Why does it always have to be dividends?

1Yr

@Reinecke Me too.

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Tomáš@MadHatter

1Yr

@Reinecke based

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DerMartin@DerMartin

1Yr

Everyone has a different motivation.
I'm 50 and would like to have foreseeable payouts from my investments.
The fact that these are constantly increasing motivates me to increase my savings rate. In the end, this motivation is more valuable to me than squeezing the last percent out of my investments. It's not always about "optimal" - it can also be "fun".

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TaxesAreTheft@TaxesAreTheft

1Yr

@DerMartin There is nothing wrong with personal preferences. However, a dividend is nothing more than a forced payout. Nobody is stopping you from making partial sales of the same amount every year. Dividends are part of your total return and not a "source of additional income" separate from the share value. Keyword dividend discount.

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1Yr

I've explained this to you before. Theoretically, the argument is correct, but there is no factual evidence that dividends weaken the growth of the company in the long term. To do so, you would have to assume that every €1 that a company reinvests in itself leads to an increase in value, which again cannot be proven. There are companies where this works and others where it does not. Take REITs, for example, which pay such high dividends because they have tax advantages due to the high payout ratio. Another example, because you mentioned it yourself, BAT, they can't reinvest as much money as they make in their operating business, it's simply not possible, so they pay a dividend to generate added value for investors. Whether you should really only buy a share because of dividends is a completely different issue. Even Meta has now decided to pay a dividend and why, because they can't profitably reinvest this excess cash. Your thesis just doesn't make sense in practice because nobody knows what will happen in the future, we don't know where prices will be in 10 years. If the market suddenly crashes or goes sideways without any price gains, you'll be glad of any dividend. I'm not even bringing the topic of reinvestment into this. There are certainly companies that are better off investing every cent in their own company, but there are also companies that would just be sitting on a mountain of cash, and permanent share buybacks are not always the solution.

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Magician@income_magician_28

1Yr

@TaxesAreTheft I can agree with you on many points. I am much more concerned with criticizing the succinct handling of dividends. Too little attention is paid to tax disadvantages. These exist and do not require a perfect market.

I can't agree with you on the last point, because why should I be happy about a dividend that reduces the value of my investment per distribution. You can also make partial sales at any time.

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1Yr

Thanks for the explanation.👍

But what's the point of selling shares? Then I'll soon have none left. 🤣

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1Yr

@income_magician_28 First of all, you assume that prices will rise and even if they don't. It makes no difference whether you receive a €3 dividend on €100 and the money is now in your clearing account or whether you sell 3%/€3 yourself. In both cases, money flows from your share to your account.

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1Yr

@Aktienmasseur The calculation is far too rational! The dividend investor "feels" poorer and poorer when selling. And that's what matters!

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Deleted User

1Yr

Comment was deleted

Magician@income_magician_28

1Yr

@Apfel72 It doesn't matter whether you have €100 in shares and €3 in your clearing account and your share cake is therefore smaller due to the dividend discount, or whether you sell €3 in shares and end up with a cake of €97.

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Nico@Lucki_Lucki

1Yr

@Aktienmasseur Of course it makes a difference. After 30 years, for example, I have sold all 10 shares and have €0 in my portfolio. In the case of dividend files, I still have all 10 shares after 30 years and can bequeath them

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SemiGrowth@SemiGrowth

1Yr

@Lucki_Lucki the only problem is that you can't sell fragments, but in principle your statement is not entirely correct.

Because when a dividend is paid out, the price of your shares falls (your position gets smaller). Exactly the same thing happens if you sell so many shares that you get exactly the same money (we assume that you can sell fractions or that you have an extremely large number of shares)

As the price rises in the best case, you will have fewer shares (not zero) but your position will be exactly the same size

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1Yr

@SemiGrowth So then I will spend the next 40 years trying to accumulate an "extremely large number of shares" so that I can then sell shares and no longer pursue the dividend strategy. In other words. I'll go for dividends and my children and grandchildren won't. 😉😁👍

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1Yr

@SemiGrowth good Ergänzung☺️

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Finanz E.@Kek15

1Yr

@Lucki_Lucki do the math again. That is not correct. You get the same result.

