid. The dividend is a known forward dated cash flow and the present value will be less than declared value*. The full value of the dividend does not drop out of the company value until payment date. In practice this will be invisible due to market volatility.

* unless we end up with negative interest rates.

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Re: What's so good about dividend investing?

#440193

Postby hiriskpaul » September 7th, 2021, 1:01 am

MDW1954 wrote:
hiriskpaul wrote:
pje16 wrote:My final opinion and VERY last post on this thread
Dividend reinvestment beats taking dividends as cash
No-one has to agree but there are plenty of articles that back that up

It is not relevant to the thread. However, reinvesting dividends can work out well, often/usually does, but it really depends where and when they are reinvested. Reinvesting Carillion dividends back into more Carillion shares would not have beaten putting the dividends into a piggy bank.


Moderator Message:
Am I alone in thinking that this thread has staggered to the point where nothing more can be said? Say the word, and we'll gladly close it. --MDW1954

I don't fully understand the reason why you are asking that. Why do you feel that way?

Is it because some of those who engage in dividend investing resent being asked to reflect or reconsider the logic behind some of their motivations?

I think I have gained a greater understanding of the motivation some people have for dividend investing, but if happy group think is preferable on this board, then yes go ahead and close the thread down.

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Re: What's so good about dividend investing?

#440194

Postby Itsallaguess » September 7th, 2021, 6:15 am

hiriskpaul wrote:
Moderator Message:
Am I alone in thinking that this thread has staggered to the point where nothing more can be said? Say the word, and we'll gladly close it. --MDW1954


I don't fully understand the reason why you are asking that. Why do you feel that way?

Is it because some of those who engage in dividend investing resent being asked to reflect or reconsider the logic behind some of their motivations?

I think I have gained a greater understanding of the motivation some people have for dividend investing, but if happy group think is preferable on this board, then yes go ahead and close the thread down.


Before anything might happen with this thread, can I just highlight the fact that on the whole, I *think* there was a general agreement from both sides of the debate that £1 in dividends is worth no more and no less that £1 in retained capital that might be generated by a share sale if required, and as such, if all else remains generally equal, then an individual investors personal preference as to how they might come into *possession* of that £1 if they need to generate income might well influence their individual approach in terms of preferring to generate it in the form of 'hands-free dividends', where another investor might prefer to generate it by occasionally selling down holdings to do so.

I recognise that the bulk of the critical discussion on this thread has been due to an illogical 'pregnancy' idea, based on what to me feels like a false premise of share-price rises between dividend-dates that might not necessarily even occur, which then seemed to suddenly transmogrify into a 'dividend re-investment' argument that's actually got nothing at all to do with the main '£1 = £1' question originally asked at the start of the thread...

I would like to think it was recognised that those illogical rabbit-holes were being put forward by a single poster who was having some real difficulty putting their case forward as to the basis for their pro-dividend arguments, and I'm not sure it would be fair, given that even other income-investors (me included) were seen to be pushing back against those particular and illogical 'pro dividend' arguments, and as such, I think it would be a real shame if we might end this thread with an accusation of 'group think' from anyone on the 'pro-capital' side of this particular discussion...

Personally, I am and always have been happy, throughout this long thread, to fully accept the opening premise, that simply said of potential dividend-seekers who look to generate 'hands-off' income via the delivery of dividends -

'You are no better off'

What I would point out though, is that framing the statement like that, from the very start of the debate, is doing so in a particularly 'accusational way', as to suggest that everyone who might be interested in income-investing currently thinks that you are 'better off', and I think that apart from one poster who's been using some very questionable logic in their pro-dividend arguments, and who has had strong push-back on that logic from people on both sides of this debate, I simply don't believe that income-investors generally *do* think they are 'better off' by following their own investment approach, but that they do so simply along 'personal preference' lines...

So I would please ask that people are very careful when using terms like 'group think' in long and often meandering topics like this, as I would like to think that it's been clear that where the vast majority of critical-discussions and push-backs have taken place on this thread, it's primarily been carried out towards a single pro-dividend poster who's actually had some of the false-premises and off-topic aspects of their views highlighted by others on *both* sides of the discussion, and so I would certainly not like the over-riding impression to be generated that such 'false-premise' views are widely embedded in any sort of 'group think' on this board, as that's simply not the case, and there's no evidence for that here...

