Larry Swedroe: Slaughtering The High Dividend Sacred Cow

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Random Walker
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Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Random Walker » Mon Nov 06, 2017 1:35 pm

https://www.advisorperspectives.com/art ... sacred-cow

In this article Larry talks about dividends. There is really nothing special about them. Dividend policy has no effect on a stock’s total return. By focusing on dividends, an investor is likely limiting his diversification. For taxable investors, they are also obtaining the modest value tilt inefficiently. Taxable investors should prefer the “self dividend”. And by no means are dividend stocks a replacement for high quality fixed income.

Dave

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patrick013
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by patrick013 » Mon Nov 06, 2017 1:46 pm

You could make a whole portfolio out of ticker SPHD - PowerShares
S&P 500® High Dividend Low Volatility Portfolio. Return, beta, etc.
backed up by 3 nationally prominent well respected researchers.
Must be some kind of marketing bias. Case closed as far as I am
concerned. :)
age in bonds, buy-and-hold, 10 year business cycle

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by magneto » Mon Nov 06, 2017 1:56 pm

This is a well trodden track.
Perhaps even a straw-man?
But then pages have to be filled !

Very few would advocate high dividends at the expense of growth
But moderate dividends with growth sounds just fine.
If a stock rose in price to offer a lower yield would it then become more attractive to the dividend gainsayers?

As oft pointed out dividends come along on a regular calendar basis. Capital gains do not.
A retiree might look to dividends to tide them over thru such a gap.

Again as oft pointed out Revenue, Profits, Earnings are what the accountants say they are.
Dividends mostly (leverage fiddling excepted) are real money.
Believe Enron paid nil dividends ?

How about some balance?
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Mon Nov 06, 2017 1:58 pm

My advice has been to cool it on High Dividend stocks and also on the Low Volatility stocks. My understanding is that Low Volatility is recently looking better in comparison with Total Market but not too long ago, Low Vol was more expensive than the market itself. High Dividend also looks overgrazed and there is overlap between Low Vol and High Dividend. These have both been very popular strategies and now isn't the greatest time to be piling in.
A fool and his money are good for business.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Artsdoctor » Mon Nov 06, 2017 2:05 pm

Larry is describing Meb Faber's research, which was discussed on Faber's podcast about two months ago. If you're at all interested in a decent discussion, you can listen to it here:

http://mebfaber.com/2017/09/14/episode- ... trategies/

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by avalpert » Mon Nov 06, 2017 3:22 pm

magneto wrote:
Mon Nov 06, 2017 1:56 pm
This is a well trodden track.
Perhaps even a straw-man?
But then pages have to be filled !

Very few would advocate high dividends at the expense of growth
But moderate dividends with growth sounds just fine.
If a stock rose in price to offer a lower yield would it then become more attractive to the dividend gainsayers?

As oft pointed out dividends come along on a regular calendar basis. Capital gains do not.
A retiree might look to dividends to tide them over thru such a gap.

Again as oft pointed out Revenue, Profits, Earnings are what the accountants say they are.
Dividends mostly (leverage fiddling excepted) are real money.
Believe Enron paid nil dividends ?
You believe incorrectly - Enron paid dividends until the end. Thinking dividends are 'real money' as an indicator of how healthy a firm's earnings are is a complete illusion.

The misunderstanding around dividends are pervasive - it isn't a strawman at all, plenty of people really do believe dividends are special. People really do believe that dividends being distributed quarterly is somehow different from having an automatic sale to extract the funds - it isn't.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Dead Man Walking » Mon Nov 06, 2017 3:27 pm

How is this argument relevant to investors who invest in target retirement funds, life strategy funds, TSM, a 3 fund portfolio, any mutual fund that does not emphasize dividends?

DMW

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Halicar » Mon Nov 06, 2017 3:41 pm

avalpert wrote:
Mon Nov 06, 2017 3:22 pm
plenty of people really do believe dividends are special. People really do believe that dividends being distributed quarterly is somehow different from having an automatic sale to extract the funds - it isn't.
I can sort of sympathize with this. Conceptually, it makes sense that if you are part owner of a company, you should get paid when the company makes a profit, and if the company is successful you should keep your stock in it. I've talked to a few people who just can't wrap their heads around the notion that the way you make money by owning stock is to sell it off.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by harvestbook » Mon Nov 06, 2017 3:45 pm

I look at reinvested dividends as a way to buy more shares of the funds, which price-per-share growth doesn't do. But I understand it's a zero-sum game anyway--whether you have more shares of slightly lower value or fewer shares of slightly greater value is a wash.
I'm not smart enough to know, and I can't afford to guess.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by avalpert » Mon Nov 06, 2017 3:54 pm

