Possibly including dividend stocks/ETFs in investment strategy

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john963red
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Possibly including dividend stocks/ETFs in investment strategy

Post by john963red »

Right now, I am using a three-fund portfolio for my Roth IRA (technically two funds as I don't have bonds for now). Lately, I've been reading about using dividend stocks which minimize volatility and maximize dividend payouts (ex. covered call ETFs) in my Roth IRA as well. Would it be worthwhile to include dividend stocks in my Roth IRA (possibly 10-15% allocation) for this compound growth? If so, what dividend ETFs are recommended for this?

In addition, I am looking into general investing in a taxable brokerage account (for money which is separate from my emergency fund). However, I am unsure of what my investing strategy should be here. I've looked through Betterment and M1 Finance's suggested portfolios for inspiration, but I'm not sure if this is the best path to follow. (Please note here that I wouldn't invest through Betterment or M1 Finance, I just used their portfolios to guide my research.) Or would I be better off completely focusing on dividend stocks here, considering that the return is generally greater than what's possible in an HYSA?

Any advice is appreciated, but please keep in mind that I do understand the volatility and risks associated with money in the stock market, and remember that my emergency fund is separate from these investments.
alex_686
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by alex_686 »

This is not a good strategy.

For funds it is pointless. The purpose of dividend distributions is to create "reportable transactions" to the IRS so you can do your taxes. No economic purpose. For context this was my day job.

For stocks there are many threads about dividends verse "Dividend Irrelevance Theory". I belong to the Dividend Irrelevance Theory. Dividends are intuitive, much like heavy objects falls faster under Aristotelian physics. Intuitive, but wrong. People start off with the wrong starting assumptions and so go down the wrong path.

Lets say you want to find stocks that have a nice steady return. There are dividend stocks that do this. There are non-dividend stocks that do this. There are dividend stocks that are very risky. In short, in real life, dividends don't convey much of a signal on what companies are going to provided nice steady dividends.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

Depends on what you want out of the Dividends.

I subscribe to a portion of my overall portfolio to be dividend growth equities and some etf's like qyld, ryld, nusi, etc.
You will have to decide if you keep as cash or reinvest and understand they will come into your account like-it-or not.

Many here will tell you that dividends are a tax drag. That is dependent on where you invest them. I consider dividends PART OF total return. Many here don't....don't know why.

My strategy --> Part of my portfolio at retirement is to have enough dividends to pay .5 to 1.0 of my monthly expenses after SS. This type of portfolio needs to be built over time imo.

Queue up the 10 page debate.

I'll be glad to send you my own list / watch list if want.
RyeBourbon
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

Why would you care about dividends in a Roth IRA? Why exclude non-dividend payers from your stock allocation? All you should be concerned with is total return.
exodusNH
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by exodusNH »

olyveoil wrote: Tue Oct 12, 2021 7:42 am Depends on what you want out of the Dividends.

I subscribe to a portion of my overall portfolio to be dividend growth equities and some etf's like qyld, ryld, nusi, etc.
You will have to decide if you keep as cash or reinvest and understand they will come into your account like-it-or not.

Many here will tell you that dividends are a tax drag. That is dependent on where you invest them. I consider dividends PART OF total return. Many here don't....don't know why.

My strategy --> Part of my portfolio at retirement is to have enough dividends to pay .5 to 1.0 of my monthly expenses after SS. This type of portfolio needs to be built over time imo.

Queue up the 10 page debate.

I'll be glad to send you my own list / watch list if want.
No rational soul thinks dividends aren't part of total return. They are.

But there's nothing special about them and have two big negatives: they create income you may not need at that time and some part of them are non-qualified (much higher taxes).

Dividends are not guaranteed. Many were cut/halted in 2020.

Ignoring taxes, selling 1% of your portfolio and taking 1% as dividends as cash is the exact same thing. Except you'll owe less to the government on the former.

There can be psychological benefits.
muffins14
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by muffins14 »

There is some probability that dividend-paying stocks also load on the value factor (check thus for your fund), meaning they’d have a higher expected return. If so you could keep the value stocks in Roth and growth stocks in taxable, because that would be better for tax purposes.

It’s better to avoid paying taxes when possible, which is

A) why people shouldn’t like dividend funds in general
B) why you shouldn’t focus on seeking higher dividends in taxable accounts
Last edited by muffins14 on Tue Oct 12, 2021 8:13 am, edited 1 time in total.
RyeBourbon
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

muffins14 wrote: Tue Oct 12, 2021 8:11 am There is some probability that dividend-paying stocks also load on the value factor, meaning they’d have a higher expected return. If so you could keep the value stocks in Roth and growth stocks in taxable, because that would be better for tax purposes.

It’s better to avoid paying taxes when possible, which is

A) why people shouldn’t like dividend funds in general
B) why you shouldn’t focus on seeking higher dividends in taxable accounts
I don't know if there is any evidence that dividend paying stocks have a higher expected return.
muffins14
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by muffins14 »

RyeBourbon wrote: Tue Oct 12, 2021 8:13 am
muffins14 wrote: Tue Oct 12, 2021 8:11 am There is some probability that dividend-paying stocks also load on the value factor, meaning they’d have a higher expected return. If so you could keep the value stocks in Roth and growth stocks in taxable, because that would be better for tax purposes.

It’s better to avoid paying taxes when possible, which is

A) why people shouldn’t like dividend funds in general
B) why you shouldn’t focus on seeking higher dividends in taxable accounts
I don't know if there is any evidence that dividend paying stocks have a higher expected return.
My point isn’t that dividend stocks by themselves have a higher return, it is that portfolios that load positively on the value factor HmL have higher expected return.

It happens to be the case that several funds that call themselves “dividend funds” also load on the value factor
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22twain
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by 22twain »

Congratulations, OP, you've stirred up the dividends-versus-total-return hornet's nest. :oops:
It's "Roth", not "ROTH". Senator William Roth was a person, not an acronym.
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JoMoney
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by JoMoney »

john963red wrote: Mon Oct 11, 2021 8:43 pm Right now, I am using a three-fund portfolio for my Roth IRA (technically two funds as I don't have bonds for now). Lately, I've been reading about using dividend stocks which minimize volatility and maximize dividend payouts (ex. covered call ETFs) in my Roth IRA as well. Would it be worthwhile to include dividend stocks in my Roth IRA (possibly 10-15% allocation) for this compound growth? If so, what dividend ETFs are recommended for this?

