Dividends almost Doubled between 2013 and now

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skor99
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Dividends almost Doubled between 2013 and now

Post by skor99 » Tue May 14, 2019 9:30 pm

I am seeing a faster growth of rate of dividends than inflation in my portfolio. My investments may have Increased by 25% with my new contributions, so that may explain a portion of the growth. Another may be the good economy which has made companies increase their dividend rates. But that still doesn’t explain double. Any other ideas ? Most of my investments are in the US stocks and bonds and those are the usual investments like growth funds or s&p 500 and some in vanguard bond funds

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Tue May 14, 2019 9:39 pm

Shsssh! Don't tell anyone. Besides, being a fan a dividends here is heresy.

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MNGopher
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Re: Dividends almost Doubled between 2013 and now

Post by MNGopher » Tue May 14, 2019 9:51 pm

Riprap wrote:
Tue May 14, 2019 9:39 pm
Shsssh! Don't tell anyone. Besides, being a fan a dividends here is heresy.
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).

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JoMoney
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Re: Dividends almost Doubled between 2013 and now

Post by JoMoney » Tue May 14, 2019 9:58 pm

S&P 500 Annual Dividends
https://www.multpl.com/s-p-500-dividend/table/by-year
Dec 31, 2018 $54.38
Dec 31, 2013 $38.17

Dec 31, 2008 $34.32
Dec 31, 1998 $25.12
Dec 31, 1988 $20.57
Dec 31, 1978 $19.04
Dec 31, 1968 $21.98
Dec 31, 1958 $15.39
Dec 31, 1948 $9.81
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Tue May 14, 2019 10:02 pm

MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.

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JoMoney
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Re: Dividends almost Doubled between 2013 and now

Post by JoMoney » Tue May 14, 2019 10:05 pm

Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
If you believe the management is on average "squandering" the money that would be better off paid out as dividends, you really shouldn't be buying the stock of that company at all (or at a minimum be petitioning the board to change the management).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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MNGopher
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Re: Dividends almost Doubled between 2013 and now

Post by MNGopher » Tue May 14, 2019 10:16 pm

Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
Would the company have maintained a higher share price if it hadn't paid out millions in dividends to it's shareholders? Wouldn't the total return have been about the same then? You could just sell some of your appreciated shares to "create your own dividend" at a time when it is most tax efficient for you to do so.

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Tue May 14, 2019 10:21 pm

JoMoney wrote:
Tue May 14, 2019 10:05 pm
If you believe the management is on average "squandering" the money that would be better off paid out as dividends, you really shouldn't be buying the stock of that company at all (or at a minimum be petitioning the board to change the management).
The squandering is normally revealed after the fact. Plus, it would be difficult to do as you suggest as a passive investor.

I'm simply stating that returning shareholder's equity isn't always such a bad thing.

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skor99
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Re: Dividends almost Doubled between 2013 and now

Post by skor99 » Tue May 14, 2019 10:21 pm

The boglehead way is to not invest in individual stocks in most part. So you do not have a choice of not buying a particular stock if it is part of SPY or any other S&P 500 tracking fund. I was reading somewhere today of how a lot of companies misuse buybacks to reward their CEOs extravagantly and without any real benefit to the common stock holder.

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Tue May 14, 2019 10:30 pm

MNGopher wrote:
Tue May 14, 2019 10:16 pm
Would the company have maintained a higher share price if it hadn't paid out millions in dividends to it's shareholders? Wouldn't the total return have been about the same then? You could just sell some of your appreciated shares to "create your own dividend" at a time when it is most tax efficient for you to do so.
Berkshire Hathaway has lagged the SP500 lately. Would it have been better for them to pay a dividend and reinvest that money in a SP500 fund?

I understand the accounting behind paying a dividend. I know there's no magic secret sauce there.

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Tue May 14, 2019 10:33 pm

skor99 wrote:
Tue May 14, 2019 10:21 pm
The boglehead way is to not invest in individual stocks in most part. So you do not have a choice of not buying a particular stock if it is part of SPY or any other S&P 500 tracking fund. I was reading somewhere today of how a lot of companies misuse buybacks to reward their CEOs extravagantly and without any real benefit to the common stock holder.
Which would be an example of squandering money IMO. Even Buffett himself is critical of most corporations buying back shares when the share price is too high. That is to say, the share price exceeds the "intrinsic value."

