Free Dividend Fallacy--Why Dividends Don't Increase Your Wealth

[@Cwilly13ify]

Dividends don't increase your wealth, but investing in quality companies that pay them does

[@morganzoeclanthem2847]

Exactly.

[@linkbelt111]

Doesn’t re-invested dividends turning into additional shares increase your net worth? I have 1 stock that generally dividends me the equivalent of 50 shares, re-invested. Ya lost me….

[@ski999]

@@linkbelt111 Maybe another way to look at it: does a two for one stock split mean your net worth has increased? No. Why? Because if you own twice the shares that are now valued at half the price, your net worth is unchanged. A dividend payout works the same way, only with fractional numbers. Example: they give you a 1% dividend while reducing the share price 1%. You own more shares, but at a lower price.

[@mariobrown1533]

@@ski999 but you can use your dividends to dollar cost average down, so when it goes back up (Div stocks normally increase close to ex-dv date, just like the go down after ex-div date). So you can trade the excess for profit. I don't bank on divs, but I'm definitely not against them.

[@ski999]

@@mariobrown1533 Of course you can DRIP as a dollar cost in either direction. In a bull market it's up, in a bear it's down. You can also do that by making outright share purchases. Dividend stocks naturally attract increased interest on declaration day, but that's irrelevant to the price action of what happens with ex-dividend. ***Dividends DILUTE your share price*** More shares are created ex-dividend. So it may seem like there's a small rise in the share price, but it's for a mathematical reason. Everyone who DRIPs is getting more shares, so the per-share stock price tends to adjust upward to counter the loss in per-share-value. It balances out in the same way that share prices ALWAYS drop to adjust for the dividend payout. I love dividends. They're fun to track. But they're nothing more than repositioning your own money. Peace.

[@miller1240]

I feel that you started with your conclusion and tried to select aspects of the dividend payout life cycle to support your argument rather than taking a holistic look at the value of dividend returns. One thing that needs to be considered is what is the alternative to receiving a dividend from the company. Is the company able to reinvest that capital and achieve a respectable IRR? In many cases, the answer is no. In these scenarios, it is better to return the capital to shareholder rather than eroding the returns from the core business.

[@irhumbled]

Absolutely. An investor should not prioritize dividends, they should prioritize total return. Dividend-paying companies tend to be less risky as they tend to be profitable to pay a dividend (looking at you Boeing, borrowing to pay a dividend).

[@kutykutyka]

That sounds like it defeats the purpose to put my money in a stock if they're not able to make a decent profit with it, and have to give my own money back to me to reinvest it somewhere else, and most of us have no clue how to do that ,when it's hard enough to find one investment that might give a decent 10 plus percent return :D Berkshire is starting to look better and better by the second :D

[@Andrew21882]

I think you may be right. In that case it’s probably not a bad idea to select a handful of solid individual dividend paying companies in addition to your portfolio which should be concentrated towards a total return capturing the entire stock market. And I also think it’s good to stay away from high yield covered call ETFs, because their high fees and monthly distributions are eroding capital appreciation.

[@OutfitMyLife]

i dont argue with anyone anymore after the years of research before i put a dime into investing and what felt comfortable to me ...i just simply say.."dividend investing?..it isnt for everybody,just like when i say im focused on using wholelife insurance to exapnd my lil real estate portfolio..people sya im crazy..which is super offensive to me because its almost saying ..i never studied anything on where i place my money..im talking years before i purchased my 1st stock or property smh..my life is good so what i do isnt for everybody..some people like mixing ramen noodles with cat food ( canned tuna) Stay Dangerous!

[@wemustdissent]

Thats true. But you don't HAVE to invest in those companies. You can invest in companies that still have a solid foundation but are still in the process of active growth. I don't think his point is that those companies are foolish for issuing dividends. The point is more why prioritize those companies in your portfolio when instead you could prioritize growth balanced with bond yields?

[@dandan5817]

WOW !!! - I have been an avid investor since I was a kid and had no idea about this - I am almost embarrassed or mad at myself for not realizing this on my own - thank you very much for the education here. I do enjoy your videos. Dan

[@same.7939]

This is a pretty important topic Rob. Thanks! I don’t think this video is necessarily a case against dividend stock investing, I actually see it as a case against *blind* dividend investing, or “chasing the yield.” If one invests in moderately or low dividend-paying *growth* companies (think MSFT), then one doesn’t have to worry about the watchouts that you’ve rightly pointed out. Why? Because when I turn my DRIP on for MSFT, I’m picking up more of those shares that have high future growth potential. Yes, DRIP can be a zero sum game that day or week you reinvested, but if this is a quality growing company, you’re good. This is the dividend investing done right - invest in high-quality growth companies that pay some dividend today and don’t chase high yield!