In addition, I am looking into general investing in a taxable brokerage account (for money which is separate from my emergency fund). However, I am unsure of what my investing strategy should be here. I've looked through Betterment and M1 Finance's suggested portfolios for inspiration, but I'm not sure if this is the best path to follow. (Please note here that I wouldn't invest through Betterment or M1 Finance, I just used their portfolios to guide my research.) Or would I be better off completely focusing on dividend stocks here, considering that the return is generally greater than what's possible in an HYSA?

Any advice is appreciated, but please keep in mind that I do understand the volatility and risks associated with money in the stock market, and remember that my emergency fund is separate from these investments.
I understand you're relatively new here, welcome aboard! You're doing good saving money for your future, and the three-fund style approach your using in your Roth IRA sounds good.

That said, there is a lot of Boglehead "cringe" in your post.
A total stock market fund already has all the dividend paying stocks in it. Over-weighting dividend paying stocks is not a recommended strategy, I would grant their are a few legitimate reasons to do so, but most of reasons are bad and without basis in reality.
A stock option "covered call" trading ETF is very different then a dividend paying stock ETF. The option trading strategy will generate high fees from the trading activity, and generates its dividends from its trading activity (generally a bad thing) rather than from return of earnings from business activity like a regular stock.
A High Yield Savings Account is essentially risk free, and not at all comparable to a dividend paying stock where one should expect a high amount of risk where they may lose a large amount of money in a very short amount of time.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Da5id
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by Da5id »

olyveoil wrote: Tue Oct 12, 2021 7:42 am Many here will tell you that dividends are a tax drag. That is dependent on where you invest them. I consider dividends PART OF total return. Many here don't....don't know why.
Find me the many people who don't think that "total return = price appreciation + dividends".

I've seen a huge number of these threads come and go, and I've not seen people saying that. Perhaps you are interpreting people saying that dividends aren't a special portion of total return as that? Or perhaps you are interpreting people saying that stocks fall by ~the amount of the dividend paid when a stock goes ex-dividend as meaning that those dividends aren't part of total return? Again, if there are "many" people in bogleheads arguing against the basic way to compute total return I've not observed them.
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CyclingDuo
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by CyclingDuo »

exodusNH wrote: Tue Oct 12, 2021 8:07 am
olyveoil wrote: Tue Oct 12, 2021 7:42 am Depends on what you want out of the Dividends.

I subscribe to a portion of my overall portfolio to be dividend growth equities and some etf's like qyld, ryld, nusi, etc.
You will have to decide if you keep as cash or reinvest and understand they will come into your account like-it-or not.

Many here will tell you that dividends are a tax drag. That is dependent on where you invest them. I consider dividends PART OF total return. Many here don't....don't know why.

My strategy --> Part of my portfolio at retirement is to have enough dividends to pay .5 to 1.0 of my monthly expenses after SS. This type of portfolio needs to be built over time imo.

Queue up the 10 page debate.

I'll be glad to send you my own list / watch list if want.
No rational soul thinks dividends aren't part of total return. They are.

But there's nothing special about them and have two big negatives: they create income you may not need at that time and some part of them are non-qualified (much higher taxes).

Dividends are not guaranteed. Many were cut/halted in 2020.
Just to clarify a couple of points...

Full year dividends for the S&P 500 were higher in 2020 than they were in 2019 by a smidge in spite of those companies that temporarily cut or halted their quarterly dividend during the pandemic. Keep in mind that over 400 companies in the S&P 500 pay dividends, so we all get to deal with dividends from our index investments as part of total return investing. :mrgreen:
exodusNH wrote: Tue Oct 12, 2021 8:07 amIgnoring taxes, selling 1% of your portfolio and taking 1% as dividends as cash is the exact same thing. Except you'll owe less to the government on the former.
LT capital gains taxes and taxes on qualified dividends are the same in a taxable account. There are ways to mitigate the taxes (especially in a MFJ household) if one is in the "sweet spot" of income where enough net income is coming in to run the household and not pay taxes on the qualified dividends (or LT cap gains). The tax strategy of diverting enough gross income into their tax deferred retirement accounts to remain within the "sweet spot" and still have enough net income to cover all household expenses is available to help with this mitigation. Not every household fits within that "sweet spot", but for those that do - the strategies are available.

:sharebeer

CyclingDuo
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Da5id
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by Da5id »

CyclingDuo wrote: Tue Oct 12, 2021 8:43 am LT capital gains taxes and taxes on qualified dividends are the same in a taxable account. There are ways to mitigate the taxes (especially in a MFJ household) if one is in the "sweet spot" of income where enough net income is coming in to run the household and not pay taxes on the qualified dividends (or LT cap gains). The tax strategy of diverting enough gross income into their tax deferred retirement accounts to remain within the "sweet spot" and still have enough net income to cover all household expenses is available to help with this mitigation. Not every household fits within that "sweet spot", but for those that do - the strategies are available.
You can also utilize that LTCG tax free space by realizing capital gains. LTCG are perhaps a bit easier to manage precisely than dividends, and has the advantage that you can defer them into the future to whatever extent you think wise. Some dividends in taxable are fine, and each to their own though.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

RyeBourbon wrote: Tue Oct 12, 2021 7:50 am Why would you care about dividends in a Roth IRA? Why exclude non-dividend payers from your stock allocation? All you should be concerned with is total return.
It's not an either/or decision. Per the OP, he/she is considering 10-20% allocated to dividend payers. There is no exclusion of anything. Dividends are part of total return.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

exodusNH wrote: Tue Oct 12, 2021 8:07 am
olyveoil wrote: Tue Oct 12, 2021 7:42 am Depends on what you want out of the Dividends.

I subscribe to a portion of my overall portfolio to be dividend growth equities and some etf's like qyld, ryld, nusi, etc.
You will have to decide if you keep as cash or reinvest and understand they will come into your account like-it-or not.