So yes - you are 'no better off' - fine - that's exactly the point as far as I'm concerned...

But then you're largely 'no worse off' either, which to me is a much fairer basis for this whole debate, because it then allows everyone to start out on a much more equitable basis, to then leave the debate open as to why some investors might have a personal preference for one method of income-generation when compared to other investors who might simply prefer another - and at that point, we're back into 'joggers' and 'swimmers' territory...

Cheers,

Itsallaguess

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Re: What's so good about dividend investing?

#440197

Postby Dod101 » September 7th, 2021, 7:10 am

Charlottesquare wrote:May I add one point, this thread appears to suppose the market is valuing a company based on its net assets, such that paying out a dividend reduces said assets . But markets do not tend to value companies this way, they value often looking at P/E with expected P/E growth factored in, if the company earned 70p a share in the year without having that 70p to hand, the 70p was obviously not needed to produce those earnings, the company can ceteris paribus earn the 70p next year without the 70p being invested. The 70p may enhance next year's earnings if the company say uses it to reduce debt (reduced interest cost) or if it can expand and invest profitably using all the 70p divs not paid, but it may not, in reality it all depends what the directors have indicated to the analysts may happen and what the analysts and the market believe is possible from the company. Valuation is rarely a substitution where the 70p div moves the price 70p, it may do, it may not, it may move it 35p, it may move it 90p.

ITs quoted with NAV figures are maybe an exception but for trading companies earnings and earnings growth are far more significant valuation factors than assets, especially given that company accounts often do not reflect accurate values re assets and liabilities anyway, they generally feature accounting convention valuations ,e. g if a compay owes £1,000,000 at say 6% interest it is very unlikely the liability in the accounts will be £1,000,000 anyway( measurement of financial instruments per accounting standards))


I had meant to bring in NAV as well because I think a number of posters are confusing the NAV of a company with its market value. In the case of investment trusts that tends to be closer to the case but for a trading company not so. It is the case though that especially for companies with a 'chunky' dividend share prices do tend to fall back after the ex div date.

Dod

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Re: What's so good about dividend investing?

#440207

Postby dealtn » September 7th, 2021, 8:45 am

hiriskpaul wrote:
The way I think about it is that the market values a company based on future expected returns. When a dividend is declared that may very well move the price if the dividend is not bang on what was expected. An unexpected cut for example is not usually welcomed by the market unless there is a damned good reason for it.



We aren't too far apart on the thinking here, but I think it important to consider what happens when "unexpected" (positive, or negative) news reaches the market. Rarely, in my opinion, is this different to market expectations news solely confined to the dividend, as such the dividend itself (and the market's views on future dividends) isn't the driver of any share price movement. The news is usually much broader and concerns the earnings, and future prospects, of the underlying business, and the market will be re-pricing on that basis.

For me the Dividend Pricing Model of equities makes sense as a legitimate theoretical stock valuation tool, but that is because it sits within the wider framework of the Future Earnings Model. A Dividend is useful as a signal of confidence (or not) in those earnings, and a recognition that some providers of Capital "require" an "income" return, for logistical and mandate reasons. So the "practice" and "theory" do deviate marginally in the real world. But the dividend is the "tail", and doesn't wag the (future) earnings "dog".

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Re: What's so good about dividend investing?

#440229

Postby Charlottesquare » September 7th, 2021, 9:54 am

dealtn wrote:
hiriskpaul wrote:
The way I think about it is that the market values a company based on future expected returns. When a dividend is declared that may very well move the price if the dividend is not bang on what was expected. An unexpected cut for example is not usually welcomed by the market unless there is a damned good reason for it.



We aren't too far apart on the thinking here, but I think it important to consider what happens when "unexpected" (positive, or negative) news reaches the market. Rarely, in my opinion, is this different to market expectations news solely confined to the dividend, as such the dividend itself (and the market's views on future dividends) isn't the driver of any share price movement. The news is usually much broader and concerns the earnings, and future prospects, of the underlying business, and the market will be re-pricing on that basis.

For me the Dividend Pricing Model of equities makes sense as a legitimate theoretical stock valuation tool, but that is because it sits within the wider framework of the Future Earnings Model. A Dividend is useful as a signal of confidence (or not) in those earnings, and a recognition that some providers of Capital "require" an "income" return, for logistical and mandate reasons. So the "practice" and "theory" do deviate marginally in the real world. But the dividend is the "tail", and doesn't wag the (future) earnings "dog".