[@lbowsk]

Bingo. Dividend Aristocrats for example. Keep buying with those D's reinvested.

[@MarcPugh]

So with dividend investing you get to retain the amount of shares of your company and if you "drip" it buys it back at a lower price (win). You also didn't examine what happens when the market returns and you have retained the amount of shares you have in the company vs the non divided investor who has fewer shares. I think you are missing the boat. 75% of the SP500's growth 1980-2019 came from dividends.

[@MarcPugh]

@Jamie Walkerdine wouldn't it only be shared dilution if the company is creating more shares? If the user is dripping they are just buying shares on the open market.

[@MarcPugh]

@@ski999 Qualified dividends paid are taxed at rates lower than the ordinary income tax rate-0% to 20%.1 Even during periods of recession, dividend stocks have historically shown growth. 75% of the returns from the S&P 500 from 1980 to 2019 came from dividends. While dividends may not outperform during a bull run over the long run, they do.

[@nova396]

​@@ski999 It isn't all psychological at all. When you retire and market goes to crap, you can use your dividend payments instead of selling stocks.

[@miri9600]

Even I knew about almost everything you said, you put it in so simple and logic way making me rethink my heavy dividend portfolio allocation. All that matters is total return.

[@coconutsfor2963]

I live off my dividends for years now and as long as you diversify your portfolios and keep investing through good and bad cycles in great companies, you’ll be just fine .

[@rogueinvestor2375]

Do you manage your portfolio by yourself or have someone else manage it for you? Currently I manage my portfolio myself. I wonder if it's worth having a financial planner or a broker manage it for me.

[@coconutsfor2963]

@@rogueinvestor2375 my advice is to read and watch alot of videos on investing and over time your gaining the knowledge that financial planners have . Markets move differently every year but if you keep your research and knowledge while watching your risk management- you’ll be good.

[@mrbigglesworth375]

Good advice-- caution on financial planners. Many not all but many will not have the vested interest in your portfolio as you would. Unfortunately, financial literacy is lacking across the country and the "I have a guy" that does it for me is all too common.

[@Andrew21882]

Are you investing in single stocks or ETFs for income?

[@seinensenpai1787]

@Craig There are growth and dividend stocks out there, two in one basically. You can have both without cutting your shares with the dividend. However, you lose the reinvestment opportunity to DRIP back into the shares if you live off your dividends. Growth is only half the equation.

[@MrKennypless]

Hello and thanks for the analysis. You noted quite often the “value” of the stock or the “price” of the stock (or ETF or mutual fund) goes down when a dividend is paid. I believe what goes down is the book value per share, often held to be meaningless. The book value per share has little if any connection to the “price”of the stock. When the price of a stock increases, the investor has u realized capital appreciation. When the investor receives a dividend, he or she realizes income. The sum of capital appreciation and income represents total return and is considered by many to be meaningful in evaluation an investment

[@RafamSales]

As a beginner in investing I would like to thank you very much for the explanation and the examples. It is really easy to understand the way you explain things. The dividend hype and fake assumptions I had are more in control now and I am thankful I came across with this video, because I think the best way for anyone to invest is check the fact instead of letting emotions decide for you.

[@brianlooksaround6125]

Thank you! I have been searching for this explanation for a long time. You’re the only one who has made it clear to me. Don’t know why it took me so long to grasp the concepts.

[@edgar_desouza]

Reinvesting dividends in good companies over the long-term does build wealth especially during down-markets when share prices are reduced and dividends buy more shares.

[@iwanchandra4877]

yes i agree sir...re invest deviden...at the same stock at lower price..for a long time...

[@vincef7487]

Exactly.👍🏽

[@iwanchandra4877]

it was compounding interest...😀

[@ivanbravomunoz1305]

Do "good companies" last and grow forever?