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Finanz E.@Kek15

1Yr

@Apfel72 change the wife every few years but the shares are not sold 😅 if women experienced so much romance, they would also be much more sociable😎😂

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Saarastronaut@Watzeklicker

1Yr

Hello my dear,

but it's always the same topic. And now let me give you my personal opinion using an example.

Imagine the Federal Republic of Germany was a company. Then the FRG would be the company with the highest dividends. It pays the highest social benefits in the world and also provides the most development aid in the world - I'm just talking about cycle paths in Peru. But only the bare minimum is invested in Germany's own company. As a result, it is far behind in education and growth is zero

The same applies to some dividend companies, even if the example of Germany is a little crass.

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1Yr

@Tenbagger2024 🤦🏻

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Robert W.@Robwe

1Yr

@Tenbagger2024 The social benefits contribute to the stability of the "BRD company" (if you really want to call it that), e.g. in terms of security from crime and domestic demand.

Comparing this with dividend payers is very misleading, but never mind:

If I hold companies with a long dividend history over the long term (which I personally don't do, by the way), then my income increases every year with sufficient diversification.

Being able to pay a dividend is simply a special quality feature.

Compare, for example, Graham's Intelligent Investor.

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devnerd_daddy@devnerd_daddy

1Yr

@Robwe
This example should make it clear that many companies pay a dividend even though they cannot afford to do so. In fact, companies often go into debt just to be able to keep to the dividend history. This is often a spiral from which the company can no longer escape, because not paying the dividend would be an enormous loss of confidence.

So it's similar to the FRG - you pay benefits and give gifts even though you can't afford it. Often just to avoid losing voters.

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Robert W.@Robwe

1Yr

@Tenbagger2024 Yes, I understand that.

But you can simply buy companies with reasonable payout / cash flow etc.

In Germany, I would say that we should definitely invest more.

But our stability is a great locational advantage.

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1Yr

@Tenbagger2024 Dude ... I don't know what to say to that. If I disagree with you, I may be ignoring the fact that your post is a perfect example of a lack of education.

Anyway, I'll do it anyway: what bullshit 🆘

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devnerd_daddy@devnerd_daddy

1Yr

@devnerd_daddy
Oh, a toxic person has just exposed themselves 🆘

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1Yr

@Tenbagger2024 Well, I wouldn't call you toxic, more like deluded or trapped in a bubble.

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1Yr

@devnerd_daddy
You were also meant by toxic

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Horrax D@Horrax

1Yr

There are also rational reasons for deciding against permanently reinvesting companies.

Example 1:
The fictitious company XYZ decides not to pay a dividend. The business concept is innovative in a growing market. Over decades, annual sales and profits increase in the double-digit range. The share price rises accordingly. Due to technical progress, the company loses out after 3 decades due to some questionable decisions by the new CEO. 7 years later, the company is fighting for survival. The share price slips to the level of 50 years ago.
Conclusion: negative return over the entire period (share price -20%)

Example 2:
The fictitious company ABC decides to distribute some of its profits directly to shareholders. The company's performance is similar to that of XYZ, but the dividends are constantly increased in line with its success, which is also reflected in a lower share price increase. After 50 years, when the company is no longer competitive like XYZ, the investors have already received the capital invested several times over through dividend payments. After 40 years, the annual dividend alone was as high as the original capital invested.
Conclusion: negative return over the entire period (share price -80%)
Although this fact is sobering due to the dividends paid out, it is far less tragic than in example 1

I am aware that these are extreme examples. However, that does not make them completely unrealistic. They serve as a logical reminder of why it is not complete nonsense to opt for this type of investment.

In a mathematically perfect world, the accumulating variant is ALWAYS better. Of course, every dividend investor should be aware of this.