Many here will tell you that dividends are a tax drag. That is dependent on where you invest them. I consider dividends PART OF total return. Many here don't....don't know why.

My strategy --> Part of my portfolio at retirement is to have enough dividends to pay .5 to 1.0 of my monthly expenses after SS. This type of portfolio needs to be built over time imo.

Queue up the 10 page debate.

I'll be glad to send you my own list / watch list if want.
No rational soul thinks dividends aren't part of total return. They are.

But there's nothing special about them and have two big negatives: they create income you may not need at that time and some part of them are non-qualified (much higher taxes).

Dividends are not guaranteed. Many were cut/halted in 2020.

Ignoring taxes, selling 1% of your portfolio and taking 1% as dividends as cash is the exact same thing. Except you'll owe less to the government on the former.

There can be psychological benefits.
Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.

They create income....many plan for that income....IE to them they are special. Investors should know how they will be taxed...this doesn't mean investors should avoid them.

Some were cut in 2020. Some grew. Kinda like the rest of the stock market. On the former in a tax deferred you will likely woe the same.
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

olyveoil wrote: Tue Oct 12, 2021 8:56 am
RyeBourbon wrote: Tue Oct 12, 2021 7:50 am Why would you care about dividends in a Roth IRA? Why exclude non-dividend payers from your stock allocation? All you should be concerned with is total return.
It's not an either/or decision. Per the OP, he/she is considering 10-20% allocated to dividend payers. There is no exclusion of anything. Dividends are part of total return.
I read the post too quickly, but even so, it's a tilt towards dividend-payers, which I don't think there is any evidence will enhance total return. Otherwise everyone would do it. As a tilt, it's just a personal preference, a form of market timing (i.e. I think at this time, dividend/value is going to be a better investment). It wouldn't be my preference as I'm not convinced that value is better than growth or vice-versa. Own the whole market at market weight (I have 100% VTI in my Roth).
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

RyeBourbon wrote: Tue Oct 12, 2021 9:06 am
olyveoil wrote: Tue Oct 12, 2021 8:56 am
RyeBourbon wrote: Tue Oct 12, 2021 7:50 am Why would you care about dividends in a Roth IRA? Why exclude non-dividend payers from your stock allocation? All you should be concerned with is total return.
It's not an either/or decision. Per the OP, he/she is considering 10-20% allocated to dividend payers. There is no exclusion of anything. Dividends are part of total return.
I read the post too quickly, but even so, it's a tilt towards dividend-payers, which I don't think there is any evidence will enhance total return. Otherwise everyone would do it. As a tilt, it's just a personal preference, a form of market timing (i.e. I think at this time, dividend/value is going to be a better investment). It wouldn't be my preference as I'm not convinced that value is better than growth or vice-versa. Own the whole market at market weight (I have 100% VTI in my Roth).
Fair enough.
Why isn't everyone doing 100% VTI?

point being -- everyone doesn't invest the same way-have the same goals-have the same needs.
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

olyveoil wrote: Tue Oct 12, 2021 9:09 am
RyeBourbon wrote: Tue Oct 12, 2021 9:06 am
olyveoil wrote: Tue Oct 12, 2021 8:56 am
RyeBourbon wrote: Tue Oct 12, 2021 7:50 am Why would you care about dividends in a Roth IRA? Why exclude non-dividend payers from your stock allocation? All you should be concerned with is total return.
It's not an either/or decision. Per the OP, he/she is considering 10-20% allocated to dividend payers. There is no exclusion of anything. Dividends are part of total return.
I read the post too quickly, but even so, it's a tilt towards dividend-payers, which I don't think there is any evidence will enhance total return. Otherwise everyone would do it. As a tilt, it's just a personal preference, a form of market timing (i.e. I think at this time, dividend/value is going to be a better investment). It wouldn't be my preference as I'm not convinced that value is better than growth or vice-versa. Own the whole market at market weight (I have 100% VTI in my Roth).
Fair enough.
Why isn't everyone doing 100% VTI?

point being -- everyone doesn't invest the same way-have the same goals-have the same needs.
I don't think 10-20% tilt is going to have a significant impact anyway so if it makes you feel like you're doing something smart, go for it.
alex_686
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by alex_686 »

muffins14 wrote: Tue Oct 12, 2021 8:11 am There is some probability that dividend-paying stocks also load on the value factor (check thus for your fund), meaning they’d have a higher expected return. If so you could keep the value stocks in Roth and growth stocks in taxable, because that would be better for tax purposes.
It is like trying to determine the sex of a person by their hair length. Long hair means that they are a woman, short hair means they are a man. Expect that lots of woman have short hair. It kind of works but there are better methods.

Some do load on the value factor. Yes, Value has had a higher return in the past. I am not sure this will continue in the future. They also have had higher risk. Most people looking for dividends stocks are looking for lower risk, not higher.

Others load on the Quality or Low Volatility Factor. Critically here how dividend stocks load on these factors change over time.

If you want Value stocks then you should buy a Value funds, not a second rate proxy dividend fund.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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CyclingDuo
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by CyclingDuo »

Da5id wrote: Tue Oct 12, 2021 8:54 am
CyclingDuo wrote: Tue Oct 12, 2021 8:43 am LT capital gains taxes and taxes on qualified dividends are the same in a taxable account. There are ways to mitigate the taxes (especially in a MFJ household) if one is in the "sweet spot" of income where enough net income is coming in to run the household and not pay taxes on the qualified dividends (or LT cap gains). The tax strategy of diverting enough gross income into their tax deferred retirement accounts to remain within the "sweet spot" and still have enough net income to cover all household expenses is available to help with this mitigation. Not every household fits within that "sweet spot", but for those that do - the strategies are available.
You can also utilize that LTCG tax free space by realizing capital gains. LTCG are perhaps a bit easier to manage precisely than dividends, and has the advantage that you can defer them into the future to whatever extent you think wise. Some dividends in taxable are fine, and each to their own though.
Correct. Due to our household having been in the "sweet spot" for many, many years - I remain agnostic about both LTCG and qualified dividends with a focus on the tax strategies to keep the accumulation years humming along. If our household was not in that "sweet spot" for household income, net income, expenses, etc... - I might be less agnostic.