[@dotunfamakinwa]

I personally have a mix. Truth be told, you have mature businesses that are not in aggressive growth mode. They need to do something with retained earnings and thus pay shareholders a portion of retained earnings in the form of dividends. I hold dividend paying stocks with no intent to ever sell. It will allow me to retire early with dividends that provide a fairly stable cash flow. I also have my 401k, IRA and other investment vehicles - Dividend paying stocks is just one of the tools for me.

[@mrrscta]

I tell this to my friends for years and they still do not get the idea.

[@kurdi98k]

Appreciate the video and I agree with the concept. However, I thought I'd introduce VIG's strong distribution history to support an argument that could be made about stability during bad times. The only year it cut its dividend was in 2009, following the great financial crisis in which we had almost lost our banking system. In 2008 it paid an annual amount of $1.026 and in 2009 it paid $0.979 . That is less than a 5% cut during one of the most difficult economic times in the history of the US.

[@teresasinchak8121]

Thanks, Rob, for enlightening me on the difference between the tax outcomes of dividend income and selling stock shares for a profit to create income for retirees. I never thought to compare the two. Receiving income sounds easier than selling stock but as you explain it, dividends create more taxes. Do you have a video on the best way to sell stocks in retirement?

[@frankcelio5305]

Rob: The small reduction in share price due to dividends is only temporary . Unlike your bank account analogy where you permanently lost 100 dollars, the small reduction in share price will be quickly revalued by the market if the company is healthy. The investor will then have more shares or more cash in hand .

[@rob_berger]

Frank, that's certainly true in the short term. Just about anything can move the market. But over the long-term, I see it differently. A company can't give away billions in dividends each quarter without affecting its value. Sure, if it's a strong business, other factors will cause it to continue to grow. But dividends taken out do reduce its value, IMO.

[@hsinglu]

@@rob_berger Great video, Rob. You are definitely one of the smartest KZbinrs on the topic of investment. But I do sort of see Frank’s point. Let’s presume that we are not in an economic downturn, unlike the example in your video, then it seems like the price per share usually rebounds after a couple days pass the ex dividend date. That’s what I saw based on the data presented in the video. If we were to take a purely data driven approach, I wonder if we will see this quick price rebound effect for most dividend funds? Maybe that could be another video! 😉

[@pigsgobroke9889]

@@hsinglu Jerry we're in a bull market

[@michaelfenell3602]

@@hsinglu Economic downturn?

[@irhumbled]

@@hsinglu Most stocks rebound after a drop regardless of a dividend. Doubt the rebound is anything other than that.

[@sbkpilot1]

I've backtested several high dividend strategies vs just investing in something like VTSAX and the high dividend strategy always ended up performing poorly over the long term. The high dividends come at the expense of growth and that can be a huge drag. So, yes, it's a huge myth that continues to live on due to a fundamental misunderstanding of how dividends work. Thanks for covering this topic.

[@ADK_Adventures]

Yeah, high dividend strategy isn't for people who want growth, but for people who are looking for income, now. I honestly don't care about principal growth at all in this strategy, just hopeful that it remains flat over time so I can have a constant dividend income stream.

[@marklydon435]

Who says anything about high dividends, you back test with dividend growth companies and take a look at those that increase their dividends year on year by 10 - 20%. We have companies in the UK that have done this for over 20 years. Those original 3% yields are now 20 - 30%.

[@fendermon]

@@marklydon435 Great comment. The purchase date yield and the later yield are two different animals.

[@davidp252]

The adjusted closing price is simply a tool that people can use if they choose for analysis reasons. It is not the value of the last transaction on the market that day, which is truly the market-driven closing price. The company did not reach into your portfolio account and pay you with your own money. Instead, they reached into the company's cash reserves and chose to pay you instead of using it for something else. They did not affect their own ability to produce free cash flow, which is what the shareholder is arguably holding.

[@tulsatom4307]

Appreciated this Tutorial; T-Shirt: Nice fitting - what Brand?

[@stephenmorin8554]

Are the monthly dividends paid by bond etfs and mutual funds in the same category as dividends paid by stocks, stock etfs, and stock mutual funds?

[@stevenmorris2736]

So how does this compare to Reit dividend returns? Those are dividends too right?

[@rob_berger]

Yes, although in a taxable account they are taxed as ordinary income in most cases, which is why I own REITs in retirement accounts.

[@biskit7]

Holy smokes.... all these years studying investing and i still learned something new! Thanks...