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Finanz E.@Kek15

1Yr

@Horrax Of course, there are also reasons for dividends to forego returns, but as your example shows, these are very adventurous 😅

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Uwe@SchlaubiSchlumpf

1Yr

@Horrax The examples do not fit at one point. The author is an advocate of partial sales. With these, I could just as easily reduce my invested volume in this company if the share price rises. Why I still think the examples are good: It implies that reinvestments in companies are often healthy. However, if they are so high that you constantly have to open up new lines of business because the sales market doesn't fit the actual focus, it can happen that I get lost with the company. Then I either make the leap to a large corporation or burn a lot of money on new projects. Maybe too much. However, in line with the saying "cobbler stick to your last", the company could pay healthy dividends for a long time and try to become or remain the market leader within the scope of its own expertise. (Dividend payout ratio greater than 0%less than 100%, usually less than 50% assumed) - view of a layman without being able to rely on studies or statistics.

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1Yr

Thanks for the further contribution on the dividend strategy! I've already had various discussions here about the sense and nonsense of dividend focus. A year ago this was even stronger than today, as in 2022 value performed better than growth (i.e. basically momentum as a reason for dividends, which no div investor would admit 😅).

It always came back to the same thing: "I know that the dividend strategy is irrational and costs me money. But monthly dividends motivate me more than rising share prices. I can buy something from the former, the latter are just abstract."

In the meantime, however, some people seem to have gotten the message. And the tips are more often in the direction of DivGrowth $GGRP, which is the strategy with the highest historical return.

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1Yr

@Epi Thank you for your words and I have no objections to personal motivations. Unfortunately, I often see irrational arguments being sold as truth and young investors in particular believing that dividends give them "free money on top".

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Pascal@Pacco93

1Yr

@Epi Has there already been a discussion somewhere about whether $GGRP or $FGEQ is better?

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1Yr

@Aktienmasseur I don't know how long you have been following the discussion about dividends here, but we had explained the striking psychological dependence of young investors on dividends with the tendency towards "instant gratification". Ideally, monthly dividends give you the feeling that you are constantly being rewarded for your actions. The fact that this ruins the compound interest effect in the long term is not so important.

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1Yr

@Pacco93 I think so, but it wasn't controversial.
$GGRP had disappointed many investors at the turn of the year with an unplanned and strangely justified div cut. The ETF is now on many people's hit list. Another cut like that "due to growth" and it's out of the portfolios. Rightly so, in my opinion.

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Pascal@Pacco93

1Yr

@Epi Thank you for the factual and quick answer!

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Eric@Weisswurstsepp

1Yr

@Epi If I am interpreting this correctly, does this only apply if I do not reinvest?

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Enrique@Dividenden_Monteur

1Yr

@Weisswurstsepp In principle, you are right that the compound interest effect is then retained. However, you are then the accumulator yourself and can actually save yourself the back and forth. The investment universe also becomes much larger, e.g. to include shares in $BRK.B

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1Yr

I can understand your points. Nevertheless, I don't necessarily want to sell my shares later, as a large part of them will, in the best case, be inherited.
As only 10% of my portfolio is invested in a few high-yield stocks, the rest in dividend growth and the lion's share in the dividend-paying World ETF, I have little or no worries about performance.
The pros and cons of dividends are a tiresome discussion and in a perfect market we wouldn't need them.
You yourself commented that financial scientists have been racking their brains over this for decades.

And as Graham noted almost 75 years ago: A man-made market is not perfect and never rational.

#teamirrational

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Eggplant@Eggplant

1Yr

@Aktienmasseur
Theoretically an interesting discussion, but highly unnecessary due to insults, polemics and the attempt to ridicule arguments.

There are various points that could be considered:
1. shares vs shareholder/entrepreneur: if you buy shares in an entrepreneur you could be speculating (share price/venture capitalist) or you are a shareholder or entrepreneur and accordingly interested in the company's results and therefore also in the results and their distributions

2. even if it has been ridiculed: suddenly finding yourself without a corresponding share is not so unlikely. There are several reasons for this: Diversification and share price. Have you ever tried to sell a fraction of a Berkshire Hathaway A? (because you're always dealing with the extreme here...)

3. dividend discount: Theoretically, it makes sense to assume that the share is reduced by the price of the dividend. But in the end, the share price is the price that someone believes the company is worth and someone else does not. Just take the Allianz share from last year, you can't really tell that there is a dividend discount (that doesn't mean it doesn't exist)

4. share buybacks do not mean that the company is doing well, nor that the share price will go up. Nor does it mean that a company is not doing this out of its assets or on credit, because it may have to do this in order to be able to maintain the employee share programs.