CyclingDuo
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olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

RyeBourbon wrote: Tue Oct 12, 2021 9:11 am
olyveoil wrote: Tue Oct 12, 2021 9:09 am
RyeBourbon wrote: Tue Oct 12, 2021 9:06 am
olyveoil wrote: Tue Oct 12, 2021 8:56 am
RyeBourbon wrote: Tue Oct 12, 2021 7:50 am Why would you care about dividends in a Roth IRA? Why exclude non-dividend payers from your stock allocation? All you should be concerned with is total return.
It's not an either/or decision. Per the OP, he/she is considering 10-20% allocated to dividend payers. There is no exclusion of anything. Dividends are part of total return.
I read the post too quickly, but even so, it's a tilt towards dividend-payers, which I don't think there is any evidence will enhance total return. Otherwise everyone would do it. As a tilt, it's just a personal preference, a form of market timing (i.e. I think at this time, dividend/value is going to be a better investment). It wouldn't be my preference as I'm not convinced that value is better than growth or vice-versa. Own the whole market at market weight (I have 100% VTI in my Roth).
Fair enough.
Why isn't everyone doing 100% VTI?

point being -- everyone doesn't invest the same way-have the same goals-have the same needs.
I don't think 10-20% tilt is going to have a significant impact anyway so if it makes you feel like you're doing something smart, go for it.
1.) Dividend paying tilt is not market timing.
2.) why isn't everyone doing 100% VTI?
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

olyveoil wrote: Tue Oct 12, 2021 9:48 am
RyeBourbon wrote: Tue Oct 12, 2021 9:11 am
olyveoil wrote: Tue Oct 12, 2021 9:09 am
RyeBourbon wrote: Tue Oct 12, 2021 9:06 am
olyveoil wrote: Tue Oct 12, 2021 8:56 am

It's not an either/or decision. Per the OP, he/she is considering 10-20% allocated to dividend payers. There is no exclusion of anything. Dividends are part of total return.
I read the post too quickly, but even so, it's a tilt towards dividend-payers, which I don't think there is any evidence will enhance total return. Otherwise everyone would do it. As a tilt, it's just a personal preference, a form of market timing (i.e. I think at this time, dividend/value is going to be a better investment). It wouldn't be my preference as I'm not convinced that value is better than growth or vice-versa. Own the whole market at market weight (I have 100% VTI in my Roth).
Fair enough.
Why isn't everyone doing 100% VTI?

point being -- everyone doesn't invest the same way-have the same goals-have the same needs.
I don't think 10-20% tilt is going to have a significant impact anyway so if it makes you feel like you're doing something smart, go for it.
1.) Dividend paying tilt is not market timing.
2.) why isn't everyone doing 100% VTI?
Not sure what you're trying to prove here? I don't claim to know more than the market. Some people think they do.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

RyeBourbon wrote: Tue Oct 12, 2021 9:51 am
olyveoil wrote: Tue Oct 12, 2021 9:48 am
RyeBourbon wrote: Tue Oct 12, 2021 9:11 am
olyveoil wrote: Tue Oct 12, 2021 9:09 am
RyeBourbon wrote: Tue Oct 12, 2021 9:06 am
I read the post too quickly, but even so, it's a tilt towards dividend-payers, which I don't think there is any evidence will enhance total return. Otherwise everyone would do it. As a tilt, it's just a personal preference, a form of market timing (i.e. I think at this time, dividend/value is going to be a better investment). It wouldn't be my preference as I'm not convinced that value is better than growth or vice-versa. Own the whole market at market weight (I have 100% VTI in my Roth).
Fair enough.
Why isn't everyone doing 100% VTI?

point being -- everyone doesn't invest the same way-have the same goals-have the same needs.
I don't think 10-20% tilt is going to have a significant impact anyway so if it makes you feel like you're doing something smart, go for it.
1.) Dividend paying tilt is not market timing.
2.) why isn't everyone doing 100% VTI?
Not sure what you're trying to prove here? I don't claim to know more than the market. Some people think they do.
1.) dividend paying tilt is not market timing
2.) you stated that if dividend tilts would enhance total return then everyone would do it. I am flipping that around. Why isn't everyone going 100% VTI? It's a different perspective.
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

olyveoil wrote: Tue Oct 12, 2021 10:03 am
RyeBourbon wrote: Tue Oct 12, 2021 9:51 am
olyveoil wrote: Tue Oct 12, 2021 9:48 am
RyeBourbon wrote: Tue Oct 12, 2021 9:11 am
olyveoil wrote: Tue Oct 12, 2021 9:09 am
Fair enough.
Why isn't everyone doing 100% VTI?

point being -- everyone doesn't invest the same way-have the same goals-have the same needs.
I don't think 10-20% tilt is going to have a significant impact anyway so if it makes you feel like you're doing something smart, go for it.
1.) Dividend paying tilt is not market timing.
2.) why isn't everyone doing 100% VTI?
Not sure what you're trying to prove here? I don't claim to know more than the market. Some people think they do.
1.) dividend paying tilt is not market timing
2.) you stated that if dividend tilts would enhance total return then everyone would do it. I am flipping that around. Why isn't everyone going 100% VTI? It's a different perspective.
Where did I claim that 100% VTI gave a higher total return?
dbr
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by dbr »

olyveoil wrote: Tue Oct 12, 2021 10:03 am
Why isn't everyone going 100% VTI?
Probably because it is too simple and does not offer proof that there is no way to meaningfully improve on the prospects when there are so many ideas that can be suggested in the spirit of "Why not X?" and "Why not Y?" It is very difficult to continuously show that there are no special ideas out there when for some investors finding a special idea is a kind of holy grail. To be satisfied with the mean is just not to be serious about investing, right?
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

dbr wrote: Tue Oct 12, 2021 10:19 am
olyveoil wrote: Tue Oct 12, 2021 10:03 am
Why isn't everyone going 100% VTI?
Probably because it is too simple and does not offer proof that there is no way to meaningfully improve on the prospects when there are so many ideas that can be suggested in the spirit of "Why not X?" and "Why not Y?" It is very difficult to continuously show that there are no special ideas out there when for some investors finding a special idea is a kind of holy grail. To be satisfied with the mean is just not to be serious about investing, right?
Yes. Plus not every investor is the same. Different goals, different risk profiles, different outlooks on investing, etc. Same reason some investors may want to allocate some of their portfolio to dividend payers for very good reasons.
The dogma of VTI only or 3 funder only doesn't work for everyone. This place would be kinda boring if everyone had the exact same investing outlook.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