[@richardcarlin1332]

I'm living on dividends and the beauty is the number of shares I own has not decreased. I see dividends like water in a pot. The water is the equivalent of a stock price. As a company earns money, the water in the pot increases. When the company distributes some of those earnings, the water in the pot temporarily decreases. The water in the pot will refill as the company earns more money. As long as you don't sell all of the water, and the company continues to earn money, you will never run out of money if you just withdraw the dividend. If you start withdrawing entire shares, you could run out of money if the stock market drops too much and you sold too many shares.

[@carlhammill5774]

The main reason to invest with Company paying dividends is not the dividends themselves but that the Company is strong enough financially to do so. There is some trade-off of future growth by paying dividends but entire objective of investments is to reduce your risk. Your risk are lower by investing with Companies with strong free cash flow, consistent sales growth & dividends.

[@jannorell6049]

Thanks for a very clear explanation of dividend stocks. I own a mix of dividend stocks, value stocks and a global index fund. I know that I wont get a super high value return since the dividend companys are mature and therefore don't grow in size. But I also think that my risk level is lower since these companys know what they are doing and how to make money. My comment is when the market turns up again after a crash, isn't it then an advantage to still own more stocks?

[@ArmageddonIsHere]

Please check your assumption that companies "know what they are doing and are therefore safe investments" against the following very large dividend paying companies: 1. JC Penney 2. Kodak 3. General Motors 4. RadioShack 5. Barnes and Noble to name just a few.

[@jamisonm5854]

I agree in that one shouldn't make a decision on buying a stock solely based on its dividend. However, most good companies worth owning pay a dividend, or will likely eventually pay a dividend, because they are companies that are earning cash profits to such an extent that they are giving those profits to shareholders when it makes sense to do so. When buying stocks, the criteria used should be centered around the quality of the business and its management.

[@DP52001]

Love your videos! Keep up the amazing work!

[@Togar-cs2jr]

In Canada, for low or moderate incomes, the effective income tax rate on (Canadian company) dividends is lower than for capital gains. Assuming, as a retiree, you need to 'withdraw' money from your portfolio, I would rather withdraw it as dividend income.

[@iamkerenlouise]

This is excellent information and a very different perspective on the topic. I had no idea regarding this fallacy regarding dividends. Thank you Sir for another great video.

[@MyUnsecretIdentity]

I'm glad i found your channel, it's good info to point out since most people (including me) would just see dividends and interest earned as the same thing. Never would've found that significant detail about dividends payouts. As you say, it doesn't make dividend stocks bad, it's just details to be aware of.

[@AlvaSudden]

19:25 "I heard dividends are, like, the BOMB." 🤣🤣🤣 But seriously, once I bought a super high-dividend REIT. It was a horrible experience since the share price went continually down. Now I have some idea what was happening.

[@JesseDayKR]

Discovered your channel a few days ago and have to say, for someone who is deeply interested in financial markets and investing, it's amazing. Love the long-form content and detailed breakdowns, tons of value here, thank you!

[@Michael_p_shea]

This is a great video! I consider myself a well educated investor but I have to admit that this video really opened my eyes to dividends. Keep up the good work!

[@phd_angel]

I'm not crazy about dividends but do like them.Yes, dividends reduce stock price, but we have the freedom to reinvest them in more stock. Because of such liquidity, dividend stocks are more desirable, thus pushing prices higher, even if fundamentals are the same. Overall, I'd say that benefits slightly outweigh the downside.

[@365vacay]

Many companies have stopped paying dividends since the pandemic, too.

[@DavS827]

I had *no idea* about this! Thank you!

[@lindapatrick2676]

Don’t know if you’ll ever see this question cause it’s an older video, however in response to new to me info re dividends my question is: Is it better not to reinvest dividends back into individual stocks in a taxable account or does it matter? Thanks!

[@calvinistjim]

I've watched lots of your videos. They're all great. But this video was the most helpful, well articulated video yet! Thank you.

[@michaelmartin9985]

Hi Rob, Great video (enjoy your other videos as well). I have the same view about dividends. I have discussions with others about this topic and most just do not understand or do not want to admit it. A few other points about dividends. I look at dividends as a withdrawal rate on my capital that is pre-determined by the company paying the dividend (I much rather have my own withdrawal rate). Also, most like to argue that the price adjustment somehow magically comes back immediately to make up the loss in value as a result of the dividend adjustment. My argument back is if that were true, then I could do the following: There are 250 trading days per year. I could just find a stock for each trading day of the year and capture the dividend. In other words, I could just roll my capital from stock to stock and capture the dividend for 250 days a year. In this scenario, if the average yield on a stock is 3%, then in theory I could make roughly 180% in profits (yes, $1 becomes $2.80) each year. However, dividend capture strategies have mixed results at best proving that the price does not make up for the price adjustment for the dividend.