RAchip
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Re: Dividends almost Doubled between 2013 and now

Post by RAchip » Tue May 14, 2019 10:39 pm

MNGopher wrote:
Tue May 14, 2019 9:51 pm
Riprap wrote:
Tue May 14, 2019 9:39 pm
Shsssh! Don't tell anyone. Besides, being a fan a dividends here is heresy.
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
If that is your opinion on dividends (irrelevant movement of money from one pocket to another), how do you feel about share buybacks? Are they also non-events?

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JoMoney
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Re: Dividends almost Doubled between 2013 and now

Post by JoMoney » Tue May 14, 2019 10:39 pm

skor99 wrote:
Tue May 14, 2019 10:21 pm
The boglehead way is to not invest in individual stocks in most part. So you do not have a choice of not buying a particular stock if it is part of SPY or any other S&P 500 tracking fund. I was reading somewhere today of how a lot of companies misuse buybacks to reward their CEOs extravagantly and without any real benefit to the common stock holder.
CEO's and corporate management have to make difficult choices that involve taking risks, hopefully they're making those decisions using information and are in areas they have expertise in. Sometimes those decisions don't work out... but "nobody bats 1000".
If you can identify (beforehand) the companies that are misusing buybacks or (on average) making bad decisions with the capital they've been entrusted with, then you would be better off picking the individual stocks and avoiding the bad ones. The 'boglehead way' is for those of us who don't have better information, and for better or worse have to accept that the corporate managers on average are making the best decisions with the information they have, and that the mutual fund management (to the best that they can) are using our proxy votes to form boards that hire good management.
Last edited by JoMoney on Tue May 14, 2019 10:40 pm, edited 1 time in total.
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randomguy
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Re: Dividends almost Doubled between 2013 and now

Post by randomguy » Tue May 14, 2019 10:40 pm

Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
You chose how either pocket is used. The difference in one case you make the choice. In the other case you let some other person make the choice for you.

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Tue May 14, 2019 10:46 pm

randomguy wrote:
Tue May 14, 2019 10:40 pm
You chose how either pocket is used. The difference in one case you make the choice. In the other case you let some other person make the choice for you.
Excellent point.

DonIce
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Re: Dividends almost Doubled between 2013 and now

Post by DonIce » Tue May 14, 2019 11:17 pm

skor99 wrote:
Tue May 14, 2019 9:30 pm
I am seeing a faster growth of rate of dividends than inflation in my portfolio. My investments may have Increased by 25% with my new contributions, so that may explain a portion of the growth. Another may be the good economy which has made companies increase their dividend rates. But that still doesn’t explain double. Any other ideas ?
Sure, it's simple. Company stock prices went up by nearly double since then, and so did dividends to keep up. The dividend payout ratio of the S&P500 has been quite steady at 2%.

MathIsMyWayr
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Re: Dividends almost Doubled between 2013 and now

Post by MathIsMyWayr » Tue May 14, 2019 11:59 pm

skor99 wrote:
Tue May 14, 2019 9:30 pm
I am seeing a faster growth of rate of dividends than inflation in my portfolio. My investments may have Increased by 25% with my new contributions, so that may explain a portion of the growth. Another may be the good economy which has made companies increase their dividend rates. But that still doesn’t explain double. Any other ideas ? Most of my investments are in the US stocks and bonds and those are the usual investments like growth funds or s&p 500 and some in vanguard bond funds
S&P 500 index appreciated by about 80% since 2013. OP also contributed about 25%. Considering these two factors, doubling of dividends is not surprising.

LFS1234
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Re: Dividends almost Doubled between 2013 and now

Post by LFS1234 » Wed May 15, 2019 5:24 am

From Bogle's 10th anniversary edition of The Little Book of Common Sense Investing, page 66:

"The stability of the annual dividends per share of the S&P 500 is truly remarkable (Exhibit 6.2). Over the 90-year span beginning in 1926, there were only three significant drops: (1) a 55 percent decline during the first years of the Great Depression (1929 -1933); (2) a 36 percent decline in the Depression's aftermath in 1938; and (3) a 21 percent decline during the global financial crisis of 2008-2009. This most recent decline occurred largely because banks were forced to eliminate their dividends. Dividends per share on the 500 Index fell from $28.39 in 2008 to $22.41 in 2009, but reached a new high of $45.70 in 2016, 60 percent above the earlier peak in 2008".

