What The Money Guy Show Thinks About Dividend Investing...

What do you think about dividend investing and what is the benefits of doing dividend investing vs. regular index funds? I am still maxing out my 401(k) and Roth IRA.

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[tinsleyLuna]

My portfolio doesn’t just cater to dividend stocks. I hold $VFIAX (S&P 500 index fund) in my Roth IRA and $VTI (Total Stock Market ETF) in my taxable brokerage account. Two of my largest holdings. The individual dividend stock positions all complement the index holdings.

[frederickruderman]

I started buying dividend paying stocks over 20 years ago. I’ve held 4 of those stocks for 20+ years and only hold a total of 6 stocks. I retired 4 years ago at age 63 and the cash flow from these dividends pay more than my expenses. I got lucky and made the right move ! I didn’t draw a single accumulated dividend until I retired. I’ve been so fortunate and thank G-d that I did this

[nickycolgantl]

I would think that a major benefit of dividend investing is that calculating portfolio size needed is not relevant. We don't care about the value of the portfolio. We care about the sustainable income it pays. As you invest you can gradually see the income rise as you invest more and pull the retirement trigger when it's high enough regardless of the market sentiment.

[Mitchbands]

I have been a dividend focused investor for a long time. This does not mean I don't own growth stocks, I do. A well rounded portfolio should be a mixture of both categories. One way to minimize the anxiety out of stock market investing, is to make sure you keep a large cash cushion. I invest in the market, but never put all my money in market.

[Dividendsmattertoo]

I do qualified dividends in my taxable account and growth in my Roth.

[davidtvedte]

Just like you guys I love the dividends that my portfolio generate. I basically have the total market, international and bonds but am slightly weighted towards value and small cap. I do not seek out investments for their dividends but for the allocation I desire and the total return.

[xiphoid]

I invest mainly index, such as VTI. I mainly look at the quarterly price performance, but I love the dividend which is I see as extra bonus I get each quarter. In the long run, growth outperform dividend investing. But this can be a valid strategy for those who are retired and mainly looking for a fixed quarterly dividend paycheck.

[voodootrois]

Return of capital to shareholders can be a great thing. The other way to do it is share buybacks. Tax law has been more favorable for share buybacks than dividends. You could invest in a "buyback" stock, and sell 1% of your shares every time the company buys 1% of shares outstanding.

[jaakkomerilainen]

If the dividend is safe and it looks like that it will rise in a stable fashion, then the company is a mature company with good profitability and the stock price will follow. Getting into these kinds of stocks at the right place have been my best single stock investments -- trying to predict winners based on non-realised improvements to future profitability have not worked so well for me.

[resterAnonyme]

I feel there is a time and place for dividends. I want growth in my IRA while I continue to work, when I reach a point at retirement, I would want Dividends in my brokerage account and REIT's in my IRA to take advantage of the tax implications. I would want to avoid selling as many assets as I can in retirement by taking dividends from my brokerage and REIT income from my IRA's first and then capital gains from my brokerage second up to the 0% tax bracket, basis in my brokerage third, and last sell off assets within my IRA's to make up the difference I need in retirement.

[JohnDoe_]

How are dividends acounted for in roths after you retire?

[Mr_P]

The nice thing about it is that if you invest in dividend aristocrats, you'll get a steady return somewhat independent of the market.
The disadvantage is that you limit your exposure to a certain kind of company (mainly not growth/tech), but even more important is the risk that if the company misses a dividend, the stock price will also drop and so you get a double whammy. First you did not get the dividend itself and since people expected it and interpret the absence of it as a sign of trouble, you'll also take a hit on the stock price. If you don't need the "steady' income, just buy the broad market.

[worldnomad]

Dividend investing isn’t the solution to your philosophy, just like debt crusaders aren’t the solution to your philosophy. They have reasons for their philosophy that you’re straw manning, so of course you think they’re wrong. If dividend investors want to fully replace their income to live a certain lifestyle with financial freedom, then that’s their choice. It’s not right or wrong.

[Pieter]

Excellent. And on top of what you guys already mentioned, dividends are nothing more than a distribution of cash from the company to its shareholders (ie they are not investment returns as such), and hence the share price falls by the dividend per share on the ex dividend date.

[matthewfarrell]

Im glad you guys pointed out that you get both, and i wished you called the chasing only dividends the name for it, dividend traps. It's well known in dividend investing and something already warned about.

Im lucky to have franking credits here in Australia. Our main ASX index funds by default bring in around 4% dividend and if you sit in the middle class, you don't have to worry about being taxed, and if you are in the lower tax bracket, you get some taxes returned.

Best of both worlds.

[MT-sqjo]

People buy a high dividend paying stock, XYZ, at $100 per share. XYZ just declared a dividend of $2, awesome, right?! Meanwhile, the stock price of X YZ just dropped by $2 from $100 to $98 per share on the ex-dividend date 😂

[danaconda]

Crazy to me how many people continue to put all their investments into SCHD and other dividend ETFs when the S&P500 continues to just go up and up. Enjoy those dividends i guess

[leitm]

I think they missed the biggest part of this whole question. The question stated that they are already maxing out Roth and 401k which means that they probably already hold a TON of index funds in those accounts. It sounds to me like the question was asking more about if they should be investing in dividend stocks in a brokerage account with after tax dollars.

If that is the question as I believe it is then the answer I think should be a resounding yes. Start by investing in the "safer" dividend stocks like the aristocrats and kings. Depending on how motivated you are in learning about them and increasing cash from dividends you can look into other types of dividend stocks as well such as REITS. Keep in mind that not all dividends are equal.

You need to understand if the dividend from the stock is qualified, nonqualified, or considered a return of capital like some of the MLP's do. I've been a dividend investor for about 10 years now and there's definitely a lot to learn especially come tax time. It's definitely worth it but you do need to spend the time learning about the company before investing just like you should with any single stock investment.

[Just_Stevo]

Growth in my 401k Dividends in my taxable. I get to scratch the itch in my taxable( I know it isn't efficient) with single stocks. BUT, only 25% of my taxable is single stocks. the rest is cash and ETF's.

[hunnybunny]

Going out of your way to get high dividends makes your investments less diversified and increases the chance of a low total return despite high dividends. If it’s in a taxable account, it’s even worse because dividends are less tax efficient than long term capital gains. Dividends are just a forced sale of stocks and you can always “create your own dividend” by selling a portion of your holdings periodically.