[@tomj528]

I've been researching how to simplify our investments, generate income (when the time comes) and still remain tax free in retirement with another 20 years to go to full retirement age. While we're firmly in the 12% bracket so we have a 0% LTCG/QD rate, I'm also in the midst of a long term plan to convert ALL of our tax deferred investment to our Roth IRA account slowly over time and under taxable limits. Unfortunately, dividends interfere with this plan since I'm using the form 8880 retirement savers credit and I'd lose that with excessive dividend income. I also don't like how dividends greatly reduce or even eliminate capital appreciation. Currently I'm thinking that a S&P 500 index fund for our taxable investments with it's low dividend yield and reinvesting the dividends for now and then after I'm done with the Roth conversions re-evaluating. In retirement we'd have Social Security, some taxable interest, I could take the dividend income from the Index funds rather than re-investing it (if needed) and then take as much or as little (or none) from our Roth IRA accounts as we wish while still remaining completely tax free, even when there's only one of us left. I like the idea of still enjoying some capital appreciation while getting a little dividend income when/if needed that's easily "activated". No RMDs to deal with, ultimate flexibility and even some "headroom" in our tax bracket to "step up" the cost basis of our taxable investments just in case they change the LTCG/QD rates or if we need to sell a large portion of our taxable holdings, above our tax-free limits. It's a complex issue but with far-sighted tax planning it's possible to move mountains and find the best solutions.

[@chrisheavens2812]

Hi Rob Even as a British investor I enjoy your videos. I would query your example of dividend v non dividend regarding sequence of returns risk because surely the point is that the dividend investor ends up with the same number of shares( even though they have lost more value) but importantly these shares can all then recover in value as the market eventually goes up.

[@Mrdest211]

If the share price regains 10%, it doesn't matter how many shares you have, that 10% applies to the total value of the position. You could have 10 shares or 100, your recovery is 10%.

[@alexgrant11]

Thank you for sharing your knowledge Rob.

[@normanwei529]

Thanks very much this is first time im hearing this and it changes my mind on dividends by quite a bit

[@kssandhu4693]

Great job..Rob..good teaching my friend..cheers..

[@ceciliajalmasco872]

Thank you Rob, I have been really learning to be more critical of investments because of you! I am a big fan of dividend investing (even as I am not yet retired) and re-investing it to gain more shares... question: does your video apply to REITS? Thanks again.

[@wemustdissent]

So if you are going off the 4% rule for withdrawls in retrirement...should you be subtracting any dividend yield from that 4% to adjust? Otherwise wouldn't say with a 2% dividiend yield and 4% withdrawl you technically be withdrawing 6% at that point?

[@jtsdeals]

In bear markets growth (non-dividend) stocks usually lose much more value than value stocks. So while theoretically the dividend vs non-dividend case may not be different, in reality it's more complicated. The core idea here that paying dividends is basically the same as selling long term gains is important to be aware of, it's true that they are not "free."

[@obidamnkenobi]

But growth also goes up more in good times than value. And there is more good times than bad times.

[@AlanBram]

I would argue it's not quite true that the owner of the dividend fund has no control: she can choose to reinvest some or all of the dividend. That provides approximately the equivalent of the non-dividend fund holder's ability to decide on the timing and amount of selling shares. I do agree, though, that the dividend fund holder ends up with less control over the tax aspect. That said, thanks for another great video: very clear and useful!

[@seattledan]

Wow so is there any point in stocks that pay dividends?

[@johnglatt3627]

Rob, my brain hurts with your whiteboard drawings BUT, it makes complete sense. Thanks for this.

[@blakegirouxphotography]

Myself I like dividend growth investing. Have a portfolio with both dividends and growth stocks and dividend growth stocks just so I can add to positions with good companies and still obtain that growth I’ve found that’s helped me a lot

[@donnafong2267]

Wow ….I never thought of it that way and I’ve been an investor since the 80’s! Good video! Keep up the good work!