I'm not sure why the figure for 2008 is $28.39 per Bogle and $34.32 per JoMoney's interesting post above, this is a big discrepancy.

It should be noted that while US dividend yields generally have been low for the past two decades (due in part to much higher stock buyback activity), they have been much higher during other periods in history. According to my 1920-2005 Value line chart (which is DJIA-centered rather than S&P500-centered), the dividend yield on the DJIA in 1948 was 6.4%, in 1958 was 4.1%, in 1968 was 3.5%, in 1978 was 5.9% and in 1988 was 3.9%.

fennewaldaj
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Re: Dividends almost Doubled between 2013 and now

Post by fennewaldaj » Wed May 15, 2019 5:32 am

JoMoney wrote:
Tue May 14, 2019 10:05 pm


If you believe the management is on average "squandering" the money that would be better off paid out as dividends, you really shouldn't be buying the stock of that company at all (or at a minimum be petitioning the board to change the management).
Thats not necessary true though right? Some companies don't have projects to invest in that are worth it. Paying out dividends in this case is in the interest of the shareholders. That doesn't imply that management is doing anything wrong. Not every company has enough worthwhile projects to spend all their earnings on.

jebmke
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Re: Dividends almost Doubled between 2013 and now

Post by jebmke » Wed May 15, 2019 5:33 am

This has been a problem. Dividends spiked again quite a lot in the first quarter of this year which has thrown off my original estimates for paying estimated taxes. It is not helpful.
When you discover that you are riding a dead horse, the best strategy is to dismount.

jebmke
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Re: Dividends almost Doubled between 2013 and now

Post by jebmke » Wed May 15, 2019 5:35 am

RAchip wrote:
Tue May 14, 2019 10:39 pm
how do you feel about share buybacks? Are they also non-events?
They allow one to choose whether to take a taxable event or defer the gain.
When you discover that you are riding a dead horse, the best strategy is to dismount.

LFS1234
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Re: Dividends almost Doubled between 2013 and now

Post by LFS1234 » Wed May 15, 2019 5:49 am

In addition to the banks' resumption of paying generous dividends, another factor in recent dividend increases is the reduction in the federal corporate income tax rate from 35% to 21%.

For those companies which pay the top tax rate, everything else being equal, stockholders essentially are now benefitting from 79% of the earnings of their companies, up from 65% before. Thus, we as stockholders are now about 21% richer (.79/.65) than we were before the tax rate change, and of course the companies can use some or all of the cash they save in paying lower taxes, to instead pay out more in dividends.

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Re: Dividends almost Doubled between 2013 and now

Post by AlohaJoe » Wed May 15, 2019 5:55 am

LFS1234 wrote:
Wed May 15, 2019 5:24 am
"The stability of the annual dividends per share of the S&P 500 is truly remarkable (Exhibit 6.2). Over the 90-year span beginning in 1926, there were only three significant drops"
I guess Bogle and I count very differently. Just as real returns are the only thing that matters, real dividends are the only thing that matters. If you're only looking at nominal dividends you are looking at the wrong thing and drawing wrong conclusions.

These are all the dividend drops I see:

Image

33% cut in 1876. Didn't recover for five years.
25% cut in 1885. Didn't recover for fifteen years.
15% cut in 1906.
13% cut in 1908-1909.
52% cut from 1912-1929 (yes, it took 27 years to recover).
47% cut from 1933-1938 (5 years to recover)
40% cut in 1938 (right after recovering from the above....took 13 years to recover)

Sure, dividends are more stable than share prices but that's a pretty low bar and no one disputes that. Schiller won a Nobel Prize for pointing that out. But I wouldn't call three separate 40% crashes, with "dividend bear markets" that are regularly over 10 years long, in a 36 year period "remarkable stability".

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gilgamesh
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Re: Dividends almost Doubled between 2013 and now

Post by gilgamesh » Wed May 15, 2019 6:11 am

Riprap wrote:
Tue May 14, 2019 10:46 pm
randomguy wrote:
Tue May 14, 2019 10:40 pm
You chose how either pocket is used. The difference in one case you make the choice. In the other case you let some other person make the choice for you.
Excellent point.
Lol

ad2007
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Re: Dividends almost Doubled between 2013 and now

Post by ad2007 » Wed May 15, 2019 7:07 am

Riprap wrote:
Tue May 14, 2019 9:39 pm
Shsssh! Don't tell anyone. Besides, being a fan a dividends here is heresy.
Even qualified div payments are all taxed at 23.8% for me. I'd rather not get div but there's nothing I can do about it, being invested in index funds.