5. financial tip Financial consideration of the various strategies (buy and hold with accumulating shares is not the winner): https://www.youtube.com/watch?v=eAY6iZ6mlyw

6. up-front lump sum: the up-front lump sum must be covered either by "own" funds or share sales in the case of the accumulating variant.
In my opinion, various tax aspects in different countries make a theoretical construct such as "accumulators are always better" absurd.

7. a dividend portfolio could be rebalanced through dividends without giving up shares in companies in which one believes. By that I mean if Lindt grew too much you could put that dividend into Tesla, for example, without sacrificing your stake. (Yes, again intentionally using an extreme example)

None of my points are not to be seen as for or against a dividend strategy, but are intended to counteract pointless bashing and also to show possible alternative points of view. My list is not complete, I just wanted to provide a counterpart to the facts.

Regardless of the unpredictability of the future, it also depends heavily on personal preferences and there is rarely a portfolio that really only consists of one or the other.

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lullatscho@lullatscho

1Yr

The biggest aspect for most people is WHEN do I make partial sales and to which company? This psychological and usually also emotional aspect is precisely the problem. With dividend stocks, I "only" have to make a good selection, to put it bluntly. The decision as to when the cash flow 💸 will come is already made in advance and is then the sum of all the individual items. Of course, the company's policy can change and then this can be completely eliminated, but it is a much easier decision to reallocate. I sleep much better with it and I think many others who rely on dividends feel the same way.

Everyone should pursue a strategy that they feel comfortable with and that is what matters, not what is better or worse.

You can always squeeze out a few percent more. The question is always how this relates to the time required.

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Joost K.@Joostkroes

1Yr

@lullatscho The argument you make is one I also hold to, that dividend investing (coupled with buy-and-hold) means that there are fewer decisions to make. It greatly reduces my cognitive load as I also have other things to do than managing my portfolio.

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Saarastronaut@Watzeklicker

1Yr

Now that this has been clarified, I propose a petition against savings accounts. This evil must be tackled even more vigorously and eradicated from the investment universe.

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Markus@_xempex_

1Yr

If all people were always totally rational, there would be no conspiracy theories, people would not vote for Trump or the AFD or Ms. Wagenknecht and would all invest in the stock market. It's totally logical in theory, but unfortunately it doesn't reflect the real world.

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1Yr

@_xempex_ too true.🥹

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Xantia@Xantia

1Yr

Dividends are great.

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Kai@Dividenden-Sammler

1Yr

Thinks he knows his stuff and then something like this. *shake head*

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IchPutzHierNur@IchPutzHierNur

1Yr

@Dividenden-Sammler Means to comment and only provides comprehensible points of criticism *shake head"

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1Yr

everything is completely correct. that's what i said as a certified financial advisor 😊👍🏼

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Sascha@Sascha-

1Yr

Paying out dividends hurts less than selling or partially disposing of securities that you have held for a long time. (:

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View all 2 further answers

Markus@_xempex_

1Yr

Theoretically, you can explain everything rationally from an ivory tower and have THE ONE TRUTH. Unfortunately, this often does not match the reality of people. (I'm not referring to the person who wrote the post, but to people in general ^^)

As many have already written, dividends are perceived by many people as additional income, while selling shares makes you feel poorer. For me, this "feeling" is even true, because my shares will definitely go to zero at some point if I sell them every month. Most people don't think that about dividends, especially as BAT should probably have already gone bankrupt three times according to this logic, because with a 9% dividend yield the share would have to go to zero every 11 years.

Another advantage that should not be underestimated is that dividends simply come and you don't have to do anything yourself. This is also a convenience that many people appreciate. A small point that I may have overlooked. Dividends generally cost no fees, whereas selling shares at "normal" banks costs around EUR 10.

And basically, I always find it a pity in such discussions that stocks are supposed to be created here again. Even the "irrational" dividend investor is better than someone who doesn't invest at all. Wouldn't it be better to get more people into investing instead of confusing beginners even more with such trench warfare?