I think that is roughly where I would be. I appreciate dividend ex dates often initially dip the share's pricing but I am not sure they longer term term have that input, a month, two months, three months after that dividend was paid is the market really reducing the price it believes applies based primarily on future earnings because of said dividend, I am not sure it is? It is however hard to tell with all the other factors acting upon share pricing, it is pretty hard in the long term to isolate the payment of the dividend to the share's pricing.

As you say, the market values based on earnings expectations , these earnings may or may to a greater of lesser extent be impacted by cash for the dividend leaving the company. There is I believe a happy balance with dividends, a company which distributes everything it earns will likely struggle for growth, a company that does not distribute may struggle for buyers and its share liquidity may be impacted (though there are exceptions, some purchasers will forego dividends because the share has an aura, say Berkshire)

To me the dividend good or bad argument boils down to what rate of return I can get from the money compared with what rate of return the company paying it could have got had they retained it, but this needs modified as giving the funds to me and giving me the choice of investment must in itself have some intrinsic value as I can in theory find A N Other company with a better ROCE than the one that paid me the dividend.

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Re: What's so good about dividend investing?

#440232

Postby hiriskpaul » September 7th, 2021, 9:59 am

dealtn wrote:
hiriskpaul wrote:
The way I think about it is that the market values a company based on future expected returns. When a dividend is declared that may very well move the price if the dividend is not bang on what was expected. An unexpected cut for example is not usually welcomed by the market unless there is a damned good reason for it.



We aren't too far apart on the thinking here, but I think it important to consider what happens when "unexpected" (positive, or negative) news reaches the market. Rarely, in my opinion, is this different to market expectations news solely confined to the dividend, as such the dividend itself (and the market's views on future dividends) isn't the driver of any share price movement. The news is usually much broader and concerns the earnings, and future prospects, of the underlying business, and the market will be re-pricing on that basis.

For me the Dividend Pricing Model of equities makes sense as a legitimate theoretical stock valuation tool, but that is because it sits within the wider framework of the Future Earnings Model. A Dividend is useful as a signal of confidence (or not) in those earnings, and a recognition that some providers of Capital "require" an "income" return, for logistical and mandate reasons. So the "practice" and "theory" do deviate marginally in the real world. But the dividend is the "tail", and doesn't wag the (future) earnings "dog".

I think we are in agreement. A Dividend Pricing Model is not required in order to understand why a share price falls by dividend per share on XD date. It is really just the market being pragmatic. The declaration of a dividend brings into existence a known fixed payment, akin to the payment of a senior unsecured bond payment. Not quite the same as the company would not be in default if the payment was not made*. As such, the market has something easily priced and will natural settle on cum-div/ex-div share prices such that cum-div = ex-div + dividend.

Another (but more complicated IMHO) way of thinking about this is that if the share price did not fall by precisely the dividend an arbitrage opportunity would be created that could be exploited in the repo market.


* I am not sure if that is true in all jurisdictions and for all types of dividend payment. I think in some circumstances the company may be in default if a declared dividend is not paid.

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Re: What's so good about dividend investing?

#440236

Postby tjh290633 » September 7th, 2021, 10:10 am

A minor point, but one of significance, is that dividends are often not reinvested in the share from which they came. I have my own method for deciding where to reinvest, embodied in the HYPTUSS, but the effect is normally to reinvest in those companies with higher yields. I say normally, because currently RIO and BHP top the list ranked by yield, due to very high dividends, and they are very unlikely to be topped up, even if top of the top-up list itself.