[@koufax174]

Great explanation

[@dougb8207]

If stocks are held over long periods of time, in many cases the dividend percentages slowly increase. So one may, for example start with a 1% dividend, and end up years later with a 4% dividend, including upon the increases in numbers of shares if the dividends were reinvested. Of course, dividends can decrease also. Nothing's certain; I keep some dividend stocks and some without for growth. Sometimes I trade one dividend stock for another that I think will perform better while still providing a decent dividend. It's a moving target. I think with dividend stocks, one hope their share price recovers in a reasonable amount of time, say 1 to 3 weeks. I guess than one might have to consider, well maybe the growth stock increased that much also? I've heard over decades, dividends contribute about 40% of S&P earnings. Interesting and thought-provoking discussion.

[@dominicbier1384]

Dividends are essentially forced selling which is bad in a bear market or when the market is down and gives people less control on when they are taxed on their investments.

[@missouri6014]

Very well done and I love your examples because they were spot on

[@brucelaw8574]

Me Berger Would not the dividend yield rise in a market downturn if no dividend cuts made?

[@rob_berger]

Yes, but the amount of the dividend wouldn't change.

[@brucelaw8574]

@@rob_berger I would agree that you must use total dividend payment and not percentages- I thought you used percentages; I bad lol

[@papabear4066]

Good information

[@matthewharrigan3568]

I think a dividend is similar to a stock split with a forced sale. A 5% dividend is like getting 21 shares for every 20 you have. Then selling that share. Then paying tax. Then rebuying that share if reinvesting dividends.

[@Random-yq1wu]

You dont pay taxes on stock split.

[@matthewharrigan3568]

@@Random-yq1wu you pay tax when you sell

[@mabuhayproductionltd3627]

@@matthewharrigan3568 No, not all

[@matthewharrigan3568]

@@mabuhayproductionltd3627 what is the difference?

[@earlwilliams5473]

I noticed that the day after the divided date the day starts off lower the the close of the prior day as well.

[@Mr.Mister96]

What about the fact that dividends allow you to purchase more shares and thus have more votes whereas if you were to sell share to create your own dividend your amount of shares would decrease and you'd have less votes in the company

[@knotwerken]

So, how do I allocate my cash? I have mixed invests. Only want a non loss parking space for cash ... thx

[@rob_berger]

The only places I know of to park cash without risk of loss are those backed by the U.S. gov't--FDIC insured bank accounts and U.S. gov't bonds (short-term), and even short-term bonds can lose money.

[@tlowensjr]

If any company discontinues dividend payments, there will be new nominees for the board of directors. There are exceptions to discontinue the dividends and most investors align with those particular exceptions. But a company sitting on large sum of money and all objectives are fully funded, investors will start applying pressure.

[@shprabin]

Rob, Thank you. I enjoyed your video. I think you gave more emphasis on the theory that the companies you invested in, will always be profitable and use the earnings for growth and further increase their value and hence your investment return. That's the best-case scenario for growth-based investment. If companies payout some earnings to investors in form of dividends, Investors can also make better use of the dividends for diversifying their investments. Hence minimizing the risk rather than risking the growth companies to re-invest all the company's earnings. Thank you again for some insights on tax thing.

[@SuperFEQMA]

This is such a thorough analysis that cuts through all of the emotion to highlight what dividends are, what they can do, and what they can’t do. I wish I would have watched this before I watched hours of pro-dividend strategy videos from other channels. Well done!

[@vitalsign0]

You spoke about the stock price dropping on ex dividend date, but the price doesn’t stay down. It goes right back up within a few days. There is no scenario where selling shares makes more sense. The flaw is this argument is thinking the share price doesn’t go back up after dividends are paid out.

[@christopherwalsh3101]

I know a number of "dividend investors" and I'm gonna send them this video!

[@LockStockAndBabble]

With the non-dividend investment you only pay taxes on the gain when selling stock. Isn't there an additional tax benefit in that capital gains taxes are at a lower rate than dividend income?

[@rob_berger]

Generally no. Qualified dividends are taxed as long-term capital gains.

[@rossmacintosh5652]

Rob addressed that benefit at 18:00 in the video.