Halicar wrote:
Mon Nov 06, 2017 3:41 pm
avalpert wrote:
Mon Nov 06, 2017 3:22 pm
plenty of people really do believe dividends are special. People really do believe that dividends being distributed quarterly is somehow different from having an automatic sale to extract the funds - it isn't.
I can sort of sympathize with this. Conceptually, it makes sense that if you are part owner of a company, you should get paid when the company makes a profit, and if the company is successful you should keep your stock in it. I've talked to a few people who just can't wrap their heads around the notion that the way you make money by owning stock is to sell it off.
I do sympathize with it and understand how they get there - that is why it is important to constantly point out the error because it isn't obvious to most people.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by jebmke » Mon Nov 06, 2017 4:04 pm

avalpert wrote:
Mon Nov 06, 2017 3:22 pm
Enron paid dividends until the end.
I think Indymac paid dividends pretty nearly to the end.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by avalpert » Mon Nov 06, 2017 4:14 pm

jebmke wrote:
Mon Nov 06, 2017 4:04 pm
avalpert wrote:
Mon Nov 06, 2017 3:22 pm
Enron paid dividends until the end.
I think Indymac paid dividends pretty nearly to the end.
They paid their last dividend in December of 2007 and had collapsed by July 2008 0 but by the time they announced they were suspending dividends you had already lost over 80% of your value, a little late to react.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by dbr » Mon Nov 06, 2017 5:35 pm

Larry has been slaughtering dividends seemingly forever and also seemingly to no effect judging from the persistence of the discussion.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Mon Nov 06, 2017 7:47 pm

He did have a chart from I believe 1975 to 2015 which showed the SP 500 returned 10.8 and the Dividend 100 13.9.Just saying that is a significant difference in a tax deferred account especially when the SP 500 is used by so many as a benchmark.The rest of the chart showed different combinations that made dividend stocks look bad in comparison,but they did soundly beat the SP 500 for whatever reasons.
K.I.S.S........so easy to say so difficult to do.

Random Walker
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Random Walker » Mon Nov 06, 2017 9:04 pm

Hoops,
Dividends are a proxy for value, so no surprise to beat S&P 500 over long time frame.

Dave

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Mon Nov 06, 2017 9:19 pm

Random Walker wrote:
Mon Nov 06, 2017 9:04 pm
Hoops,
Dividends are a proxy for value, so no surprise to beat S&P 500 over long time frame.

Dave
Ok.I get it.
K.I.S.S........so easy to say so difficult to do.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by willthrill81 » Mon Nov 06, 2017 9:30 pm

Dead Man Walking wrote:
Mon Nov 06, 2017 3:27 pm
How is this argument relevant to investors who invest in target retirement funds, life strategy funds, TSM, a 3 fund portfolio, any mutual fund that does not emphasize dividends?

DMW
It isn't particularly relevant to them. None of those funds or portfolios emphasize dividends as anything more than a part of the total return. Whether the growth comes from capital appreciation or from dividends, at the end of the day, it doesn't matter (aside from taxes if the securities are held in a taxable account, where capital appreciation is often preferable).
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by White Coat Investor » Mon Nov 06, 2017 10:19 pm

I agree with Larry on the dividend issue. But what are you going to do? Lots of people have an almost religious belief in them.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by EddyB » Mon Nov 06, 2017 10:55 pm

magneto wrote:
Mon Nov 06, 2017 1:56 pm
This is a well trodden track.
Perhaps even a straw-man?
But then pages have to be filled !i
Hardly fair to call it a straw man when we see reports of views like this: viewtopic.php?p=3605854#p3605854

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by magneto » Tue Nov 07, 2017 3:49 am

avalpert wrote:
Mon Nov 06, 2017 3:22 pm
magneto wrote:
Mon Nov 06, 2017 1:56 pm
Very few would advocate high dividends at the expense of growth
But moderate dividends with growth sounds just fine.
If a stock rose in price to offer a lower yield would it then become more attractive to the dividend gainsayers?
Again as oft pointed out Revenue, Profits, Earnings are what the accountants say they are.
Dividends mostly (leverage fiddling excepted) are real money.
Believe Enron paid nil dividends ?
You believe incorrectly - Enron paid dividends until the end. Thinking dividends are 'real money' as an indicator of how healthy a firm's earnings are is a complete illusion.
Thanks for that correction.
The Enron accounts must have been useless, yet a wonder to behold.
But then the rising debt was hidden off balance sheet seem to recall?
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by goingup » Tue Nov 07, 2017 10:21 am

dbr wrote:
Mon Nov 06, 2017 5:35 pm
Larry has been slaughtering dividends seemingly forever and also seemingly to no effect judging from the persistence of the discussion.
This was my thought too. That cow is not going quietly! :D

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 12:17 pm

hoops777 wrote:
Mon Nov 06, 2017 7:47 pm
He did have a chart from I believe 1975 to 2015 which showed the SP 500 returned 10.8 and the Dividend 100 13.9.Just saying that is a significant difference in a tax deferred account especially when the SP 500 is used by so many as a benchmark.The rest of the chart showed different combinations that made dividend stocks look bad in comparison,but they did soundly beat the SP 500 for whatever reasons.
As Random Walker said, dividends are often a proxy for value. There is overlap with low volatility too, which has also outperformed. This is why the "dividend myth" doesn't die, many dividend stocks have the characteristics that many investors really like. When I pick stocks, I have a preference for dividends but dividends are never the reason that I buy. I am looking primarily for Value characteristics. It isn't the dividends themselves, but the underlying factors.