This leads to cranking up the dividend payout from the portfolio faster than its natural rate of increase. I do not know what the effect would be if retained earnings were to be the criterion. Here are the rankings of my portfolio by yield and weight:

Yield                              Value                
Rank EPIC Yield Cum Mean Rank EPIC Weight
1 RIO 12.98% 12.98% 1 IMI 3.98%
2 BHP 10.26% 11.62% 2 AV. 3.50%
3 IMB 8.80% 10.68% 3 DGE 3.42%
4 BATS 7.87% 9.98% 4 ADM 3.36%
5 ADM 7.04% 9.39% 5 S32 3.16%
6 VOD 6.43% 8.90% 6 PSON 3.16%
7 LGEN 6.29% 8.52% 7 BHP 3.14%
8 GSK 5.38% 8.13% 8 SGRO 3.13%
9 NG. 5.25% 7.81% 9 LGEN 3.11%
10 AV. 5.14% 7.54% 10 UU. 3.07%
11 BP. 5.13% 7.32% 11 SSE 3.05%
12 IGG 4.96% 7.13% 12 TW. 3.03%
13 SSE 4.88% 6.95% 13 BA. 3.01%
14 BT.A 4.67% 6.79% 14 NG. 3.00%
15 TW. 4.65% 6.65% 15 SMDS 2.97%
16 BA. 4.29% 6.50% 16 GSK 2.96%
17 TATE 4.27% 6.37% 17 PHP 2.93%
18 UU. 4.08% 6.24% 18 IGG 2.91%
19 RDSB 3.75% 6.11% 19 TSCO 2.89%
20 ULVR 3.73% 5.99% 20 KGF 2.88%
21 PHP 3.72% 5.88% 21 BP. 2.85%
22 TSCO 3.55% 5.78% 22 AZN 2.78%
23 RKT 3.05% 5.66% 23 BLND 2.77%
24 LLOY 2.83% 5.54% 24 RIO 2.70%
25 BLND 2.80% 5.43% 25 TATE 2.67%
26 S32 2.78% 5.33% 26 RDSB 2.48%
27 SMDS 2.69% 5.23% 27 VOD 2.46%
28 PSON 2.60% 5.14% 28 BT.A 2.36%
29 KGF 2.34% 5.04% 29 BATS 2.30%
30 AZN 2.26% 4.95% 30 ULVR 2.24%
31 DGE 2.04% 4.86% 31 MARS 2.24%
32 SGRO 1.76% 4.76% 32 IMB 2.14%
33 IMI 1.27% 4.65% 33 LLOY 1.91%
34 MKS 0.00% 4.52% 34 CPG 1.88%
35 MARS 0.00% 4.39% 35 RKT 1.79%
36 CPG 0.00% 4.27% 36 MKS 1.78%

The top-up ranking combines the inverse ranking of weight and the ranking of yield. Hence BT.A which is my highest eligible share is (37-28)+14=23. The highest ranking is for IMB at (37-32)+3=8, but is disqualified because it gives a high proportion of the dividend income, as do BATS and RIO, and VOD is disqualified because I have invested as much as I feel prudent in that share.

TJH

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Re: What's so good about dividend investing?

#440242

Postby absolutezero » September 7th, 2021, 10:41 am

MDW1954 wrote:
hiriskpaul wrote:
pje16 wrote:My final opinion and VERY last post on this thread
Dividend reinvestment beats taking dividends as cash
No-one has to agree but there are plenty of articles that back that up

It is not relevant to the thread. However, reinvesting dividends can work out well, often/usually does, but it really depends where and when they are reinvested. Reinvesting Carillion dividends back into more Carillion shares would not have beaten putting the dividends into a piggy bank.


Moderator Message:
Am I alone in thinking that this thread has staggered to the point where nothing more can be said? Say the word, and we'll gladly close it. --MDW1954

Why should it be closed just because you think nothing more can be said?
Surely that's up to the contributors unless someone starts getting abusive and then you can just simply delete their posts.
In the meantime the discussion can continue as the contributors want it to.

Why do moderators feel the need to close threads?
It's one thing I find baffling on this site, a discussion forum, that discussions seem to get shut down.

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Re: What's so good about dividend investing?

#440246

Postby hiriskpaul » September 7th, 2021, 10:56 am

Charlottesquare wrote:
dealtn wrote:
hiriskpaul wrote:
The way I think about it is that the market values a company based on future expected returns. When a dividend is declared that may very well move the price if the dividend is not bang on what was expected. An unexpected cut for example is not usually welcomed by the market unless there is a damned good reason for it.



We aren't too far apart on the thinking here, but I think it important to consider what happens when "unexpected" (positive, or negative) news reaches the market. Rarely, in my opinion, is this different to market expectations news solely confined to the dividend, as such the dividend itself (and the market's views on future dividends) isn't the driver of any share price movement. The news is usually much broader and concerns the earnings, and future prospects, of the underlying business, and the market will be re-pricing on that basis.

