Value Investing or Dividend Investing - Which Is It?

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FinancialDave
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Value Investing or Dividend Investing - Which Is It?

Post by FinancialDave »

Is it one in the same, or are you stuck on just one side of the fence?

http://seekingalpha.com/article/2682355 ... -relate-to

The short story is I pick a Value-tilted Vanguard 3-Fund Portfolio as a play on Dividend Investing.



fd
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baw703916
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Re: Value Investing or Dividend Investing - Which Is It?

Post by baw703916 »

But value and dividends aren't completely synonymous. It's true that growth stocks tend not to pay much if any dividends (they're reinvesting their profits into the company). But neither do deep value stocks (which are often in a precarious financial situation). So targeting dividends tends to select moderately value-oriented stocks.

I'm not sure why targeting dividends is all that desirable though, at least in the U.S., other than as a proxy for value--it doesn't seem to be that great a proxy for value. I own a couple of Wisdomtree's dividend-oriented ETFs as the next best thing to ISV/EMSV, for which there isn't really a passive retail fund. Not ideal, IMO, but the best thing out there at the moment.

Also, how do you have the international part of a Vanguard 3-fund portfolio be value-oriented? The only thing they have is VTRIX, which is active. Or do you go with iShares' EFV?
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FinancialDave
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Re: Value Investing or Dividend Investing - Which Is It?

Post by FinancialDave »

Ok, let me be more clear for those that don't have access to SA or what to register.

This is a 100% equity portfolio made up of the following 3 Vanguard Funds, which were selected for a value tilt, similar to what one might find in a portfolio made up of all dividend stocks, but without having to buy and manage all the dividend stocks. It consists of:

VDIGX ( Div Growth, Large Blend)- 20%
VASVX (mid cap value) - 40%
VTV (Large Value ETF) - 40%

Not everyone believes they need international or bonds in their portfolio - or if that concept is just to hard to swallow, then just put these 3 funds in your mind for the US equity portion of your allocation. I believe the international allocation for these 3 funds is 8%, but I think everyone could agree if they look at the stocks involved, many are US companies with quite significant international income. In any event the conclusion drawn was that at least over the 10 years studied (VTV does not have a 15 year life as of yet) this portfolio had a better risk adjusted return than the benchmark, which was chosen as the SP500.

fd
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Stryker
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Re: Value Investing or Dividend Investing - Which Is It?

Post by Stryker »

As far as dividend growth, only three countries in the investing world seem to have the attributes to make it successful as a strategy. U.S.A., United Kingdom, and Canada. You can see it in the country components of PID. It seems to me, if I remember correctly, this ETF began without including the U.S. Someone can correct me if I'm wrong.
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oneleaf
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Re: Value Investing or Dividend Investing - Which Is It?

Post by oneleaf »

I see high dividend yield as a proxy for value. But dividend growth/appreciation is different. Looking at Vanguard's dividend growth and appreciation funds, you see these are high quality (similar to GMO's classification) and, in fact, VDAIX often has a lower dividend yield than the broad market. Historically, it also has a 0.85 beta, based on a 5 yr regression test I did.

A lot of the quant strategies now are interested in low-beta stocks which often have a higher return than their risk would justify and I see a dividend appreciation strategy (VDAIX) as a way to access that strategy. This is different from a value strategy.
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