I will say that Jeremy Siegel likes dividends too, though he seems to be a minority opinion in academia.
A fool and his money are good for business.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Random Walker » Tue Nov 07, 2017 12:26 pm

Nedsaid,
Have you read Siegel’s other book, The Future For Investors? If I remember correctly, he referred to the “dividend accelerator”: reinvesting dividends when stocks are down to amplify the comeback when stocks rise again.

Dave

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nedsaid
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 12:29 pm

Random Walker wrote:
Tue Nov 07, 2017 12:26 pm
Nedsaid,
Have you read Siegel’s other book, The Future For Investors? If I remember correctly, he referred to the “dividend accelerator”: reinvesting dividends when stocks are down to amplify the comeback when stocks rise again.

Dave
Yep, that is the exact book I am referring to. I mentioned it to Larry Swedroe and he dismissed it. Something about Siegel making money off Wisdom Tree. So I guess we are only supposed to listen to approved research and approved academics. Fama/French are thumbs up, Siegel is thumbs down.
A fool and his money are good for business.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 12:33 pm

In fairness to Larry, "The Future For Investors" book was published in 2005 when you could still get a decent yield on a bond and before all the post 2008-2009 financial crisis dividend chasing. It is a different world today than it was in 2005. It would be interesting to hear what Jeremy Siegel has to say now.
A fool and his money are good for business.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Random Walker » Tue Nov 07, 2017 12:46 pm

William Bernstein once wrote something to the effect “We make more money when markets going down, we just don’t know it at the time”. The dividend accelerator is a big part of that I believe.

Dave

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Tue Nov 07, 2017 12:55 pm

nedsaid wrote:
Tue Nov 07, 2017 12:17 pm
hoops777 wrote:
Mon Nov 06, 2017 7:47 pm
He did have a chart from I believe 1975 to 2015 which showed the SP 500 returned 10.8 and the Dividend 100 13.9.Just saying that is a significant difference in a tax deferred account especially when the SP 500 is used by so many as a benchmark.The rest of the chart showed different combinations that made dividend stocks look bad in comparison,but they did soundly beat the SP 500 for whatever reasons.
As Random Walker said, dividends are often a proxy for value. There is overlap with low volatility too, which has also outperformed. This is why the "dividend myth" doesn't die, many dividend stocks have the characteristics that many investors really like. When I pick stocks, I have a preference for dividends but dividends are never the reason that I buy. I am looking primarily for Value characteristics. It isn't the dividends themselves, but the underlying factors.

I will say that Jeremy Siegel likes dividends too, though he seems to be a minority opinion in academia.
It is human nature.One of the phrases that I constantly see from the dividend advocates is I am getting paid.They believe they are getting something back in a payment.ATT is paying me 5.5 pct for owning their stock.It feels better knowing that you get that payment even if the share price drops.The other major deal is dividend growth.You bought 20 dividend growth stocks 10 years ago at age 55 with an average yield of 3 pct. producing 1500 a month income.Now you retire at 65 and they are producing 2000 a month.At 75 Maybe 2500 a month.
I understand you can accomplish the same thing by selling shares assuming they have increased in value,but they look at not selling shares as the holy grail of investing.The last point is everyone likes to think they are smart and can beat the market,so they develop portfolios of dividend payers with long histories and above avg yields.Who wants to be average?
Anyway,this was my experience when I was considering doing it and what I see over at Seeking Alpha where many believe in it.There are a lot of people there who actually have pretty good portfolios.They diversify across sectors and really research the companies,they just prefer dividends.It makes them technically incorrect but they are quite happy with their results.Vanguard has some very famous funds that are dividend focused and widely used by bogleheads.Dividend stocks are mostly value stocks and value stocks perform quite well,so in the end does it really matter?Warren Buffet himself said to just buy the SP500 and it has been clearly shown that these dividend proxy value stocks soundly beat it.So just maybe it is just a matter of choice and each side can feel good about what they invest in.
K.I.S.S........so easy to say so difficult to do.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Da5id » Tue Nov 07, 2017 1:04 pm

nedsaid wrote:
Tue Nov 07, 2017 12:29 pm
Random Walker wrote:
Tue Nov 07, 2017 12:26 pm
Nedsaid,
Have you read Siegel’s other book, The Future For Investors? If I remember correctly, he referred to the “dividend accelerator”: reinvesting dividends when stocks are down to amplify the comeback when stocks rise again.