LFS1234
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Re: Dividends almost Doubled between 2013 and now

Post by LFS1234 » Wed May 15, 2019 8:30 am

AlohaJoe wrote:
Wed May 15, 2019 5:55 am
LFS1234 wrote:
Wed May 15, 2019 5:24 am
"The stability of the annual dividends per share of the S&P 500 is truly remarkable (Exhibit 6.2). Over the 90-year span beginning in 1926, there were only three significant drops"
I guess Bogle and I count very differently. Just as real returns are the only thing that matters, real dividends are the only thing that matters. If you're only looking at nominal dividends you are looking at the wrong thing and drawing wrong conclusions.
That is a good point. Do the dividend drops you note (below) comply with these standards? Are they real or just nominal? Could you cite a source?

For example, there was a lot of deflation during between 1870 and 1890:

https://en.wikipedia.org/wiki/The_Great_Deflation

If the data below isn't adjusted for deflation, then the drops noted might be greatly exaggerated in real terms.


These are all the dividend drops I see:

Image

33% cut in 1876. Didn't recover for five years.
25% cut in 1885. Didn't recover for fifteen years.
15% cut in 1906.
13% cut in 1908-1909.
52% cut from 1912-1929 (yes, it took 27 years to recover).
47% cut from 1933-1938 (5 years to recover)
40% cut in 1938 (right after recovering from the above....took 13 years to recover)

Sure, dividends are more stable than share prices but that's a pretty low bar and no one disputes that. Schiller won a Nobel Prize for pointing that out. But I wouldn't call three separate 40% crashes, with "dividend bear markets" that are regularly over 10 years long, in a 36 year period "remarkable stability".

In defense of Bogle, he was referring to the 90 years beginning in 1926, not to an earlier era. The world was quite a different place in the 1800s, as were the stock markets and the types of companies listed on those stock markets.

It is also relevant that a long time ago, corporations used to pay out a much larger proportion of their annual earnings in dividends, so dividends fluctuated quite a bit in many industries depending on how each year went. Nowadays, US companies in general hate to "send a negative signal to the markets" by cutting dividends, so they generally try to pay out only an amount they believe to be highly likely to be at least sustainable in the long term, with the remaining earnings either being retained in the company or spent on acquisitions or share repurchases. Changing tax laws have also affected dividend policies. Due to these factors, It is more realistic to count on a diversified portfolio of US stocks providing a relatively stable stream of dividend income today, than it would have been to expect this 50+ years ago. Today, corporate management often has the option of saving money by cutting share buybacks instead of having to cut dividends.

In many other parts of the world it is still typical to declare dividends based upon the previous year's earnings, which depending on the business may fluctuate a lot from year to year.

In my personal planning, I expect the S&P 500 to be able to drop 50% at any time, for any reason or for no reason. (I also expect it to subsequently recover and continue rising.) I do not expect the S&P 500 dividend yield to drop anywhere close to that, and think that one should be fairly secure in assuming that a diversified portfolio of dividend-paying stocks is unlikely to drop in yield by more than about 20% during future tough times.

While we're being doomy and gloomy, let's not lose sight of the fact that over time, cumulative rises both in stock prices and in dividends have dwarfed cumulative falls. Counting just drops and failing to count rises is a bit like noticing that the temperature drops by 20 degrees between midday and midnight every day, and calculating that the temperature therefore drops by 7300 degrees per year. I'm sure that very few people on this board would make that mistake, but lots of ordinary civilians do, to their great financial detriment.

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CyclingDuo
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Re: Dividends almost Doubled between 2013 and now

Post by CyclingDuo » Wed May 15, 2019 8:31 am

AlohaJoe wrote:
Wed May 15, 2019 5:55 am
LFS1234 wrote:
Wed May 15, 2019 5:24 am
"The stability of the annual dividends per share of the S&P 500 is truly remarkable (Exhibit 6.2). Over the 90-year span beginning in 1926, there were only three significant drops"
I guess Bogle and I count very differently. Just as real returns are the only thing that matters, real dividends are the only thing that matters. If you're only looking at nominal dividends you are looking at the wrong thing and drawing wrong conclusions.

