Dividends... when will we know how much?

[InvestorNewb]

Hello,

When will we know how much we're going to get paid per share?

I thought it would be today, but I didn't see any update on Vanguard's web site.

Thanks

[Minot]

http://tinyurl.com/ntqnbgk

[NightOwl]

http://tinyurl.com/ntqnbgk

Yes, but see the thread Vanguard 2013 Year End Distributions for a few reasons why the current estimated dividend per share might be low.

From that thread:

If I'm reading it right it looks like 2013 fourth quarter distributions are approximately half of 2012, in VTI, VXUS, VEU, and VOO. Fiscal cliff stuff from last year, per livesoft?

No. You are missing the fact that these are dividends only up to Nov. 30. A lot of companies will be declaring dividends between 11/30 and 12/20. At least as many (if not more) than in November.

NightOwl

[NightOwl]

When will we know how much we're going to get paid per share?

The phrase "get paid" raises an eyebrow especially given some recent posts (not yours) on the forum about this topic -- "get paid" makes it seem like you're looking forward to receiving dividends and thinking that you will benefit from them? Perhaps you will, if you are in an income tax bracket below the LTCG rate -- otherwise, dividends simply increase your tax burden with no offsetting benefit for you.

If that's not what you meant, my apologies -- just checking.

NightOwl

[InvestorNewb]

Thanks for the link. I am looking forward to receiving them. More money is always good.

[nordlead]

Thanks for the link. I am looking forward to receiving them. More money is always good.

When you are paid dividends, the value of your stock drops accordingly. You aren't getting more money, but instead you are transferring money out of the stock you own into your pocket with a theoretical net gain of 0. You then may need to also account for taxes.

So, dividends can be useful, but they don't really benefit you if you are purely in an accumulation phase and all dividends are being reinvested.

[countdown]

'The Power of Compounding Dividends'?

[InvestorNewb]

So, dividends can be useful, but they don't really benefit you if you are purely in an accumulation phase and all dividends are being reinvested.

I disagree with this. Compare two investors who have a 30-year time horizon. One re-invests all dividends, and the other one doesn't. The numbers will speak for themselves.

[Ketawa]

So, dividends can be useful, but they don't really benefit you if you are purely in an accumulation phase and all dividends are being reinvested.

I disagree with this. Compare two investors who have a 30-year time horizon. One re-invests all dividends, and the other one doesn't. The numbers will speak for themselves.

This is a meaningless comparison. Money is fungible. If I don't reinvest dividends for a dividend-generating investment, I can just buy more of it. All that matters is whether the investment is at its appropriate weight in my asset allocation.

[Code Commit]

So, dividends can be useful, but they don't really benefit you if you are purely in an accumulation phase and all dividends are being reinvested.

I disagree with this. Compare two investors who have a 30-year time horizon. One re-invests all dividends, and the other one doesn't. The numbers will speak for themselves.

You are misreading. nordlead didn't say it does not matter whether you are reinvesting or not. He/she is saying "IF all dividends are being reinvested", then it does not matter whether your funds were giving your dividends (and dropping in NAV) or keep the NAV high by not paying dividend. That is why it does not make sense to say "I look forward to getting paid. More money is good". It is still your money, even if the fund didn't pay dividend (or paid less per share), since your NAV will be higher by the same amount.

[DSInvestor]

Dividends received in taxable accounts are taxable. As a Canadian investor, you're probably not receiving a preferential tax rate for your dividends and qualified dividends. What the other posters are saying is that fund and ETF NAV includes all assets of the fund dividends until the fund goes ex-dividend. Your fund may be $10/share before dividend and $9/share after the $1 dividend. The share price drops by the amount of the the dividend so those dividends are not found money. You have $10 before and after ($9 in fund and $1 cash) the dividend. Sure you can reinvest the dividend to maintain $10 balance in the fund (1.11 shares at $9/share) but the dividends are taxed even if you reinvest.

If you sell shares before the dividend, you don't lose out on the dividend because the NAV includes accumulated dividends.

[countdown]

In a tax qualified account, we now have 1.11 share at $9., but benefit by having more shares when the market increases our share value to $11. hypothetically. Yes?

And when we are in withdrawal/retirement phase, we possibly maintain principal and receive dividends, versus withdraw from sale of principal. The latter argument being you would have had greater growth from which to draw principal.

Is this essentially the distinction between the two principles/theories of investing? (Sorry for such a basic question, but I would like to know I understand it correctly--or not.)

[Code Commit]

In a tax qualified account, we now have 1.11 share at $9., but benefit by having more shares when the market increases our share value to $11. hypothetically. Yes?

No. In your example, a growth of $2 ($11-$9) means 22.22% growth (2/9). So, at $11, you have (1.111 shares * $11) = $12.22

Without dividend, if $10 also grows by the same 22.22%, then you still get $12.22.

No difference.

[countdown]

I see. Thank you, Code.

Then what are the arguments in favor of dividend investing? Potentially less risky portfolio?

I do recall reading several interviews with Jack Bogle wherein he recommends allocating a portion of equities to dividend stocks.

Am I correct that dividend investment is 'old school'?

This probably belongs in theory....searching, but unless I missed it, didn't find thorough discussion in wiki....