[@natewinslow]

Always learning with this channel

[@trulyanonymous7436]

Thank you very much for making this video and highlighting this very important aspect. I heard the stories and saw the videos of people living off their dividend portfolios. I was on the fence about considering the same until I watched this. I'm now content to just carry on with my total US & total international funds

[@j.p.9189]

Curious to hear your opinion on DRIP. Always like to hear other viewpoints. Thanks

[@robertarmer6060]

DRIP is the way you become an investor and not a speculator. Do your research and pick companies you believe in that have a good cash buffer and proven growth record.

[@j.p.9189]

@@robertarmer6060 Thank you

[@stevenanter2958]

I tried calculating the difference between "close" and "adjusted close" for Mcdonalds (MCD) at time of dividend. The stock price difference is equal to the dividend only for the most current dividend. If I do the calculation on prior dividends, the difference does not equal the dividend amount. What gives?

[@rob_berger]

Yes, there are other things that can affect the adjusted close.

[@Lagunabeachbikini]

Everytime there is a dividend, stock split or cap gains distriubution, Yahoo recalculates all the prior Adj Close prices. Adj Close is a number calculated by Yahoo to facilitate calcualing return from one date to another date. It has no more usefulness than that.

[@billhillify4924]

Appreciated the video…good information

[@davidpatterson4024]

What about funds that buy calls?

[@christschool]

I was up 58% on my tobacco holdings in 2022, paying 9% dividend yield too. Not all dividend stocks are equal.

[@Brownbeltforever]

It seems dividend stocks attract a lot of attention, causing market buyers to purchase them - potentially over non dividend stocks. Does this not cause stock prices to rise potentially more than non dividend stocks simply because of the attractiveness of them (even if dividend stocks are only paying you your own money)?

[@tennnis498]

I think so. In some cases, the businesses that pay a solid dividend are also great companies. So, everything goes together. In my opinion, it’s just another layer of accounting and complexity added to the company.

[@thetradersam6157]

well!! I have used my DIV's to purchase and diversify my portfolio, and my wealth have grown quite substantially...

[@Jay1971lion]

Portfolio to analyze… 20% FLCSX 45% FSKAX 15% FSPSX 5% FIKCX 8% FXNAX 7% FIQTX. Question, why would Warren Buffet select 10 short term gov versus total bond fund? Thanks!!!

[@jonnelson9760]

I will add something from my own experience. I once owned a company that paid a dividend. They were not doing well financially so the dividend was at 13% yield because of it. I thought ok it’s a big risk but I will take it until they turn things around and even if they reduced their dividend it would still be an acceptable amount. Well a new CEO came on board and eliminated the dividend. I sold right away @ $6.30 per share. Since then the price crashed and it’s now less than $1.00. In this case it seems the dividend actually increased the share price. Removing it should have increased the price if things are as you say.

[@jonathonpriest]

Companies have a choice: reinvest profits (stock price goes up) or pay dividends (stock price stays the same - or dips by a trivial amount). Either way, wealth is being generated. You either get that wealth generation in the form of higher stock or in the form of a dividend, but the end result for the investor is the same.

[@jeremysmith3142]

The S/P price index w negative 24% from 2000- 2010. The S/P price index minus dividends accounts for 40% of the S/P return over an average rolling 10 year period

[@redchevy3307]

I recently read an article on Forbes (7 best retirement funds of 2022). The article recommended Vanguard's Wellesley and Wellington funds and these are highly rated funds. Wellesley and Wellington invest primarily in dividend paying stocks. This article was written by Rob Berger. If you invested $10k in an S&P 500 fund (VFINX) in 1986 you would have about $394k today with dividends reinvested. Do not reinvest the dividends your total is $156k. (Portfolio Visualizer) That's a big difference. To say "dividends don't increase your wealth"? I don't get it.

[@hummerchine]

HUGELY important video! I’ve been investing and studying investing for decades, yet I only recently learned this important fact. Nobody talks about it, I honestly think most “experts” don’t even know. I also recently discovered your KZbin channel, GREAT JOB!!!

[@johncartier3956]

Rob. I think that a more Holistic Analysis would be to compare the Total Return (Capital Appreciation & Dividends & Interest (if applicable) of Top Dividend paying Stocks vs Top Non - Dividend Paying Stocks,. I think that you will find that the Capital Appreciation of the Stocks are similar, so getting paid the Dividend is a Bonus. I do understand that its payed out of the Earnings.