These are all the dividend drops I see:

Image

33% cut in 1876. Didn't recover for five years.
25% cut in 1885. Didn't recover for fifteen years.
15% cut in 1906.
13% cut in 1908-1909.
52% cut from 1912-1929 (yes, it took 27 years to recover).
47% cut from 1933-1938 (5 years to recover)
40% cut in 1938 (right after recovering from the above....took 13 years to recover)

Sure, dividends are more stable than share prices but that's a pretty low bar and no one disputes that. Schiller won a Nobel Prize for pointing that out. But I wouldn't call three separate 40% crashes, with "dividend bear markets" that are regularly over 10 years long, in a 36 year period "remarkable stability".
Image
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lostdog
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Re: Dividends almost Doubled between 2013 and now

Post by lostdog » Wed May 15, 2019 8:36 am

Should dividend investors be concerned about the increased popularity of share buybacks?
I don't invest looking in the rear view mirror and I know absolutely nothing about the future. I invest in Vanguard Total World Stock Index.

dbr
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Re: Dividends almost Doubled between 2013 and now

Post by dbr » Wed May 15, 2019 8:43 am

lostdog wrote:
Wed May 15, 2019 8:36 am
Should dividend investors be concerned about the increased popularity of share buybacks?
It would certainly seem that if a person considers it to be to their advantage for the dividend payout to be as high as possible, that this would not be to that person's advantage. I can't tell you how to forecast the future income stream in dividends from any particular portfolio.
Last edited by dbr on Wed May 15, 2019 8:44 am, edited 1 time in total.

deltaneutral83
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Re: Dividends almost Doubled between 2013 and now

Post by deltaneutral83 » Wed May 15, 2019 8:44 am

Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
You do realize you have the ability to "declare" your own dividend anytime you wish and sell off shares if you owned BRK if dividends are your fancy (and at capital gains rates most likely)? When the company declares a dividend on a schedule you have no choice and it is taxed at whatever rate. I like choices, not a forced hand. It's almost as if I see people talking about the "dividends vs. no dividends" conversation as an intellectual discussion when it certainly isn't for me, it's pretty mechanical.

elderwise
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Re: Dividends almost Doubled between 2013 and now

Post by elderwise » Wed May 15, 2019 8:56 am

I am interested if someone can tell how the situation changes say under this hypothetical situation (No taxation on dividend income ) but taxation on LTCG stock sold.

1. You have 100,000 paying dividend at around 4% or 4000 no tax.

2. You liquidate shares / stock / MF et preferable LTCG rates of 0-20%. returning a yield around 12% of 100,000.

Which would be more preferred?

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HomerJ
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Re: Dividends almost Doubled between 2013 and now

Post by HomerJ » Wed May 15, 2019 8:58 am

MNGopher wrote:
Tue May 14, 2019 9:51 pm
Riprap wrote:
Tue May 14, 2019 9:39 pm
Shsssh! Don't tell anyone. Besides, being a fan a dividends here is heresy.
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
They are taking a couple of bucks out of the executives' pockets, and putting them in your pocket so the executives' don't waste those bucks on another company jet or new boardroom remodel.

Books can be cooked. Cash flow is harder to fake (for a long time).
The J stands for Jay

BJJ_GUY
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Re: Dividends almost Doubled between 2013 and now

Post by BJJ_GUY » Wed May 15, 2019 8:59 am

MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
Dividends and share repurchases COULD be akin to taking $ from one pocket and passing it to the other.

None of the capital allocation decisions are inherently good/bad.