RyeBourbon wrote: Tue Oct 12, 2021 10:14 am
olyveoil wrote: Tue Oct 12, 2021 10:03 am
RyeBourbon wrote: Tue Oct 12, 2021 9:51 am
olyveoil wrote: Tue Oct 12, 2021 9:48 am
RyeBourbon wrote: Tue Oct 12, 2021 9:11 am
I don't think 10-20% tilt is going to have a significant impact anyway so if it makes you feel like you're doing something smart, go for it.
1.) Dividend paying tilt is not market timing.
2.) why isn't everyone doing 100% VTI?
Not sure what you're trying to prove here? I don't claim to know more than the market. Some people think they do.
1.) dividend paying tilt is not market timing
2.) you stated that if dividend tilts would enhance total return then everyone would do it. I am flipping that around. Why isn't everyone going 100% VTI? It's a different perspective.
Where did I claim that 100% VTI gave a higher total return?
You didn't. where did I claim you did?
dbr
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by dbr »

olyveoil wrote: Tue Oct 12, 2021 10:26 am
dbr wrote: Tue Oct 12, 2021 10:19 am
olyveoil wrote: Tue Oct 12, 2021 10:03 am
Why isn't everyone going 100% VTI?
Probably because it is too simple and does not offer proof that there is no way to meaningfully improve on the prospects when there are so many ideas that can be suggested in the spirit of "Why not X?" and "Why not Y?" It is very difficult to continuously show that there are no special ideas out there when for some investors finding a special idea is a kind of holy grail. To be satisfied with the mean is just not to be serious about investing, right?
Yes. Plus not every investor is the same. Different goals, different risk profiles, different outlooks on investing, etc. Same reason some investors may want to allocate some of their portfolio to dividend payers for very good reasons.
The dogma of VTI only or 3 funder only doesn't work for everyone. This place would be kinda boring if everyone had the exact same investing outlook.
One should also keep sight of the fact that VTI does not not pay dividends. Investing in a fund of stocks that do not pay dividends is probably another one of those "Why not X?" things and doesn't even exist as far as I know. There is always Berkshire.
RyeBourbon
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by RyeBourbon »

olyveoil wrote: Tue Oct 12, 2021 10:26 am
RyeBourbon wrote: Tue Oct 12, 2021 10:14 am
olyveoil wrote: Tue Oct 12, 2021 10:03 am
RyeBourbon wrote: Tue Oct 12, 2021 9:51 am
olyveoil wrote: Tue Oct 12, 2021 9:48 am
1.) Dividend paying tilt is not market timing.
2.) why isn't everyone doing 100% VTI?
Not sure what you're trying to prove here? I don't claim to know more than the market. Some people think they do.
1.) dividend paying tilt is not market timing
2.) you stated that if dividend tilts would enhance total return then everyone would do it. I am flipping that around. Why isn't everyone going 100% VTI? It's a different perspective.
Where did I claim that 100% VTI gave a higher total return?
You didn't. where did I claim you did?
We're done here. Good day.
Admiral
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by Admiral »

OP: Perhaps it would be helpful if you could state your goal with regards to dividend investing.

For example, do you seek income?

Or, are you looking for growth?

If you seek income, then selling shares to create the income you need is generally a better strategy when it comes to taxation of that income. You control when you get it, how much you get, and taxes are due only on the gain.

If you seek growth, then dividends are one part of a total return strategy, with the other being growth of capital. Again, in general, owning the entire market provides much better diversification and better tax mitigation (assuming you hold a fund that does not pay capital gains and distributes qualified dividends only).

Dividends are not a free lunch. Way back in the day I remember my Morgan Stanley advisor touting this stock and that fund because it "paid a nice dividend." Never did he mention that I'd be paying needless tax on money I didn't need. That was before I knew better.
lostdog
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by lostdog »

alex_686 wrote: Mon Oct 11, 2021 9:05 pm This is not a good strategy.

For funds it is pointless. The purpose of dividend distributions is to create "reportable transactions" to the IRS so you can do your taxes. No economic purpose. For context this was my day job.

For stocks there are many threads about dividends verse "Dividend Irrelevance Theory". I belong to the Dividend Irrelevance Theory. Dividends are intuitive, much like heavy objects falls faster under Aristotelian physics. Intuitive, but wrong. People start off with the wrong starting assumptions and so go down the wrong path.

Lets say you want to find stocks that have a nice steady return. There are dividend stocks that do this. There are non-dividend stocks that do this. There are dividend stocks that are very risky. In short, in real life, dividends don't convey much of a signal on what companies are going to provided nice steady dividends.
+1
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

RyeBourbon wrote: Tue Oct 12, 2021 10:30 am
olyveoil wrote: Tue Oct 12, 2021 10:26 am
RyeBourbon wrote: Tue Oct 12, 2021 10:14 am
olyveoil wrote: Tue Oct 12, 2021 10:03 am
RyeBourbon wrote: Tue Oct 12, 2021 9:51 am
Not sure what you're trying to prove here? I don't claim to know more than the market. Some people think they do.
1.) dividend paying tilt is not market timing
2.) you stated that if dividend tilts would enhance total return then everyone would do it. I am flipping that around. Why isn't everyone going 100% VTI? It's a different perspective.
Where did I claim that 100% VTI gave a higher total return?
You didn't. where did I claim you did?
We're done here. Good day.
That's too bad.
Topic Author
john963red
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by john963red »

Admiral wrote: Tue Oct 12, 2021 10:38 am OP: Perhaps it would be helpful if you could state your goal with regards to dividend investing.

For example, do you seek income?

Or, are you looking for growth?