Dave
Yep, that is the exact book I am referring to. I mentioned it to Larry Swedroe and he dismissed it. Something about Siegel making money off Wisdom Tree. So I guess we are only supposed to listen to approved research and approved academics. Fama/French are thumbs up, Siegel is thumbs down.
You said above Siegel was a "minority opinion" among academics. Why do you choose to give him credence, is it because he agrees with your point of view :) Nothing unusual about that, it is human nature to give a more positive reading to things we agree with (I certainly see that in myself). But ultimately as with all "authorities", Swedroe, Fama, French, Bogle, Siegel, Buffett, whatever, one must pick and choose if they aren't unanimous. Because they often are saying opposite things. Pick something you find compelling and live with it is probably a better strategy than holding ones finger in the air waiting for the next "big idea" in investments.

I'm with Larry on dividends, but don't act on it (almost all in 3 fund).

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by RAchip » Tue Nov 07, 2017 1:13 pm

One problem with the "dividends are pointless" argument is that there is no way to actually prove it. There is no way to know what JNJ or MO's stock price would be today if it had never paid dividends. The value of a cash payment to you by a company you own is known or calculable. The market value over time of that stock if it retained that cash can never be established because it didn't happen. Unless a company has a plan it really believes in for its cash, I think the best use of that cash is to pay it out to its stockholders.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 1:16 pm

Da5id wrote:
Tue Nov 07, 2017 1:04 pm
nedsaid wrote:
Tue Nov 07, 2017 12:29 pm
Random Walker wrote:
Tue Nov 07, 2017 12:26 pm
Nedsaid,
Have you read Siegel’s other book, The Future For Investors? If I remember correctly, he referred to the “dividend accelerator”: reinvesting dividends when stocks are down to amplify the comeback when stocks rise again.

Dave
Yep, that is the exact book I am referring to. I mentioned it to Larry Swedroe and he dismissed it. Something about Siegel making money off Wisdom Tree. So I guess we are only supposed to listen to approved research and approved academics. Fama/French are thumbs up, Siegel is thumbs down.
You said above Siegel was a "minority opinion" among academics. Why do you choose to give him credence, is it because he agrees with your point of view :) Nothing unusual about that, it is human nature to give a more positive reading to things we agree with (I certainly see that in myself). But ultimately as with all "authorities", Swedroe, Fama, French, Bogle, Siegel, Buffett, whatever, one must pick and choose if they aren't unanimous. Because they often are saying opposite things. Pick something you find compelling and live with it is probably a better strategy than holding ones finger in the air waiting for the next "big idea" in investments.

I'm with Larry on dividends, but don't act on it (almost all in 3 fund).
Siegel's work is well regarded, his book "Stocks for the Long Run" is considered an investment classic. There are also different schools of thought. Most of us think Fama/French and academics of their factors school hold sway and have become sort of an alternative orthodoxy among many here. Others say that factors are products of back testing and what worked in the past may not work in the future, these folks are the die hard indexers, the three fund people. So pretty much, two main schools of thought here, the dividend school is looked upon as heresy.

I suspect too that a lot has changed since Siegel's earlier works. We have learned a lot more about factors and understand better what drives market returns.

So pretty much market cap weighted indexing is orthodoxy, factor tilting is tolerated, and dividends are the heretics. Factor tilters are sort of "separated brethren."
A fool and his money are good for business.

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nedsaid
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 1:23 pm

hoops777 wrote:
Tue Nov 07, 2017 12:55 pm
nedsaid wrote:
Tue Nov 07, 2017 12:17 pm
hoops777 wrote:
Mon Nov 06, 2017 7:47 pm
He did have a chart from I believe 1975 to 2015 which showed the SP 500 returned 10.8 and the Dividend 100 13.9.Just saying that is a significant difference in a tax deferred account especially when the SP 500 is used by so many as a benchmark.The rest of the chart showed different combinations that made dividend stocks look bad in comparison,but they did soundly beat the SP 500 for whatever reasons.
As Random Walker said, dividends are often a proxy for value. There is overlap with low volatility too, which has also outperformed. This is why the "dividend myth" doesn't die, many dividend stocks have the characteristics that many investors really like. When I pick stocks, I have a preference for dividends but dividends are never the reason that I buy. I am looking primarily for Value characteristics. It isn't the dividends themselves, but the underlying factors.

I will say that Jeremy Siegel likes dividends too, though he seems to be a minority opinion in academia.
It is human nature.One of the phrases that I constantly see from the dividend advocates is I am getting paid. They believe they are getting something back in a payment.ATT is paying me 5.5 pct for owning their stock. It feels better knowing that you get that payment even if the share price drops. The other major deal is dividend growth. You bought 20 dividend growth stocks 10 years ago at age 55 with an average yield of 3 pct. producing 1500 a month income.Now you retire at 65 and they are producing 2000 a month. At 75 Maybe 2500 a month.