Importantly, often times companies are financing buybacks, dividends, acquisitions, among many other uses. Corporate debt has increased substantially during the last decade, so a lot of the activity being discussed may be increasing leverage all while investors celebrate dividends and share buybacks without any further consideration

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HomerJ
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Re: Dividends almost Doubled between 2013 and now

Post by HomerJ » Wed May 15, 2019 9:00 am

JoMoney wrote:
Tue May 14, 2019 10:05 pm
Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
If you believe the management is on average "squandering" the money that would be better off paid out as dividends, you really shouldn't be buying the stock of that company at all (or at a minimum be petitioning the board to change the management).
I buy all companies via the Index, so I can't choose which companies to invest in.
The J stands for Jay

dkturner
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Re: Dividends almost Doubled between 2013 and now

Post by dkturner » Wed May 15, 2019 9:00 am

lostdog wrote:
Wed May 15, 2019 8:36 am
Should dividend investors be concerned about the increased popularity of share buybacks?
Dividend increases are generally favored by companies because they are attractive to both existing shareholders and potential new purchasers of their common stock. Share repurchases make it possible for company managements to increase dividends without allocating more overall $. The increased popularity of share buybacks may be responsible for a significant amount of the recent increase in dividend payments.

dbr
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Re: Dividends almost Doubled between 2013 and now

Post by dbr » Wed May 15, 2019 9:02 am

HomerJ wrote:
Wed May 15, 2019 9:00 am
JoMoney wrote:
Tue May 14, 2019 10:05 pm
Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
If you believe the management is on average "squandering" the money that would be better off paid out as dividends, you really shouldn't be buying the stock of that company at all (or at a minimum be petitioning the board to change the management).
I buy all companies via the Index, so I can't choose which companies to invest in.
Exactly. Stock picking and index investing are completely orthogonal enterprises. The result can be a certain amount of talking past each other when dividends are in the discussion.

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HomerJ
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Re: Dividends almost Doubled between 2013 and now

Post by HomerJ » Wed May 15, 2019 9:04 am

MathIsMyWayr wrote:
Tue May 14, 2019 11:59 pm
skor99 wrote:
Tue May 14, 2019 9:30 pm
I am seeing a faster growth of rate of dividends than inflation in my portfolio. My investments may have Increased by 25% with my new contributions, so that may explain a portion of the growth. Another may be the good economy which has made companies increase their dividend rates. But that still doesn’t explain double. Any other ideas ? Most of my investments are in the US stocks and bonds and those are the usual investments like growth funds or s&p 500 and some in vanguard bond funds
S&P 500 index appreciated by about 80% since 2013. OP also contributed about 25%. Considering these two factors, doubling of dividends is not surprising.
This by the way is the correct answer to the original question (since we all got derailed on whether dividends are a good thing or not).
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SovereignInvestor
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Re: Dividends almost Doubled between 2013 and now

Post by SovereignInvestor » Wed May 15, 2019 9:05 am

deltaneutral83 wrote:
Wed May 15, 2019 8:44 am
Riprap wrote:
Tue May 14, 2019 10:02 pm
MNGopher wrote:
Tue May 14, 2019 9:51 pm
It's not that people here don't like dividends, they just realize that they are nothing more than taking a couple bucks out of your right pocket and putting it in your left pocket (and possibly paying taxes on it).
That's your take. If it stays in your right pocket, it's your cash but someone else gets to decide how it's used. If it passes to your left pocket, you decide how it's used. Big difference in my book.

Some cases it's better left in the company; Berkshire Hathaway being a good example. It other cases, cash is squandered by management in acquisitions or other dumb ideas and would have been put to better use by the shareholder personally.
You do realize you have the ability to "declare" your own dividend anytime you wish and sell off shares if you owned BRK if dividends are your fancy (and at capital gains rates most likely)? When the company declares a dividend on a schedule you have no choice and it is taxed at whatever rate. I like choices, not a forced hand. It's almost as if I see people talking about the "dividends vs. no dividends" conversation as an intellectual discussion when it certainly isn't for me, it's pretty mechanical.
This exactly.

If a stock buys back 10% of its shares you can immediately sell 10% of the shared and boom you paid yourself a 10% dividend and your ownership didn't change.

But if you wanted to reinvest the divdend..then do nothing and the company did it tax free for you.

Also of you did want cash dividend and you paid yourself...at least only some of what you sold is taxed...difference between proceeds and cost basis. Where if company paid dividend all of it is taxed.

Buybacks are more choice..the choice to reinvestment tax free....and even if you decline the choice and want cash, buybacks are more tax efficient.

