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What do you expect from a dividend portfolio in the long term?
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@PikaPika0105 Probably dividends
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@DerMartin I hadn't even thought about that. And what is that other than a yield killer?
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@PikaPika0105 There are so many ways to approach your personal investment/provision etc. that your very general, out-of-context statement is simply wrong.
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@DerMartin Why so aggressive, that was a serious question, albeit perhaps too pointed for some people. What is it, your dividend stocks, other than a yield killer? If you can't find an answer to that, it doesn't speak for your form of investment.
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@PikaPika0105 Please explain why dividends are a yield killer.
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@PikaPika0105 My goodness, he wants to build a dividend portfolio. There is no need for a yield issuer to constantly come along and explain how much higher returns are possible.
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@CI_Mom Because dividend stocks usually belong to companies with minimal growth and little untapped potential. You often see high dividend yields in companies that have problems and have therefore suffered an increased share price decline, which tends to indicate further losses, but many then blindly buy the whole thing because of 7-10% dividends. In addition to the already low growth, several % (i.e. the dividend, often 3-6%) are then ripped out of the share price every year. Most people then consume these dividends instead of reinvesting them. In the end, the whole concept of the dividend portfolio is a yield killer in several places (weak potential, potential problems, reduced share price), which can also be seen from the numerous profiles on Getquin that post incredible personal milestones with 85-100% equity. What's impressive about having saved a lot of money? You don't usually post your account balance. In this context, I would simply have been interested to hear what someone who bets on dividend stocks has to say about this overall. Didn't expect the outrage here....
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@Maverick4831 then just refuse to engage in discourse. The fact that no one here can explain what the dividend fetish is actually supposed to bring them is not surprising, but it is telling enough.
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@PikaPika0105 I've already commented on this far too often in the forum, so I'll just copy and paste my other posts:
The assumption that dividend stocks generate structurally weaker returns is empirically untenable. Numerous studies show that dividend yields are closely linked to value factors. Dividends are essentially a form of distribution of free cash flow to investors, whereby it is theoretically irrelevant whether this is done via traditional dividends or share buybacks.
Since the early 2000s, many investors have established a preference for stocks without dividends, as they expect higher growth from them. Historically, however, it has not been shown that growth stocks have systematically outperformed value stocks in the long term. On the contrary: value strategies, which often include dividend stocks, have delivered a risk-adjusted excess return over long periods of time.
Fama & French already showed in 1988 https://www.sciencedirect.com/science/article/abs/pii/0304405X88900207 that the dividend yield is a reliable indicator of expected long-term returns. Simplified: higher dividend yield = higher expected return. Logically speaking, companies with falling valuations often have higher dividend yields, making them more attractive to investors and achieving higher returns on average in the long term.
The period from 2010 to the present is fundamentally driven by debt-financed share buybacks financed during the zero interest rate phase. Hence the outperformance of the MSCI Worlds in recent years.
A comparison of indices confirms this with both higher Sharpe ratios and higher annualized returns:
https://curvo.eu/backtest/de/vergleichen?portfolios=NoIgsgygwgkgBAdQPYCcA2ATEAaYoYCiADEQEIAsAMgKwCaAnABwDMOAjALpdA%2C+NoIgsgygwgkgBAdQPYCcA2ATOAJAlgcwAs4ARXAN1wwFMA7LATV2sxABphQYBRABl4BCUbAgByARQCcAFnYBGALpKgA
If we extend the review back to 1975, the comparison for an MSCI World looks even worse.
The assumption that dividend stocks generate structurally weaker returns is empirically untenable. Numerous studies show that dividend yields are closely linked to value factors. Dividends are essentially a form of distribution of free cash flow to investors, whereby it is theoretically irrelevant whether this is done via traditional dividends or share buybacks.
Since the early 2000s, many investors have established a preference for stocks without dividends, as they expect higher growth from them. Historically, however, it has not been shown that growth stocks have systematically outperformed value stocks in the long term. On the contrary: value strategies, which often include dividend stocks, have delivered a risk-adjusted excess return over long periods of time.
Fama & French already showed in 1988 https://www.sciencedirect.com/science/article/abs/pii/0304405X88900207 that the dividend yield is a reliable indicator of expected long-term returns. Simplified: higher dividend yield = higher expected return. Logically speaking, companies with falling valuations often have higher dividend yields, making them more attractive to investors and achieving higher returns on average in the long term.
The period from 2010 to the present is fundamentally driven by debt-financed share buybacks financed during the zero interest rate phase. Hence the outperformance of the MSCI Worlds in recent years.
A comparison of indices confirms this with both higher Sharpe ratios and higher annualized returns:
https://curvo.eu/backtest/de/vergleichen?portfolios=NoIgsgygwgkgBAdQPYCcA2ATEAaYoYCiADEQEIAsAMgKwCaAnABwDMOAjALpdA%2C+NoIgsgygwgkgBAdQPYCcA2ATOAJAlgcwAs4ARXAN1wwFMA7LATV2sxABphQYBRABl4BCUbAgByARQCcAFnYBGALpKgA
If we extend the review back to 1975, the comparison for an MSCI World looks even worse.
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@PikaPika0105 The author has presented his investment case and clearly defined the objective. The question is why you want to open a discourse under his post at all without contributing anything to the question. You are generalizing, both with regard to companies that pay dividends and that their investors consume the dividends. Why don't you start your own thread and explain to everyone (who is interested in the discourse) why dividends are stupid and how you can achieve your 25-30% annual return and be financially free at 30😉
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