I understand you can accomplish the same thing by selling shares assuming they have increased in value,but they look at not selling shares as the holy grail of investing.The last point is everyone likes to think they are smart and can beat the market,so they develop portfolios of dividend payers with long histories and above avg yields.Who wants to be average?

Anyway, this was my experience when I was considering doing it and what I see over at Seeking Alpha where many believe in it. There are a lot of people there who actually have pretty good portfolios. They diversify across sectors and really research the companies,they just prefer dividends. It makes them technically incorrect but they are quite happy with their results. Vanguard has some very famous funds that are dividend focused and widely used by bogleheads.Dividend stocks are mostly value stocks and value stocks perform quite well,so in the end does it really matter? Warren Buffet himself said to just buy the SP500 and it has been clearly shown that these dividend proxy value stocks soundly beat it. So just maybe it is just a matter of choice and each side can feel good about what they invest in.
Again, the factors drive the returns and not the dividends themselves. I suppose there is something about seeing a cash payment hit your account that is psychologically satisfying.

My take is that dividend strategies have worked well in the past, but yield has been chased very hard for eight and 1/2 years now and it makes no sense to chase a popular strategy even harder. Everyone and their brother knows that bond yields are very low. Like Rip Van Winkle, some investors have woken from their slumber and realized bond yields are low and want to chase yields after everyone else has chased them too. Ditto for Low Volatility which has a lot of overlap with High Dividend.

When no one gives a rip about dividends, a dividend strategy would make a lot more sense. I remember the late 1990's when people said cash was trash. Amazing how things looked a lot different when high tech and internet stocks crashed and burned.
A fool and his money are good for business.

hoops777
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Tue Nov 07, 2017 1:38 pm

nedsaid wrote:
Tue Nov 07, 2017 1:23 pm
hoops777 wrote:
Tue Nov 07, 2017 12:55 pm
nedsaid wrote:
Tue Nov 07, 2017 12:17 pm
hoops777 wrote:
Mon Nov 06, 2017 7:47 pm
He did have a chart from I believe 1975 to 2015 which showed the SP 500 returned 10.8 and the Dividend 100 13.9.Just saying that is a significant difference in a tax deferred account especially when the SP 500 is used by so many as a benchmark.The rest of the chart showed different combinations that made dividend stocks look bad in comparison,but they did soundly beat the SP 500 for whatever reasons.
As Random Walker said, dividends are often a proxy for value. There is overlap with low volatility too, which has also outperformed. This is why the "dividend myth" doesn't die, many dividend stocks have the characteristics that many investors really like. When I pick stocks, I have a preference for dividends but dividends are never the reason that I buy. I am looking primarily for Value characteristics. It isn't the dividends themselves, but the underlying factors.

I will say that Jeremy Siegel likes dividends too, though he seems to be a minority opinion in academia.
It is human nature.One of the phrases that I constantly see from the dividend advocates is I am getting paid. They believe they are getting something back in a payment.ATT is paying me 5.5 pct for owning their stock. It feels better knowing that you get that payment even if the share price drops. The other major deal is dividend growth. You bought 20 dividend growth stocks 10 years ago at age 55 with an average yield of 3 pct. producing 1500 a month income.Now you retire at 65 and they are producing 2000 a month. At 75 Maybe 2500 a month.

I understand you can accomplish the same thing by selling shares assuming they have increased in value,but they look at not selling shares as the holy grail of investing.The last point is everyone likes to think they are smart and can beat the market,so they develop portfolios of dividend payers with long histories and above avg yields.Who wants to be average?

Anyway, this was my experience when I was considering doing it and what I see over at Seeking Alpha where many believe in it. There are a lot of people there who actually have pretty good portfolios. They diversify across sectors and really research the companies,they just prefer dividends. It makes them technically incorrect but they are quite happy with their results. Vanguard has some very famous funds that are dividend focused and widely used by bogleheads.Dividend stocks are mostly value stocks and value stocks perform quite well,so in the end does it really matter? Warren Buffet himself said to just buy the SP500 and it has been clearly shown that these dividend proxy value stocks soundly beat it. So just maybe it is just a matter of choice and each side can feel good about what they invest in.
Again, the factors drive the returns and not the dividends themselves. I suppose there is something about seeing a cash payment hit your account that is psychologically satisfying.

My take is that dividend strategies have worked well in the past, but yield has been chased very hard for eight and 1/2 years now and it makes no sense to chase a popular strategy even harder. Everyone and their brother knows that bond yields are very low. Like Rip Van Winkle, some investors have woken from their slumber and realized bond yields are low and want to chase yields after everyone else has chased them too. Ditto for Low Volatility which has a lot of overlap with High Dividend.