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Wed May 15, 2019 9:35 am

deltaneutral83 wrote:
Wed May 15, 2019 8:44 am
You do realize you have the ability to "declare" your own dividend anytime you wish and sell off shares if you owned BRK if dividends are your fancy (and at capital gains rates most likely)? When the company declares a dividend on a schedule you have no choice and it is taxed at whatever rate. I like choices, not a forced hand. It's almost as if I see people talking about the "dividends vs. no dividends" conversation as an intellectual discussion when it certainly isn't for me, it's pretty mechanical.
Sigh...I do realize this. I invest because I like and need money and I don't like seeing my cash in a corporation spent foolishly. How does creating homegrown dividends by selling appreciated shares have anything to do with that?

Having my cash returned to me because management doesn't have a good use for it is not such a bad thing.

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Dialectical Investor
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Re: Dividends almost Doubled between 2013 and now

Post by Dialectical Investor » Wed May 15, 2019 9:47 am

lostdog wrote:
Wed May 15, 2019 8:36 am
Should dividend investors be concerned about the increased popularity of share buybacks?
Yes. They should be concerned because it weakens one of their main arguments for preferring dividends--that they don't want management sqaundering excess cash on lavish perquisites and overly conservative contingency funds.

deltaneutral83
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Re: Dividends almost Doubled between 2013 and now

Post by deltaneutral83 » Wed May 15, 2019 9:52 am

Riprap wrote:
Wed May 15, 2019 9:35 am
deltaneutral83 wrote:
Wed May 15, 2019 8:44 am
You do realize you have the ability to "declare" your own dividend anytime you wish and sell off shares if you owned BRK if dividends are your fancy (and at capital gains rates most likely)? When the company declares a dividend on a schedule you have no choice and it is taxed at whatever rate. I like choices, not a forced hand. It's almost as if I see people talking about the "dividends vs. no dividends" conversation as an intellectual discussion when it certainly isn't for me, it's pretty mechanical.
Sigh...I do realize this. I invest because I like and need money and I don't like seeing my cash in a corporation spent foolishly. How does creating homegrown dividends by selling appreciated shares have anything to do with that?

Having my cash returned to me because management doesn't have a good use for it is not such a bad thing.
I am not 100% sure where you are coming from but it sounds like you are suggesting that you feel companies that declare larger div's are just better off (in terms of total ROI) in general than companies that do not distribute div's or distribute a lower % of divs????

BJJ_GUY
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Re: Dividends almost Doubled between 2013 and now

Post by BJJ_GUY » Wed May 15, 2019 9:55 am

dkturner wrote:
Wed May 15, 2019 9:00 am
lostdog wrote:
Wed May 15, 2019 8:36 am
Should dividend investors be concerned about the increased popularity of share buybacks?
Dividend increases are generally favored by companies because they are attractive to both existing shareholders and potential new purchasers of their common stock. Share repurchases make it possible for company managements to increase dividends without allocating more overall $. The increased popularity of share buybacks may be responsible for a significant amount of the recent increase in dividend payments.
If a company has $5 in free cash they can (among other things) repurchase shares OR pay it to shareholders via a dividend. However, the $5 cannot be used twice, as in the way detailed in the bold-quote above.

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gilgamesh
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Re: Dividends almost Doubled between 2013 and now

Post by gilgamesh » Wed May 15, 2019 10:02 am

fennewaldaj wrote:
Wed May 15, 2019 5:32 am
JoMoney wrote:
Tue May 14, 2019 10:05 pm


If you believe the management is on average "squandering" the money that would be better off paid out as dividends, you really shouldn't be buying the stock of that company at all (or at a minimum be petitioning the board to change the management).
Thats not necessary true though right? Some companies don't have projects to invest in that are worth it. Paying out dividends in this case is in the interest of the shareholders. That doesn't imply that management is doing anything wrong. Not every company has enough worthwhile projects to spend all their earnings on.
Is that what you see in real life? Is it typical for a company to periodically decide whether they have projects that are worthy or not and decide how much dividend to pay out?

I see companies evaluating when it’s opportune to buy-back, but dividends most of the times seems to be on auto, until they are so ruined they have to lower dividends.

Are you saying all dividend companies already knows their profit, what they need for re-investing years in advance and pays out some of the difference in dividends?

What are your observations on this?
Last edited by gilgamesh on Wed May 15, 2019 10:06 am, edited 1 time in total.