For me the Dividend Pricing Model of equities makes sense as a legitimate theoretical stock valuation tool, but that is because it sits within the wider framework of the Future Earnings Model. A Dividend is useful as a signal of confidence (or not) in those earnings, and a recognition that some providers of Capital "require" an "income" return, for logistical and mandate reasons. So the "practice" and "theory" do deviate marginally in the real world. But the dividend is the "tail", and doesn't wag the (future) earnings "dog".


I think that is roughly where I would be. I appreciate dividend ex dates often initially dip the share's pricing but I am not sure they longer term term have that input, a month, two months, three months after that dividend was paid is the market really reducing the price it believes applies based primarily on future earnings because of said dividend, I am not sure it is? It is however hard to tell with all the other factors acting upon share pricing, it is pretty hard in the long term to isolate the payment of the dividend to the share's pricing.


I mostly agree with that. Once a dividend has been paid the money has gone. In some instances there may be a lasting impact, for example if it subsequently becomes clear that debt reduction would have been a better use for the money.

As you say, the market values based on earnings expectations , these earnings may or may to a greater of lesser extent be impacted by cash for the dividend leaving the company. There is I believe a happy balance with dividends, a company which distributes everything it earns will likely struggle for growth, a company that does not distribute may struggle for buyers and its share liquidity may be impacted (though there are exceptions, some purchasers will forego dividends because the share has an aura, say Berkshire)


Not sure about the Aura! For some investors, including me, one of the attractions of Berkshire is that it does not pay a dividend which makes it more tax efficient for me than if it did. Berkshire does sometimes return cash via buy backs, which suit me better as these are not taxable.

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Re: What's so good about dividend investing?

#440247

Postby absolutezero » September 7th, 2021, 11:00 am

hiriskpaul wrote: Berkshire does sometimes return cash via buy backs, which suit me better as these are not taxable.

I'm always suspicious of the motivation behind buybacks in general.

I'm sure it has nothing to do with reducing the denominator in earnings per share calculations - in order to increase EPS.

I'm also sure that management bonuses often being tied to increasing EPS is purely coincidental.

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Re: What's so good about dividend investing?

#440251

Postby Alaric » September 7th, 2021, 11:15 am

Dod101 wrote:I had meant to bring in NAV as well because I think a number of posters are confusing the NAV of a company with its market value. In the case of investment trusts that tends to be closer to the case but for a trading company not so.


Although according to accounting standards, the published NAV of a company has to be "true and fair", in practice there's a large variance in what might be quoted in one accounting team to the next. That's particularly the case where intangibles such as goodwill and value of future contracts come into play.

Dividends have the advantage to investors that they have to be settled in cash rather than goodwill or intangibles, but even that can be thwarted by the use of borrowing powers to finance them. It's not unknown or directors to seek to retain market confidence and thus support share prices by paying dividends above those justified by a conservative estimate of profits. Even those investors who prefer dividends to share price growth should keep an eye on relative share prices as a possible signal that the dividend isn't coming from profitable trading.

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Re: What's so good about dividend investing?

#440253

Postby Charlottesquare » September 7th, 2021, 11:20 am

hiriskpaul wrote:
Charlottesquare wrote:
dealtn wrote:
We aren't too far apart on the thinking here, but I think it important to consider what happens when "unexpected" (positive, or negative) news reaches the market. Rarely, in my opinion, is this different to market expectations news solely confined to the dividend, as such the dividend itself (and the market's views on future dividends) isn't the driver of any share price movement. The news is usually much broader and concerns the earnings, and future prospects, of the underlying business, and the market will be re-pricing on that basis.

For me the Dividend Pricing Model of equities makes sense as a legitimate theoretical stock valuation tool, but that is because it sits within the wider framework of the Future Earnings Model. A Dividend is useful as a signal of confidence (or not) in those earnings, and a recognition that some providers of Capital "require" an "income" return, for logistical and mandate reasons. So the "practice" and "theory" do deviate marginally in the real world. But the dividend is the "tail", and doesn't wag the (future) earnings "dog".


