Dividend stocks or ETFs?

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rafkg29
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Dividend stocks or ETFs?

Post by rafkg29 » Sun Jan 27, 2019 4:14 pm

what do you feel is a great dividend stock or etf portfolio that has been working for you? And do you like dividend stocks or dividend ETFs instead?

Living Free
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Re: Dividend stocks or ETFs?

Post by Living Free » Sun Jan 27, 2019 4:23 pm

Where to you plan to hold this fund? Within a retirement account or other tax advantaged account? I'd try to avoid dividend focused stock funds in taxable due to the need to pay taxes on dividends.

Topic Author
rafkg29
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Joined: Tue Oct 09, 2018 1:07 pm

Re: Dividend stocks or ETFs?

Post by rafkg29 » Sun Jan 27, 2019 4:56 pm

Living Free wrote:
Sun Jan 27, 2019 4:23 pm
Where to you plan to hold this fund? Within a retirement account or other tax advantaged account? I'd try to avoid dividend focused stock funds in taxable due to the need to pay taxes on dividends.
I did want to hold it in a taxable account. Is the amount of taxes you pay on dividends in a taxable account that drastic?

mega317
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Re: Dividend stocks or ETFs?

Post by mega317 » Sun Jan 27, 2019 5:11 pm

To the second part of your question, I prefer funds to individual stocks which I feel is taking unnecessary risk. To the first part, VTSAX pays a dividend and that fund works for me.

Beliavsky
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Re: Dividend stocks or ETFs?

Post by Beliavsky » Sun Jan 27, 2019 5:12 pm

rafkg29 wrote:
Sun Jan 27, 2019 4:56 pm
Living Free wrote:
Sun Jan 27, 2019 4:23 pm
Where to you plan to hold this fund? Within a retirement account or other tax advantaged account? I'd try to avoid dividend focused stock funds in taxable due to the need to pay taxes on dividends.
I did want to hold it in a taxable account. Is the amount of taxes you pay on dividends in a taxable account that drastic?
How can we answer that question for you? You need to look up the dividend yield of the ETF you are interested in and multiply it the sum of your federal and state marginal income tax rates for dividends.

GrowthSeeker
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Re: Dividend stocks or ETFs?

Post by GrowthSeeker » Sun Jan 27, 2019 5:27 pm

For most Bogleheads, the focus is on total return, rather than dividends.
I understand that many people believe that stocks or funds that pay high dividends are great because you're getting whatever the share price increase gives you plus you're getting dividends. But every time any stock pays a dividend, it's share price drops by equal number of dollars per share. So there is nothing special about dividends except tax wise (see below); you either get more share price increase (if it's a stock that does not pay dividends), or you get less share price increase plus a dividend. A=B+C. No free lunch.

Tax wise: share price increase becomes a capital gain when you sell. If you held it less than one year, then it is taxed the same as the last dollar of income you earned that year (short term cap gain). If you held it over one year and then sold it, it becomes a long term capital gain, taxed at either 0% or 15% or 20% depending on your income level.
Similarly dividends are taxed either just like short term capital gains (ie taxed just like regular income) or just like long term capital gains. Except whereas the holding period for cap gains is one year (to be taxed at a lower rate), for dividends that holding period is about 2 months. The terminology they give to dividends which will be taxed at the lower rate is "Qualified".

In tax advantaged I go for something like Total Stock Market, VTSAX, and reinvest the dividends.
In taxable, I either use ETFs or Funds and I do not reinvest the dividends simply because I don't want the headache of lots of little transactions complicating the basis.
Just because you're paranoid doesn't mean they're NOT out to get you.

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Nate79
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Re: Dividend stocks or ETFs?

Post by Nate79 » Sun Jan 27, 2019 5:42 pm

Hundreds of threads on this topic. Just search and ye shall find.

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arcticpineapplecorp.
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Re: Dividend stocks or ETFs?

Post by arcticpineapplecorp. » Sun Jan 27, 2019 5:50 pm

rafkg29 wrote:
Sun Jan 27, 2019 4:14 pm
what do you feel is a great dividend stock or etf portfolio that has been working for you? And do you like dividend stocks or dividend ETFs instead?
what happened to your prior post from October 9, 2018?:
rafkg29 wrote:
Tue Oct 09, 2018 1:47 pm
I am 22 years old I’d like to know how is asset allocation on this specific portfolio? 75% Vanguard total market fund (VTI)
15% Vanguard total bond market fund (BND) and 10% Vanguard total international (VXUS).
Have you changed your mind in 3 months? Or was that post above referring to tax deferred but now this post is about a taxable account??

maybe read up on why dividends shouldn't matter:
viewtopic.php?f=10&t=242939&=high+yield ... d#p3806231
viewtopic.php?f=1&t=225546&=high+yield+ ... d#p3490496
viewtopic.php?f=10&t=242939&=high+yield ... d#p3806364
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

Living Free
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Re: Dividend stocks or ETFs?

Post by Living Free » Mon Jan 28, 2019 12:00 pm

rafkg29 wrote:
Sun Jan 27, 2019 4:56 pm
Living Free wrote:
Sun Jan 27, 2019 4:23 pm
Where to you plan to hold this fund? Within a retirement account or other tax advantaged account? I'd try to avoid dividend focused stock funds in taxable due to the need to pay taxes on dividends.
I did want to hold it in a taxable account. Is the amount of taxes you pay on dividends in a taxable account that drastic?
you do not control when you receive the dividends. with a more total return approach you can sell at a time when you are in a lower tax bracket (such as in retirement) and thus potentially pay less tax overall.

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patrick013
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Re: Dividend stocks or ETFs?

Post by patrick013 » Mon Jan 28, 2019 2:28 pm

The best place for a dividend index is the Roth.

Looking at long term total return and at equal weighted or yield weighted dividend indexes we see that the dividend index is very capable of beating cap weighted stocks funds in total return and total return after all taxes have been applied. The extra 1 or 2 per cent yield or total return offsets any higher tax due to larger dividends rec'd.

That's how the math works out or I wouldn't touch them.
age in bonds, buy-and-hold, 10 year business cycle

bloom2708
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Location: Fargo, ND

Re: Dividend stocks or ETFs?

Post by bloom2708 » Mon Jan 28, 2019 2:32 pm

The base question is interesting.

An ETF is a container that can own stocks and bonds. Exchange Traded Fund with a set of rules to govern.

A Mutual Fund is another container for owning stocks and bonds. With a set of rules to govern.

A stock can pay a dividend.
A stock can not pay a dividend.
An ETF can own a stock that pays a dividend
An ETF can own a stock that does not pay a dividend
An ETF can own both a stock that pays a dividend and a stock that does not pay a dividend
A mutual fund can own a stock that pays a dividend
A mutual fund can own a stock that does not pay a dividend
A mutual fund can own both a stock that pays a dividend and a stock that does not pay a dividend

Best to pause and read up on a host of investing topics. :|
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

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