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Wed May 15, 2019 10:02 am

deltaneutral83 wrote:
Wed May 15, 2019 9:52 am
I am not 100% sure where you are coming from but it sounds like you are suggesting that you feel companies that declare larger div's are just better off (in terms of total ROI) in general than companies that do not distribute div's or distribute a lower % of divs????
See? You're just showing what a lousy communicator I am. :oops:

How is selling those appreciated shares of General Electric working out? I wonder how things would have turned out had GE just paid dividends instead of using cash to expand into areas outside their core business and expertise. Maybe GE would have been better off.

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gilgamesh
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Re: Dividends almost Doubled between 2013 and now

Post by gilgamesh » Wed May 15, 2019 10:08 am

Riprap wrote:
Wed May 15, 2019 10:02 am
deltaneutral83 wrote:
Wed May 15, 2019 9:52 am
I am not 100% sure where you are coming from but it sounds like you are suggesting that you feel companies that declare larger div's are just better off (in terms of total ROI) in general than companies that do not distribute div's or distribute a lower % of divs????
See? You're just showing what a lousy communicator I am. :oops:

How is selling those appreciated shares of General Electric working out? I wonder how things would have turned out had GE just paid dividends instead of using cash to expand into areas outside their core business and expertise. Maybe GE would have been better off.
Lol, this one is even better...can’t make this stuff up.

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vineviz
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Re: Dividends almost Doubled between 2013 and now

Post by vineviz » Wed May 15, 2019 10:18 am

gilgamesh wrote:
Wed May 15, 2019 10:02 am
Are you saying all dividend companies already knows their profit, what they need for re-investing years in advance and pays out some of the difference in dividends?
“Know” might be a tad strong, since none of us “know” the future.

But otherwise, yes, this is what companies do. They evaluate their growth opportunities, evaluate the ROI in the various uses of cash flow, and decide what to do with the cash.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Riprap
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Re: Dividends almost Doubled between 2013 and now

Post by Riprap » Wed May 15, 2019 10:19 am

gilgamesh wrote:
Wed May 15, 2019 10:08 am
Lol, this one is even better...can’t make this stuff up.
Sort of a known unknown, don't ya think? It's known companies are gonna do dumb things only knowable in hindsight. Returning cold hard cash doesn't seem so dumb.

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skor99
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Re: Dividends almost Doubled between 2013 and now

Post by skor99 » Wed May 15, 2019 10:36 am

Maybe if there were strict standards on how buy backs should be used to benefit the stockholders instead of primarily benefitting the high executives , then buybacks might be better. Is there any analysis available on how buybacks have affected the stock price positively? So instead of getting a 3% dividend , if there is a buyback then does the stock price go up by 3% every thing else being equal ?
Last edited by skor99 on Wed May 15, 2019 10:39 am, edited 1 time in total.

deltaneutral83
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Re: Dividends almost Doubled between 2013 and now

Post by deltaneutral83 » Wed May 15, 2019 10:37 am

Riprap wrote:
Wed May 15, 2019 10:02 am
deltaneutral83 wrote:
Wed May 15, 2019 9:52 am
I am not 100% sure where you are coming from but it sounds like you are suggesting that you feel companies that declare larger div's are just better off (in terms of total ROI) in general than companies that do not distribute div's or distribute a lower % of divs????
See? You're just showing what a lousy communicator I am. :oops:

How is selling those appreciated shares of General Electric working out? I wonder how things would have turned out had GE just paid dividends instead of using cash to expand into areas outside their core business and expertise. Maybe GE would have been better off.
OK, I see what you are suggesting now but that is more a function of stock picking than indexing. Most of the div's discussions are in regards to indexing and not single stocks which is a completely different discussion. If you haven't diversified single stock risk away in this discussion, then it's really two separate conversations.

BJJ_GUY
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Re: Dividends almost Doubled between 2013 and now

Post by BJJ_GUY » Wed May 15, 2019 10:51 am

skor99 wrote:
Wed May 15, 2019 10:36 am
Maybe if there were strict standards on how buy backs should be used to benefit the stockholders instead of primarily benefitting the high executives , then buybacks might be better. Is there any analysis available on how buybacks have affected the stock price positively? So instead of getting a 3% dividend , if there is a buyback then does the stock price go up by 3% every thing else being equal ?
Price reaction isn't the best way to answer that question. More intuitively, share buybacks result in an increased ownership stake for stockholders. With this basic premise, this question becomes one of opportunity cost: Whatever you do to reinvestment dividends vs return from a company that (post repurchase) you now own a slightly larger % of

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