I think that is roughly where I would be. I appreciate dividend ex dates often initially dip the share's pricing but I am not sure they longer term term have that input, a month, two months, three months after that dividend was paid is the market really reducing the price it believes applies based primarily on future earnings because of said dividend, I am not sure it is? It is however hard to tell with all the other factors acting upon share pricing, it is pretty hard in the long term to isolate the payment of the dividend to the share's pricing.


I mostly agree with that. Once a dividend has been paid the money has gone. In some instances there may be a lasting impact, for example if it subsequently becomes clear that debt reduction would have been a better use for the money.

As you say, the market values based on earnings expectations , these earnings may or may to a greater of lesser extent be impacted by cash for the dividend leaving the company. There is I believe a happy balance with dividends, a company which distributes everything it earns will likely struggle for growth, a company that does not distribute may struggle for buyers and its share liquidity may be impacted (though there are exceptions, some purchasers will forego dividends because the share has an aura, say Berkshire)


Not sure about the Aura! For some investors, including me, one of the attractions of Berkshire is that it does not pay a dividend which makes it more tax efficient for me than if it did. Berkshire does sometimes return cash via buy backs, which suit me better as these are not taxable.


Berkshire does have the Warren effect, when someone's talks to shareholders are as widely read as his are it is pretty apparent that he has an aura that in part drives investors to hold Berkshire, I would never have even initially heard of them were it not for Warren's reputation.

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Re: What's so good about dividend investing?

#440254

Postby hiriskpaul » September 7th, 2021, 11:22 am

absolutezero wrote:
hiriskpaul wrote: Berkshire does sometimes return cash via buy backs, which suit me better as these are not taxable.

I'm always suspicious of the motivation behind buybacks in general.

I'm sure it has nothing to do with reducing the denominator in earnings per share calculations - in order to increase EPS.

I'm also sure that management bonuses often being tied to increasing EPS is purely coincidental.

Can be a problem, but I would hope that most Remuneration committees would be able to see through EPS manipulation. Of more concern to me is the price paid, but Berkshire seem to be reasonably good at avoiding overpaying.

MDW1954
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Re: What's so good about dividend investing?

#440263

Postby MDW1954 » September 7th, 2021, 11:37 am

absolutezero wrote:
MDW1954 wrote:
hiriskpaul wrote:It is not relevant to the thread. However, reinvesting dividends can work out well, often/usually does, but it really depends where and when they are reinvested. Reinvesting Carillion dividends back into more Carillion shares would not have beaten putting the dividends into a piggy bank.


Moderator Message:
Am I alone in thinking that this thread has staggered to the point where nothing more can be said? Say the word, and we'll gladly close it. --MDW1954

Why should it be closed just because you think nothing more can be said?
Surely that's up to the contributors unless someone starts getting abusive and then you can just simply delete their posts.
In the meantime the discussion can continue as the contributors want it to.

Why do moderators feel the need to close threads?
It's one thing I find baffling on this site, a discussion forum, that discussions seem to get shut down.


Only one voice has voted for closing it, so it remains open.

MDW1954

Dod101
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Re: What's so good about dividend investing?

#440267

Postby Dod101 » September 7th, 2021, 11:44 am

absolutezero wrote:
MDW1954 wrote:
hiriskpaul wrote:It is not relevant to the thread. However, reinvesting dividends can work out well, often/usually does, but it really depends where and when they are reinvested. Reinvesting Carillion dividends back into more Carillion shares would not have beaten putting the dividends into a piggy bank.


Moderator Message:
Am I alone in thinking that this thread has staggered to the point where nothing more can be said? Say the word, and we'll gladly close it. --MDW1954

Why should it be closed just because you think nothing more can be said?
Surely that's up to the contributors unless someone starts getting abusive and then you can just simply delete their posts.
In the meantime the discussion can continue as the contributors want it to.

Why do moderators feel the need to close threads?
It's one thing I find baffling on this site, a discussion forum, that discussions seem to get shut down.


Mainly I think because some threads, like this one, are now beginning to go way off topic and those remaining on topic are pretty well played out.

Dod

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Re: What's so good about dividend investing?

#440276

Postby hiriskpaul » September 7th, 2021, 12:02 pm

Itsallaguess wrote:
hiriskpaul wrote:
Moderator Message:
Am I alone in thinking that this thread has staggered to the point where nothing more can be said? Say the word, and we'll gladly close it. --MDW1954


I don't fully understand the reason why you are asking that. Why do you feel that way?