[@briankelly7632]

Hi Rob. Love your videos. With regard to your examples of share price decreases on the ex-dividend date, is there data that shows anything about share price adjustments *after* dividend distributions? In other words, does the dividend amount *remain* reflected in the share price or do investors readjust the price based on what they see as the inherent value of the company (investors may not think the inherent value of the company has been reduced precisely by the amount of the distributed dividend)? Of course the dividend is a distribution of capital so there's that much less cash on the company's books, but there's more to a company's value than simply that. Just wondering if you know of any data on share price adjustments immediately-post dividend distribution. Thanks.

[@suprithAnCom]

I have the same question

[@mabuhayproductionltd3627]

the company should earn new money, so usaly the stock price will recover (also because stock prices increase on average 8-8,5% a year), if the company pays out 100% of the years profit?, then the stock price should be at least the same next year (same date before X-day)

[@rudycriss935]

I have 5 years to retirement I have a 70-30 portfolio is that good for my time frame? Thanks

[@LarkOfTheWoods]

If you have 70% in equities, most advisors would say that this is too risky for someone that close to retirement, especially considering the current high valuations and likelihood of a significant correction. I am also around five years to retirement and have reduced my retirement investments to 50/50.

[@martin_for_a_break]

Many thanks Rob. Very helpful. What if I wanted to produce income not relying on dividend? Sell stocks? - Can you explain what alternative options there are if dividends are not the solution to regular income from investments? Thank you.

[@eddenoy321]

There are 3 main safe options : Annuities, Treasuries, and CD's ....IF you are willing to accept low but stable returns. All major online brokers and banks have them. Do your homework if you want to avoid market risk.

[@frankcelio5305]

Companies do not set stock prices..markets do. If dividends reduce stock prices why dont other operating expenses do the same ?

[@rob_berger]

Well, expenses affect the stock price indirectly in that they lower profits. In the long-term, profits are what drive stock values. But dividends are treated differently as you saw in the video. They literally lower the price of the stock by the amount of any cash dividends.

[@PradeepKumar-eh1wh]

What about Dividend from a Bond ETF or mutual fund?

[@rob_berger]

Bonds pay interest.

[@TheHomeHandyman]

Question: Ill keep it very simple - Example: I started buying KO a long time back in the 25-30 range and it pays a dividend which i reinvested into additional shares. Fast Forward to present and i still have it and i have added shares over time increasaing my position hugely. So, price appreciation aside for a sec and with the reinvestment into additional shares and compounding etc-. How is it that this is a bad idea? please explain because i just do not see it

[@Pdub_Productions]

The stock market does not set prices based on the NAV of the stock. It is based on sentiment and expected future returns of the company. Most of what you do is great, but this makes me question your understanding on how stocks are priced

[@wiv2631]

Thank you for this video. I'm at an age where I think I have fully grasped a concept, but later realize I might have a gap here and there. I'm going to review the video a second time.

[@bujin5455]

An excellent analysis.

[@earlwilliams5473]

Thank you. I was about to go 100% SCHD because I too thought that dividends where extra money. Back to the drawing board.

[@eddenoy321]

You really learned something.

[@ShamileII]

Very interesting Rob. You know way more than I do but after the dividend is paid, the amount is replenished by earnings. In the savings example, the amount never goes back up to 100% because that's all you have...but the dividends are created by earnings. Please show me where I'm missing something. BTW, dividend growth investor here.

[@mrbigglesworth375]

You are so correct! Thanks for sharing! I don't know where the motivation to tarnish dividends is coming from? Its suspect.

[@44_max3]

Interesting and enlightening video, thank you! If folks are still enamored with ‘aristocrat companies’, that’s all well and good, but then you’re talking about stock-picking, which brings some element of risk into the equation, however small. Also, in the scenario you laid out, you were extremely generous with the dividend payout being exactly the same in a down market.

[@billcarrick4077]

I live off my dividends, AND haven't sold any stock, AND my stocks increase in value each year. YES, the dividend THAT DAY doesn't increase wealth, BUT holding those stocks long term increases your wealth dramatically. If you reinvest those dividends, your good as gold.

[@royprovins7037]

Berkshire doesn't pay a dividend but Buffett always invests in dividend stocks. Why ? So he can invest the money as he wants

[@jasonhawkins2717]

Great presentation, thank you. I suspected that there are no “free” rides in the stock market without accepting risk.

[@terryadams1830]

Spot on!