And just want to say I appreciate the patience of Bogleheads in helping investors of all levels of experience.

[Code Commit]

Then what are the arguments in favor of dividend investing?

Here, we are only discussing the effects of mutual funds (or ETFs) paying out their accumulated dividends and there is no difference before and ex-dividend (other than potential taxes) .

If you are asking about a strategy of investing in dividend paying stocks, then that is a different topic and I would certainly let others chime in.

[countdown]

Yes, Code, understood....realize I went far afield, bur still hope to learn from the questions. Thank you!

[NHRATA01]

I see. Thank you, Code.

Then what are the arguments in favor of dividend investing?

In my understanding, it's more beneficial for individual stock investing. Individual stock pricing is dictated more by what the market thinks the stock is worth - from my experience I haven't really seen a stock price drop noticeably on dividend day. Mutual funds are a bit different since the NAV is essentially the value of all the stocks + cash. As all the stocks in a fund pay out dividends on random days, the fund accumulates this cash, causing a small rise in the NAV over time due to the dividends. When it distributes the dividends, then the NAV drops since by nature the fund decreases its cash. Basically, IMO, with mutual funds dividends are basically, six of one, half dozen of the other.

There's also the investing theory that companies which pay dividends, and steadily increase them, tend to be financially healthy, well managed, and place a premium on "shareholder value". Keep in mind that's just a theory. I'm not trying to support it. On the contrary there's been plenty of research to suggest that healthy companies which don't pay a dividend make better use of their cash by reinvesting it in the business and thus growing their value, which will then (likely) be reflected in an increasing stock price.

[rkhusky]

The advantage to dividends that I can see are that, if they are consistent, you can get an income stream that is independent of the NAV. However, dividends from stocks are not nearly as reliable as dividends from bonds. There may also be a correlation between the stability of the company and the amount of dividends that it pays.

[bberris]

individual stocks are also marked down on ex dividend day. Doesn't this make sense? The movement of money from corporate (or mutual fund) bank account to your bank account does not create wealth. It might be less noticeable for individual stocks because their prices are noisier; averages are smoothed.

[BrandonBogle]

I see. Thank you, Code.

Then what are the arguments in favor of dividend investing? Potentially less risky portfolio?

I do recall reading several interviews with Jack Bogle wherein he recommends allocating a portion of equities to dividend stocks.

Am I correct that dividend investment is 'old school'?

Before low-cost index funds were widely available, dividend stock investment was an option to avoid the high fees of a MF (though with concentration risk/lack of diversification) since you only paid fees for the stock once (at purchase). Widely available low-cost mutual funds now provide an opportunity to remove the lack of diversification risk while only costing fractions of a penny on the dollar. Someone who might have been paying 3% annually in fees might have been willing to take the risk on dividend stocks to minimize fees. There are better options (IMO) available today.

[Grasshopper]

I have been known to sell before the dividend to take my gain as LTCG. YMMV

[InvestorNewb]

We should know tomorrow how accurate the estimates are.

[sscritic]

I got a cap gain today.

Code: Select all

Distribution	 Record Date	 Reinvest Date	 Payable Date
   $0.11000	  12/16/2013	   12/17/2013	    12/18/2013

P.S. I was thinking about starting a thread about how my fund got killed today. Those threads are always so much fun. Why hasn't anyone started one yet? Maybe tomorrow.

[synergy]

Due to a head cold, I am awake at this silly hour. This enabled me to see a post at 1:21 about this very topic. Reassuring that some things are so constant.

[dickenjb]

Then what are the arguments in favor of dividend investing? Potentially less risky portfolio?

There are no arguments in favor of dividend investing. At least no good ones.

You are less diversified than owning VTSAX, have a higher tax burden, to no real benefit.

People who tout dividend strategies feel that dividends are magic, different from capital appreciation, and they "aren't touching principal".

See Larry Swedroe's post - Dividend investing is a poor man's value strategy.

[dickenjb]

P.S. I was thinking about starting a thread about how my fund got killed today. Those threads are always so much fun. Why hasn't anyone started one yet? Maybe tomorrow.

I know sscritic has seen this, but for the benefit of others reading this thread:

http://www.bogleheads.org/forum/viewtop ... st=1888822

[OT comment removed by admin LadyGeek]

[sscritic]

P.S. I was thinking about starting a thread about how my fund got killed today. Those threads are always so much fun. Why hasn't anyone started one yet? Maybe tomorrow.

I know sscritic has seen this, but for the benefit of others reading this thread:

http://www.bogleheads.org/forum/viewtop ... st=1888822

[OT comment removed by admin LadyGeek]

He admitted he was totally new, and it was his first post, so I cut him some slack. It's when someone with 1000 posts asks the same question that I start to wondering what is going on.

[abuss368]

Vanguard did publish an updated estimate on their website. Historically they are very accurate at least for the funds we invest in.

[InvestorNewb]

The numbers are now published on Vanguard's web site if anyone is interested.

VTI: 0.49400
VXUS: 0.45800
VNQ: 0.61800

Not bad..more than I thought it would be.

[InvestorNewb]

I made a mistake with my last post. VNQ is actually set to pay a dividend of $1.00800.

Not that I'm complaining, but any reason why it's so high?