When no one gives a rip about dividends, a dividend strategy would make a lot more sense. I remember the late 1990's when people said cash was trash. Amazing how things looked a lot different when high tech and internet stocks crashed and burned.
With all due respect,I would say throughout the long history of the stock market,people have always cared about dividends.
K.I.S.S........so easy to say so difficult to do.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 1:43 pm

hoops777 wrote:
Tue Nov 07, 2017 1:38 pm

With all due respect, I would say throughout the long history of the stock market, people have always cared about dividends.
Well, I care about dividends but they are a secondary consideration. If I admit that I like dividends, I might get my membership card revoked. :wink:
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Da5id » Tue Nov 07, 2017 1:53 pm

nedsaid wrote:
Tue Nov 07, 2017 1:16 pm
Siegel's work is well regarded, his book "Stocks for the Long Run" is considered an investment classic. There are also different schools of thought. Most of us think Fama/French and academics of their factors school hold sway and have become sort of an alternative orthodoxy among many here. Others say that factors are products of back testing and what worked in the past may not work in the future, these folks are the die hard indexers, the three fund people. So pretty much, two main schools of thought here, the dividend school is looked upon as heresy.

I suspect too that a lot has changed since Siegel's earlier works. We have learned a lot more about factors and understand better what drives market returns.

So pretty much market cap weighted indexing is orthodoxy, factor tilting is tolerated, and dividends are the heretics. Factor tilters are sort of "separated brethren."
I own Siegel's book that you reference. And Bogle's Common Sense on Mutual Funds. And Malkiel's Random Walk Down Wall Street for that matter. I respect them all, and they clearly all know more than me about their subject. And yet I make my own judgments anyway. Bogle argues no Int'l needed (and max 20% if you must) in his book, and Buffett agrees. And here I am with more Int'l.

I'd also tend to distinguish between popular works and academic studies. Are you aware of current academic studies that demonstrate that dividends qua dividends are a useful way to pick stocks (as opposed to factor based screens, etc)? Because if so seems incredibly easy to arbitrage away, and income chasers have bid up high dividend stocks anyway. If there isn't a real basis for it, um, why shouldn't it be considered "heresy", or at least bad advice to pursue a dividend focused strategy rather than a total return one?

I'm not sure you are correct that "most" bogleheads are factor based tilters, on what is that based? Many folks don't post much, or don't post on threads about factors. Others think there might probably is something to factors but don't choose to tilt anyway due to doubts and/or desire for simplicity (I'm in that camp). If I had to guess I'd say 3 fund folks are more in the majority, YMMV.
Last edited by Da5id on Tue Nov 07, 2017 2:03 pm, edited 1 time in total.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Tue Nov 07, 2017 2:01 pm

nedsaid wrote:
Tue Nov 07, 2017 1:43 pm
hoops777 wrote:
Tue Nov 07, 2017 1:38 pm

With all due respect, I would say throughout the long history of the stock market, people have always cared about dividends.
Well, I care about dividends but they are a secondary consideration. If I admit that I like dividends, I might get my membership card revoked. :wink:
The black SUV’s are already headed your way :D
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by nedsaid » Tue Nov 07, 2017 2:04 pm

Da5id wrote:
Tue Nov 07, 2017 1:53 pm
nedsaid wrote:
Tue Nov 07, 2017 1:16 pm
Siegel's work is well regarded, his book "Stocks for the Long Run" is considered an investment classic. There are also different schools of thought. Most of us think Fama/French and academics of their factors school hold sway and have become sort of an alternative orthodoxy among many here. Others say that factors are products of back testing and what worked in the past may not work in the future, these folks are the die hard indexers, the three fund people. So pretty much, two main schools of thought here, the dividend school is looked upon as heresy.

I suspect too that a lot has changed since Siegel's earlier works. We have learned a lot more about factors and understand better what drives market returns.

So pretty much market cap weighted indexing is orthodoxy, factor tilting is tolerated, and dividends are the heretics. Factor tilters are sort of "separated brethren."
I own Siegel's book that you reference. And Bogle's Common Sense on Mutual Funds. And Malkiel's Random Walk Down Wall Street for that matter. I respect them all, and they clearly all know more than me about their subject. And yet I make my own judgments anyway. Bogle's no Int'l needed (and max 20% if you must) in his book, and Buffett agrees. And here I am with more Int'l.

I'd also tend to distinguish between popular works and academic studies. Are you aware of current academic studies that demonstrate that dividends qua dividends are a useful way to pick stocks (as opposed to factor based screens, etc)? Because if so seems incredibly easy to arbitrage away, and income chasers have bid up high dividend stocks anyway. If there isn't a real basis for it, um, why shouldn't it be considered "heresy", or at least bad advice to pursue a dividend focused strategy rather than a total return one?