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Yannik@BottomTopInvest

1Yr

Basically, I wouldn't disagree with you except for two points. 1. if you look at the history of the past decades, dividends have accounted for a large part of the gains.
2. if you sell in a crash because you want cash flow compared to the dividend strategy, in my opinion the biggest possible disadvantage. If the market suddenly rises, you have fewer shares and lose returns at the crucial moment.
Just my two Cents❤️.

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Shoot@Shoot

1Yr

That's true, but I think that for most people it's a lack of knowledge about when to buy and when to sell, e.g. eli Lilly has always been a regular stock, even if it's growing slowly and the dividend is still rising in the best case and I don't have to worry about buying or selling, preferably via a savings plan and thus head off and the main thing is that the money is invested 👍.

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Alex91@Alex91

1Yr

There is no perfect strategy, there is no one rule fits all. Depending on your age, risk tolerance, macroeconomic outlooks and most importantly the company performance it can make sense to invest in dividend paying stocks out there, mainly the ones that grow their dividends every year in a sustainable way and also paying off debt and realising buybacks. And if they are undervalued because everyone is focusing on hit growth stocks even better.

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Felix@Investor_in_Jogginghose

1Yr

Dividends would not be a problem if there were no taxes on them.

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Rendite_Fuxx@Rendite_Fux

1Yr

I agree with you. I don't look at dividends as a first step, and I also look at shares without dividends.
A decent dividend increase and a strong rise in the share price is more fun anyway 😄😅

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erT@erT

1Yr

What you are unfortunately forgetting in your presentation is that you cannot choose whether to buy Microsoft with or without a dividend and the dividend discount is usually quickly made up. It may still be easy to find a similar alternative with Microsoft. But if you want to invest in utilities, consumer goods, real estate, finance or industry, for example, then it's difficult to choose a company that doesn't pay dividends and invests everything itself. You are therefore limited in your choice when it comes to avoiding dividends. Of course, today everything can be done via ETFs, but that doesn't change anything else.
Just don't draw the two camps into extremes. There is not just black and white. I'm happy about my dividends. From Microsoft, Siemens or Waste Management. I certainly didn't buy the shares solely because of the dividends, but that way I don't have to discriminate against entire sectors.

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Bestcapitalinvest@BestCapitalInvest

Simon@Reisbauer

1Yr

Cobbler (masseur) stick to your last

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1Yr

Finally someone who has understood it 🫶🫶🫶🫶 this hype about high div costs everyone so much return... at the same time many forget that for almost 15! years the markets have been rising. I'm looking forward to the next crash. Community companies such as $SHEL $T $MPW $WBA etc have already cut back

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Viktor_Wachstum@Viktor_Wachstum

Simon@ChunkyMonkey

1Yr

You have already written the rational advantage yourself in the text. Dividends "can" be shortened or deleted. Exactly right. They "can" but do not have to be reduced or canceled. If the share price continues to rise and I get dividends on top of that, I clearly see the advantage in dividend stocks.
You also qualify your statement right at the beginning and write that you are only referring to BAT, for example. Later in the text you generalize your statement again and refer to ALL dividend investors.

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1Yr

I stick with dividends✅ because they go straight into the account.
This is not the case with share price performance. As quickly as a share price "goes through the roof", it can also fall just as quickly. And your book value gain has vanished into thin air.
To each his own. You stick with share prices. I'll stick with dividends ✅😎

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Marcel@Lalarobo

1Yr

In the end, it all comes down to a good mix. Growth stocks that provide performance and can also be sold from time to time, as well as value stocks that earn money year after year and distribute it to shareholders.
I would like to mention one point again, because some people have not understood why it makes no difference in theory that you can also sell shares and are not left with an empty portfolio at some point. If I sell 10% of my portfolio every year, I will still have something after 10 years. In theory, this is just as much € as the dividend hunter, as the share price of the remaining share is so high that you end up with the same portfolio value. One share for €10 is just as much as 10 shares for €1.

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Ronny H.@Maximus2

1Yr

You are shedding something and that is decisive. The dividend increase every year. Warren Buffett now gets 71 percent dividends. Invested around 1985. Time is the magic word.

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