Is it because some of those who engage in dividend investing resent being asked to reflect or reconsider the logic behind some of their motivations?

I think I have gained a greater understanding of the motivation some people have for dividend investing, but if happy group think is preferable on this board, then yes go ahead and close the thread down.


Before anything might happen with this thread, can I just highlight the fact that on the whole, I *think* there was a general agreement from both sides of the debate that £1 in dividends is worth no more and no less that £1 in retained capital that might be generated by a share sale if required, and as such, if all else remains generally equal, then an individual investors personal preference as to how they might come into *possession* of that £1 if they need to generate income might well influence their individual approach in terms of preferring to generate it in the form of 'hands-free dividends', where another investor might prefer to generate it by occasionally selling down holdings to do so.

I recognise that the bulk of the critical discussion on this thread has been due to an illogical 'pregnancy' idea, based on what to me feels like a false premise of share-price rises between dividend-dates that might not necessarily even occur, which then seemed to suddenly transmogrify into a 'dividend re-investment' argument that's actually got nothing at all to do with the main '£1 = £1' question originally asked at the start of the thread...

I would like to think it was recognised that those illogical rabbit-holes were being put forward by a single poster who was having some real difficulty putting their case forward as to the basis for their pro-dividend arguments, and I'm not sure it would be fair, given that even other income-investors (me included) were seen to be pushing back against those particular and illogical 'pro dividend' arguments, and as such, I think it would be a real shame if we might end this thread with an accusation of 'group think' from anyone on the 'pro-capital' side of this particular discussion...

Personally, I am and always have been happy, throughout this long thread, to fully accept the opening premise, that simply said of potential dividend-seekers who look to generate 'hands-off' income via the delivery of dividends -

'You are no better off'

What I would point out though, is that framing the statement like that, from the very start of the debate, is doing so in a particularly 'accusational way', as to suggest that everyone who might be interested in income-investing currently thinks that you are 'better off', and I think that apart from one poster who's been using some very questionable logic in their pro-dividend arguments, and who has had strong push-back on that logic from people on both sides of this debate, I simply don't believe that income-investors generally *do* think they are 'better off' by following their own investment approach, but that they do so simply along 'personal preference' lines...

So I would please ask that people are very careful when using terms like 'group think' in long and often meandering topics like this, as I would like to think that it's been clear that where the vast majority of critical-discussions and push-backs have taken place on this thread, it's primarily been carried out towards a single pro-dividend poster who's actually had some of the false-premises and off-topic aspects of their views highlighted by others on *both* sides of the discussion, and so I would certainly not like the over-riding impression to be generated that such 'false-premise' views are widely embedded in any sort of 'group think' on this board, as that's simply not the case, and there's no evidence for that here...

So yes - you are 'no better off' - fine - that's exactly the point as far as I'm concerned...

But then you're largely 'no worse off' either, which to me is a much fairer basis for this whole debate, because it then allows everyone to start out on a much more equitable basis, to then leave the debate open as to why some investors might have a personal preference for one method of income-generation when compared to other investors who might simply prefer another - and at that point, we're back into 'joggers' and 'swimmers' territory...

Cheers,

Itsallaguess

Very good points. No better off, no worse off. Taxation may be something that sways the preference. For example, one of the advantages of dividends lies in our peculiar inheritance tax regime. Regular gifts from surplus income fall out of the estate immediately. Surplus income includes dividend payments, but does not include proceeds from share disposals. A work around is to put disposals at arms length by buying ITs that generate dividends from capital gains, option premium, etc. Utterly barmy, but within the rules.

ITs that smooth income also offer an additional advantage as this makes the income appear more regular.

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Re: What's so good about dividend investing?

#440366

Postby absolutezero » September 7th, 2021, 4:09 pm

Given today's announcement about a rise on dividend tax matching the rise in National Insurance, what's so good about dividend investing?

Only a matter of time until they equalise dividend tax with income tax in my view. For anything not in an ISA of course (for now).

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Re: What's so good about dividend investing?

#440367

Postby tjh290633 » September 7th, 2021, 4:10 pm

Moderator Message:
I have just deleted 3 posts from this topic because they have taken no notice of the Mod request above not to discuss Total Return or Safe Withdrawal Rates in this thread or on this Board.

I am now locking the Thread.

TJH


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