I'm not sure you are correct that "most" bogleheads are factor based tilters, on what is that based? Many folks don't post much, or don't post on threads about factors. Others think there might probably is something to factors but don't choose to tilt anyway due to doubts and/or desire for simplicity (I'm in that camp). If I had to guess I'd say 3 fund folks are more in the majority, YMMV.
I would say the three fund, market weighted indexing people are the majority here. A significant minority would be the factor tilters. People who invest only for dividends would be a pretty small group here.
A fool and his money are good for business.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by patrick013 » Tue Nov 07, 2017 2:20 pm

Image

Opinions aren't facts, bad research isn't facts, here's some facts. People on
Morningstar write articles all the time wondering why VYM doesn't beat the
500. Because the 50 or 100 stocks needed in a dividend index aren't market
cap weighted, they're yield or equal weighted. Otherwise you might as well
keep the 500 or TSM.

Just FYI. :)
age in bonds, buy-and-hold, 10 year business cycle

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Tue Nov 07, 2017 2:37 pm

Well,according to the research done by Kenneth French,dividend paying stocks outperformed non dividend paying stocks by an avg of 1.48 pct per year since 1927 with less risk.Maybe his facts were wrong.
In the end,this argument is pointless.People who like like dividend stocks will continue to do do and the technocrats will continue to feel satisfied that they are correct in their facts.It is very much like the national political debate which is banned on this forum.Both sides are satisfied with their belief about dividends and that is that.
Seriously,to tell someone who has been investing with great success in the best companies in the world for many years that they are mistaken, and need to be re-educated in the “right way”, is pretty tough to swallow,especially when it comes from an I am smarter than you approach,like Swedroe loves to take.Most people really do not give a crap about value proxies and factors.They just see blue chip company,pays a nice dividend and has returned 12 pct the last 20 years or whatever.
They beat the SP soundly in Swedroe’s article,but they are just value proxies.
Last edited by hoops777 on Tue Nov 07, 2017 3:19 pm, edited 1 time in total.
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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by triceratop » Tue Nov 07, 2017 2:49 pm

hoops777 wrote:
Tue Nov 07, 2017 2:37 pm
Well,according to the research done by Kenneth French,dividend paying stocks outperformed non dividend paying stocks by an avg of 1.48 pct per year since 1927 with less risk.Maybe his facts were wrong.
Is that factor-adjusted? How much of that return came from exposure to other established factors?
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Tue Nov 07, 2017 3:20 pm

triceratop wrote:
Tue Nov 07, 2017 2:49 pm
hoops777 wrote:
Tue Nov 07, 2017 2:37 pm
Well,according to the research done by Kenneth French,dividend paying stocks outperformed non dividend paying stocks by an avg of 1.48 pct per year since 1927 with less risk.Maybe his facts were wrong.
Is that factor-adjusted? How much of that return came from exposure to other established factors?
Who cares what factor?
K.I.S.S........so easy to say so difficult to do.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by triceratop » Tue Nov 07, 2017 3:42 pm

hoops777 wrote:
Tue Nov 07, 2017 3:20 pm
triceratop wrote:
Tue Nov 07, 2017 2:49 pm
hoops777 wrote:
Tue Nov 07, 2017 2:37 pm
Well,according to the research done by Kenneth French,dividend paying stocks outperformed non dividend paying stocks by an avg of 1.48 pct per year since 1927 with less risk.Maybe his facts were wrong.
Is that factor-adjusted? How much of that return came from exposure to other established factors?
Who cares what factor?
Because buybacks are the same as dividends (before taxes) I find no logical rationale to invest in dividends as a pure strategy. There are risk stories for value, however, that make more sense and the factor has been tested in other markets etc. Therefore I care about the extent to which this excess return was due to factors that I can understand in terms of risk.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by kosomoto » Tue Nov 07, 2017 4:38 pm

triceratop wrote:
Tue Nov 07, 2017 3:42 pm
hoops777 wrote:
Tue Nov 07, 2017 3:20 pm
triceratop wrote:
Tue Nov 07, 2017 2:49 pm
hoops777 wrote:
Tue Nov 07, 2017 2:37 pm
Well,according to the research done by Kenneth French,dividend paying stocks outperformed non dividend paying stocks by an avg of 1.48 pct per year since 1927 with less risk.Maybe his facts were wrong.
Is that factor-adjusted? How much of that return came from exposure to other established factors?
Who cares what factor?
Because buybacks are the same as dividends (before taxes) I find no logical rationale to invest in dividends as a pure strategy. There are risk stories for value, however, that make more sense and the factor has been tested in other markets etc. Therefore I care about the extent to which this excess return was due to factors that I can understand in terms of risk.
Buybacks aren't the same as dividends unless you sell a portion of the stock that is bought back. Good luck knowing the buyback percentage done in your ETF or fund. Buybacks force you to reinvest funds in companies that are often very large and given US valuations, highly valued.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Grt2bOutdoors » Tue Nov 07, 2017 5:49 pm