If you seek income, then selling shares to create the income you need is generally a better strategy when it comes to taxation of that income. You control when you get it, how much you get, and taxes are due only on the gain.

If you seek growth, then dividends are one part of a total return strategy, with the other being growth of capital. Again, in general, owning the entire market provides much better diversification and better tax mitigation (assuming you hold a fund that does not pay capital gains and distributes qualified dividends only).

Dividends are not a free lunch. Way back in the day I remember my Morgan Stanley advisor touting this stock and that fund because it "paid a nice dividend." Never did he mention that I'd be paying needless tax on money I didn't need. That was before I knew better.
My goal with dividend investing is just growth. Honestly, looking at an ETF like RYLD, I noticed it's consistent price and dividend yield (with the exception of covid of course) and figured this may be a way of growing my money through compound interest (minus taxes). Given that a fund like RYLD yields ~10% in dividends each year, I thought it'd be worthwhile to grow my money through dividend reinvestment. This thought also led me to question whether it would be beneficial to include in my Roth IRA.

I've noticed there were some replies stating that these dividend stocks are already included when a three fund portfolio is used, so I suppose it may not be the best idea in that case? On the other hand, what then is the plan of action for general investments in a taxable account? For instance, wouldn't using just RYLD and dividend reinvestment result in growing the money by at least 10% a year (assuming relatively steady ETF price)? I'd also read that dividends from funds like RYLD are treated as return of capital and will not incur the same taxation as ordinary dividends which made the option even more appealing.
Admiral
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by Admiral »

john963red wrote: Tue Oct 12, 2021 3:32 pm
Admiral wrote: Tue Oct 12, 2021 10:38 am OP: Perhaps it would be helpful if you could state your goal with regards to dividend investing.

For example, do you seek income?

Or, are you looking for growth?

If you seek income, then selling shares to create the income you need is generally a better strategy when it comes to taxation of that income. You control when you get it, how much you get, and taxes are due only on the gain.

If you seek growth, then dividends are one part of a total return strategy, with the other being growth of capital. Again, in general, owning the entire market provides much better diversification and better tax mitigation (assuming you hold a fund that does not pay capital gains and distributes qualified dividends only).

Dividends are not a free lunch. Way back in the day I remember my Morgan Stanley advisor touting this stock and that fund because it "paid a nice dividend." Never did he mention that I'd be paying needless tax on money I didn't need. That was before I knew better.
My goal with dividend investing is just growth. Honestly, looking at an ETF like RYLD, I noticed it's consistent price and dividend yield (with the exception of covid of course) and figured this may be a way of growing my money through compound interest (minus taxes). Given that a fund like RYLD yields ~10% in dividends each year, I thought it'd be worthwhile to grow my money through dividend reinvestment. This thought also led me to question whether it would be beneficial to include in my Roth IRA.

I've noticed there were some replies stating that these dividend stocks are already included when a three fund portfolio is used, so I suppose it may not be the best idea in that case? On the other hand, what then is the plan of action for general investments in a taxable account? For instance, wouldn't using just RYLD and dividend reinvestment result in growing the money by at least 10% a year (assuming relatively steady ETF price)? I'd also read that dividends from funds like RYLD are treated as return of capital and will not incur the same taxation as ordinary dividends which made the option even more appealing.
That fund is not even two years old, so there's nothing consistent about it: its historical return is irrelevant. But, since you mentioned it, here is RYLD and S&P:

3M
6M
9M
1Y
RYLD
-1.21%
+2.64%
+9.07%
+17.69%

SP500
-0.19%
+5.63%
+14.78%
+25.42%

Which one shows more growth? And with very little taxed growth.

Dividends are taxable events that reduce the share price, they are not interest. There's no special compounding formula.
dbr
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by dbr »

john963red wrote: Tue Oct 12, 2021 3:32 pm

My goal with dividend investing is just growth. Honestly, looking at an ETF like RYLD, I noticed it's consistent price and dividend yield (with the exception of covid of course) and figured this may be a way of growing my money through compound interest (minus taxes). Given that a fund like RYLD yields ~10% in dividends each year, I thought it'd be worthwhile to grow my money through dividend reinvestment. This thought also led me to question whether it would be beneficial to include in my Roth IRA.

I've noticed there were some replies stating that these dividend stocks are already included when a three fund portfolio is used, so I suppose it may not be the best idea in that case? On the other hand, what then is the plan of action for general investments in a taxable account? For instance, wouldn't using just RYLD and dividend reinvestment result in growing the money by at least 10% a year (assuming relatively steady ETF price)? I'd also read that dividends from funds like RYLD are treated as return of capital and will not incur the same taxation as ordinary dividends which made the option even more appealing.
You have a fundamental misconception that growth in stock investments is a matter of compounding interest (dividends). That is a basic mathematical error. Growth in stock investments depends on compounding return, which is the combination of price and dividend. Generally selecting stock investments on dividend does not predict greater return. Note RYLD has existed for about one year now and in that year produced about half the return of the total stock market, mainly paid out in dividends and at similar volatility to a stock fund.

But RYLD is a Russell 2000 Covered Call ETF. That is not even a stock fund though its assets include owning shares of the Russell 2000 ETF VTWO. Do you have any idea what the description below actually means (see https://www.globalxetfs.com/funds/ryld/#holdings ):

"Below is a description of how RYLD’s covered call-writing process works:

RYLD sells Russell 2000 Index options (RTY) to a counterparty that will expire in one month
A premium is received in exchange for the sale of the index options
At the end of the month, RYLD seeks to distribute a portion of the income from writing/selling the RTY index option to the ETF shareholders
At the beginning of each new month this process is repeated
In option pricing, many factors determine the value of the premium received from selling a call option, such as the time to expiration, the strike price, the security’s current price, the risk free rate, and the security’s volatility. Since RYLD is writing at-the-money covered call options on a monthly basis, the time to expiration is one month, and the strike price is equal to the current price of the index, meaning these factors have little variation on a monthly basis in determining the option premium received. In addition, the risk free rate, particularly in the current interest rate environment, tends to be fairly stable. Therefore, the major source of variation in the value of an at-the-money option premium is volatility. The higher the volatility, typically the greater the option premium received from selling a call option. Historically, small caps, such as those tracked by the Russell 2000, have displayed greater volatility than their large cap counterparts, tracked by the S&P 500. All else equal, this implies that the option premiums for writing calls on a small cap index is expected to be higher over time than writing calls on a large cap index."
sycamore
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by sycamore »

john963red wrote: Tue Oct 12, 2021 3:32 pm ... I'd also read that dividends from funds like RYLD are treated as return of capital and will not incur the same taxation as ordinary dividends which made the option even more appealing.
In addition to the previous replies, I'll add that it doesn't appear that RYLD dividends are return of capital. The RYLD factsheet says "Portion of the distribution may include a return of capital" so maybe it will, maybe it won't. And a general Fund Filings & Tax Supplements for Global X ETFs says "It is estimated that AUSF, DIV, MLPA, MLPX, QYLD, RNRG, SDIV & XYLD have distributed more than their income and net realized gains; therefore, a portion of your distribution is a return of capital." No mention of RYLD, but I do see QYLD.

Do you have a reference that indicates RYLD dividends were in fact return of capital? If that's a key reason for wanting to use the fund, I would want to be 100% sure exactly how the dividends are treated.

Also, RYLD's expense ratio is 0.70%, which is too much. Consider the ER for various simple, non-covered-call ETFs:
- VTI / Total US Stock fund for 0.03%
- VIG / Dividend Appreciation fund for 0.06%
- VYM / High Dividend Yield for 0.06%

RYLD (and its cousins QYLD, XYLD, etc.) seems to be yet another example of a financial product designed to be sold rather than bought!
Topic Author
john963red
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by john963red »

Ohhh :oops: . Thank you Admiral and dbr for spelling things out for me. Seems I got carried away with higher dividend yields. To solidify my understanding, on the other hand, would stocks that pay dividends while also showing growth in share price be worthwhile investments?

This brings me back to square one in a sense. For anyone investing outside of retirement accounts, what is generally the recommended portfolio for this? Would this also just be a three-fund portfolio, or do I invest in a way similar to what Betterment and M1Finance use (ex. Goldman Sachs portfolio, expert pies, etc.).
dbr
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by dbr »

john963red wrote: Tue Oct 12, 2021 4:21 pm Ohhh :oops: . Thank you Admiral and dbr for spelling things out for me. Seems I got carried away with higher dividend yields. To solidify my understanding, on the other hand, would stocks that pay dividends while also showing growth in share price be worthwhile investments?

Many stocks pay dividends and grow in share price. Certainly if you hold a broad market index fund the return comes from both. There is little or no evidence that sorting stocks on dividend criteria gives you a set of higher returning investments except maybe as a proxy for a value tilt, which may also be of dubious use. Dividends always have the problem that in taxable accounts they impose tax costs. It is also not very feasible to invest in things that only do not pay dividends. Berkshire stock is one that doesn't, but that is not a recommendation.

This brings me back to square one in a sense. For anyone investing outside of retirement accounts, what is generally the recommended portfolio for this? Would this also just be a three-fund portfolio, or do I invest in a way similar to what Betterment and M1Finance use (ex. Goldman Sachs portfolio, expert pies, etc.).

I think it is hard to prove that you need to do anything except hold a total stock market index fund in taxable and bonds in tax deferred. Note there is not a separate taxable portfolio. The portfolio is everything considered as a whole.
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by TropikThunder »

CyclingDuo wrote: Tue Oct 12, 2021 8:43 am Full year dividends for the S&P 500 were higher in 2020 than they were in 2019 by a smidge in spite of those companies that temporarily cut or halted their quarterly dividend during the pandemic.
At least for VTIAX, that isn't true:
  • 2019 $5.581/share
  • 2020 $5.310/share
Or do you mean in terms of yield? One of the problems these dividend threads have is inconsistent language. Some pro-dividend folks try to use yield to show that dividends don't go down as much during a crash as stock prices do, but yield is not meaningful in that scenario - only dollars are.

For example with made-up numbers: before the crash MFUND pays $3.00/share on a $100/share NAV (3%). After a crash, the NAV drops by 40% to $60/share but the dividend yield doesn't drop at all, it's still 3%. Great right? Well, 3% OF $60 is only $1.80/share. So while the yield didn't change, the dividend itself dropped by 40%. You can't spend yield, you can only spend dollars.
CyclingDuo wrote: Tue Oct 12, 2021 8:43 am LT capital gains taxes and taxes on qualified dividends are the same in a taxable account.
You've made this same point on a number of dividend threads and I have yet to see you acknowledge this mistake when it's pointed out: when you sell stock, not all of the proceeds are gains (unless you somehow got it for free). If I receive $1,000 in dividends, whatever my dividend tax rate is gets applied to the entire $1,000. If I sell $1,000 in stock, whatever my LTCG rate is only gets applied to the gain, not to the entire $1,000. So if equal dollars are taken out for spending purposes, the proceeds from the sale of shares will have less tax then an equal amount of dividends would even if the rates are the same.
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by tibbitts »

john963red wrote: Tue Oct 12, 2021 4:21 pm Ohhh :oops: . Thank you Admiral and dbr for spelling things out for me. Seems I got carried away with higher dividend yields. To solidify my understanding, on the other hand, would stocks that pay dividends while also showing growth in share price be worthwhile investments?
It's not like people haven't thought of this before; if there was an obvious way to select individual stocks that would be "worthwhile" (presumably meaning outperform) through growth or dividend or other screens, everybody would be doing that. Although a completely different strategy than dividend investing, there's also the dividend growth approach, and there are numerous active and passive funds that pursue both paths.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

john963red wrote: Tue Oct 12, 2021 3:32 pm
Admiral wrote: Tue Oct 12, 2021 10:38 am OP: Perhaps it would be helpful if you could state your goal with regards to dividend investing.

For example, do you seek income?

Or, are you looking for growth?

If you seek income, then selling shares to create the income you need is generally a better strategy when it comes to taxation of that income. You control when you get it, how much you get, and taxes are due only on the gain.