It’s no surprise people are irrational, we see the same behavior with consumerism - a higher price of a product indicates a “good buy” because it’s indicative of quality when nothing could be further from the truth for certain goods and services. No surprise they are chasing yield. A better investment would be a screen for low p/b, quality factors, low p/e, low p/s. But that would shrink the universe of eligible candidates significantly.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by saltycaper » Tue Nov 07, 2017 6:22 pm

hoops777 wrote:
Tue Nov 07, 2017 2:37 pm

In the end,this argument is pointless.People who like like dividend stocks will continue to do do and the technocrats will continue to feel satisfied that they are correct in their facts.It is very much like the national political debate which is banned on this forum.Both sides are satisfied with their belief about dividends and that is that.
I think the discussion is worthwhile, as a handful of posters do appear to have seen the light, never mind the readers who don't post.

The dividend question can become tangled in so many ways--value proxy, transaction costs of yesteryear, ways to return cash to shareholders, etc.--that it's not so easy to identify and dismantle the specific ill-conceived notion(s) at play.

I think part of the reason some people come across with the tone, "You need an education, son," is due to their perception that this is merely a psychological problem, when there are several factors at work.

I'll admit I always had an urge to favor dividend-paying stocks. I still do. It's just that I'm able to overcome the urge and not act on it.

In the tree of subjective reality, the dividend misunderstanding is but one branch hanging off the limb that supposes, even ideally, that it is not possible to transact for any investment at any time. That whole limb should be the real target, IMO.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Toons » Tue Nov 07, 2017 6:32 pm

"McDonald's dividend strength is the kind you dream of"

https://seekingalpha.com/article/411397 ... ong-future

They keep increasing the dividend and the share price continues to rise :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by triceratop » Tue Nov 07, 2017 6:35 pm

Toons wrote:
Tue Nov 07, 2017 6:32 pm
"McDonald's dividend strength is the kind you dream of"

https://seekingalpha.com/article/411397 ... ong-future

They keep increasing the dividend and the share price continues to rise :happy
A single example cannot prove much either way. Here's an example for why (note: you didn't write this):
"Berkshire Hathaway's dividend weakness is the kind you dream of"

https://seekingalpha.com/article/411397 ... ong-future

They keep the dividend at zero and the share price continues to rise :happy
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by hoops777 » Tue Nov 07, 2017 7:14 pm

All I am trying to get across is that many normal everyday investors who like dividend stocks,buy them because they pay a dividend and most are household names with long histories of good returns.They do not think about factors or technically correct reasons for their returns.It means more to them that they eat the cereal or drink the drinks,have prescriptions for their products,whatever.Liking seeing those dividends invested in your bank account without having to sell anything is also quite understandable and not some psychological deficiency.I like seeing $1400 deposited in my bank account every 6 months from a GO muni bond I own.I like seeing the interest paid on my many CD’s.I think that is a normal human reaction.
Would anyone like to take a guess at how many millionaire next door types have gotten there buying shares of boring,blue chip dividend stocks over many years?To me that is proven,old school investing before everyone got so smart.
K.I.S.S........so easy to say so difficult to do.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by dbr » Wed Nov 08, 2017 9:12 am

I have no issue with preference, don't mind psychology, but I dig in my heels with ignorance. Some discussions of dividends are sensible searches for facts but the place a fix is required is when the issue is not understanding basic facts, often compounded with innumeracy.

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by Da5id » Wed Nov 08, 2017 9:20 am

hoops777 wrote:
Tue Nov 07, 2017 7:14 pm
Liking seeing those dividends invested in your bank account without having to sell anything is also quite understandable and not some psychological deficiency.I like seeing $1400 deposited in my bank account every 6 months from a GO muni bond I own.I like seeing the interest paid on my many CD’s.I think that is a normal human reaction.
The distinction between getting a dividend (where the price of your shares falls by the amount of the dividends) and a scheduled interest payment on a fixed income investment is pretty stark, but they are often conflated. Would you likewise be pleased if your CD returned some capital to you as a "bank account deposit" but had the cash value fall as a result?

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Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Post by RAchip » Wed Nov 08, 2017 9:35 am

"the price of your shares falls by the amount of the dividends"

This is what I don't agree with. Over the long term (5-10 years or more) if cash is held in a company rather than being paid out as a dividend, nobody knows for sure what would happen to the market price of the stock. That money could easily be wasted by the company (spent on things that don't increase earnings). You should ask yourself: why do over 80% of the companies in the S&P 500 and 100% of the companies in the DJIA pay dividends? Answer: they do it because it creates shareholder value.

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