If you seek growth, then dividends are one part of a total return strategy, with the other being growth of capital. Again, in general, owning the entire market provides much better diversification and better tax mitigation (assuming you hold a fund that does not pay capital gains and distributes qualified dividends only).

Dividends are not a free lunch. Way back in the day I remember my Morgan Stanley advisor touting this stock and that fund because it "paid a nice dividend." Never did he mention that I'd be paying needless tax on money I didn't need. That was before I knew better.
My goal with dividend investing is just growth. Honestly, looking at an ETF like RYLD, I noticed it's consistent price and dividend yield (with the exception of covid of course) and figured this may be a way of growing my money through compound interest (minus taxes). Given that a fund like RYLD yields ~10% in dividends each year, I thought it'd be worthwhile to grow my money through dividend reinvestment. This thought also led me to question whether it would be beneficial to include in my Roth IRA.

I've noticed there were some replies stating that these dividend stocks are already included when a three fund portfolio is used, so I suppose it may not be the best idea in that case? On the other hand, what then is the plan of action for general investments in a taxable account? For instance, wouldn't using just RYLD and dividend reinvestment result in growing the money by at least 10% a year (assuming relatively steady ETF price)? I'd also read that dividends from funds like RYLD are treated as return of capital and will not incur the same taxation as ordinary dividends which made the option even more appealing.
RYLD is a covered call ETF. Not a stock. Doubt it exists in many if any funds.
No offense...but I would suggest you learn what dividend investing entails. I DO believe in it for part if my portfolio....but, one needs to know the difference between stocks, ETF's, covered call ETF's, closed end funds, etc.

Plenty of dividend investing websites and books on the subject.
Not much advocacy for it here, though.
Chip
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by Chip »

olyveoil wrote: Tue Oct 12, 2021 9:01 am Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.
Still waiting for you to show us anyone that believes dividends aren't part of total return, much less "plenty" or "many" people.
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burritoLover
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by burritoLover »

Stock dividends do not increase your net worth. A dividend payment is the equivalent of you moving money from your own pile of money and sticking it in your pocket. Re-investing that dividend payment is the equivalent of you pulling it out of your pocket and putting it back into your original pile of money. And, if in taxable, you get the privilege of paying taxes on this "movement" of money.
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
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patrick013
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by patrick013 »

john963red wrote: Mon Oct 11, 2021 8:43 pm Any advice is appreciated, but please keep in mind that I do understand the volatility and risks associated with money in the stock market, and remember that my emergency fund is separate from these investments.
Image

These funds have a pretty close race especially in a normal business
cycle. Dividends look best in a Roth if any. Check the wiki for tax
efficient fund placement.
age in bonds, buy-and-hold, 10 year business cycle
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

Chip wrote: Wed Oct 13, 2021 7:23 am
olyveoil wrote: Tue Oct 12, 2021 9:01 am Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.
Still waiting for you to show us anyone that believes dividends aren't part of total return, much less "plenty" or "many" people.
Someone on this thread stated that almost verbatim...then deleted. I didn't get screenshot. Assume they saw this back/forth.

viewtopic.php?f=10&t=358324&p=6232280
10th post.
13th post
18th post
a few others..i quit counting.

Search for yourself.
olyveoil
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by olyveoil »

Chip wrote: Wed Oct 13, 2021 7:23 am
olyveoil wrote: Tue Oct 12, 2021 9:01 am Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.
Still waiting for you to show us anyone that believes dividends aren't part of total return, much less "plenty" or "many" people.
Or...scroll down to the post immediately below yours I am quoting.
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burritoLover
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by burritoLover »

olyveoil wrote: Wed Oct 13, 2021 10:58 am
Chip wrote: Wed Oct 13, 2021 7:23 am
olyveoil wrote: Tue Oct 12, 2021 9:01 am Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.
Still waiting for you to show us anyone that believes dividends aren't part of total return, much less "plenty" or "many" people.
Or...scroll down to the post immediately below yours I am quoting.
Yeah, I'm not saying dividends aren't part of total return. You received that money, even though your net worth dropped by the same amount, therefore you need to include dividends in any total return calculation.
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
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burritoLover
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by burritoLover »

How hard is it to understand that if a company pays out X amount per share of a dividend, that the company is now worth X amount less per share? If not, then you could simply buy individual stocks the day before ex-div date and then sell on the ex-div date and collect the full dividend (with little risk). Nowadays, an ETF could use that strategy and keep the money in bonds the rest of the time - that would be a way to capitalize on dividends with very little risk. If the market was not efficient enough to arbitrage away that opportunity, one that can be seen hundred miles away (the exact payout and time is known in advance), then active managers would be making a killing over their benchmark index (hint: the vast majority can't even beat their index).
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by nolesrule »

olyveoil wrote: Wed Oct 13, 2021 10:54 am
Chip wrote: Wed Oct 13, 2021 7:23 am
olyveoil wrote: Tue Oct 12, 2021 9:01 am Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.
Still waiting for you to show us anyone that believes dividends aren't part of total return, much less "plenty" or "many" people.
Someone on this thread stated that almost verbatim...then deleted. I didn't get screenshot. Assume they saw this back/forth.

viewtopic.php?f=10&t=358324&p=6232280
10th post.
13th post
18th post
a few others..i quit counting.

Search for yourself.
I keep reading those posts. I don't think they mean what you think they mean.
Chip
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Re: Possibly including dividend stocks/ETFs in investment strategy

Post by Chip »

olyveoil wrote: Wed Oct 13, 2021 10:54 am
Chip wrote: Wed Oct 13, 2021 7:23 am
olyveoil wrote: Tue Oct 12, 2021 9:01 am Plenty here do believe dividends are not part of total return. Keep scrolling..... I'd bet they will show up.
Still waiting for you to show us anyone that believes dividends aren't part of total return, much less "plenty" or "many" people.
Someone on this thread stated that almost verbatim...then deleted. I didn't get screenshot. Assume they saw this back/forth.

viewtopic.php?f=10&t=358324&p=6232280
10th post.
13th post
18th post
a few others..i quit counting.
Read them again. They don't say that dividends aren't part of total return.
Search for yourself.
You made the questionable claim. You back it up.
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