Does Dividend Investing Beat the Market?

Dividend investing has fallen in popularity and is often called irrelevant, is this fair?

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Timestamps:
00:00 - Dividends
01:23 - Dividend irrelevance theory
03:15 - Sponsor
04:02 - The Aristocrats
05:12 - Tech dominance
08:54 - Dividend dominance
10:17 - Decumulation
12:58 - Risk adjusted

[AndrewHenry]

I came across your channel through this video—case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.

[ThatonedudeCR]

I recently read something where someone explained this in the most succinct way I have heard. "Whether you invest for growth or stability, if you're buying companies which are not paying dividends, the only way you will make money is if you're able to sell your shares later at a higher price to someone else."

Basically, the reason Graham only looked at companies paying dividends is because he was in the Great Depression. You're watching "value" companies decline day after day and you eventually end up down 80-90% on your investment and tap out by selling. Dividends allow you to continue investing in that company if you choose to or find better values using your already realized returns from the first. You're not reliant on a company increasing in price forever and finding someone willing to buy your shares.

Dividends are for stability and remaining in the game. Use your dividends to buy growth if you want. Dividends are for the crashes. Growth is secondary and anyone who has lived through downturns and watched their retirement accounts decline daily while being incapable of finding a job would understand that.

[Exposurelife]

Of course a good dividend fund is less volatile. They are usually based on companies that sell things we always need.

[AlisonWonderland]

That "sequencing risk" graphic is going to give me nightmares 😁 Thank you for pointing to a potential solution that I'd never normally consider. Oh, and for making it understandable and entertaining. You are amazing 🌟

[davideyres]

I’ve heard this re dividends not mattering and how the stock only drops. They leave out people moving money out of the stock after the ex dividend date. They also fail to take in to account limits like ISA limits. So once you’ve put in 20k you can’t invest more. So Dividends can provide additional investment capital to buy additional stocks that you couldn’t if you were relying on stock growth to sell a stock to buy more stock.

Without dividends why own the stock? You are relying on the value of the stock going up which with tech is a big risk. I’ve see so many tech companies go under even when they were the number one in the market.

[johnristheanswer]

The main benefit of dividends to me is " you get them ", which is a lot easier than deciding when to sell the stock to realise the gain. Also, even when the stock is down, dividends can still be rising.

[acommenter]

Legend says that if a finance youtuber says "Dividend" into a mirror 3 times, Ben Felix comes out of the mirror and lectures you on "Dividend Irrelevance"

[peterwstacey]

That is an enormous book for you to pull one sentence out of! At least you now have a good monitor stand

[PeacockRhino]

It depends on what your goals are. If you want to replace some or all of your regular income then dividends are absolutely essential.

[genericusername]

Today’s American large cap give ceo bonuses in stock, so the leadership is only motivated by inflating stock value. In the long term that isn’t necessarily compatible with the health of the company. So for long term stock holders, dividends are more relevant than buybacks and acquisitions

[gibboman]

So pleased you don't edit out bits like the coloured paper printing thing at the start. Cracked me up. Never lose that Damo, it's gold.

[realharo]

2:15 The business cannot reinvest that money, but at the same time, they cannot squander that money by bad decisions (looking at Intel). Potentially less return, but less risk. Of course, diversification kinda protects you from that, because what are the chances *every* company would make bad decisions?

[Callofdootie]

I enjoy the small dopamine hit of getting “free money” every month, which I can reinvest and get more free money the next month!

[ChristopherPellIELTS]

Dividend Investing can encourage certain people to invest a lot more than they actually would in other investments.

It was the first kind of investing that made sense to me, and I was actually excited about researching the best dividend stocks.

It meant I maxed out my ISA and pension every year.

Some people love the simplicity of index investing, others want to find the next AAPL or NVDA. I love finding boring companies that not many people know about.

Find what you love investing in.

It also gave me the skills to understand when some growth companies were undervalued. META isn’t a dividend company but I was able to roll some of my profits from aristocrats into it when it was undervalued a few years ago.

[Boxsalesman]

Maybe a good thing to mention also is that your local tax rules might partially dictate your approach. In Belgium there is a 30% dividend tax, but 0% capital gains tax. This heavily skews in favour of non-dividend stocks. As the market adjusts on an international level, having local imbalance in taxes can create favour into one direction or the other.

[sambrook]

@DamienTalksMoney is love to see a video on exist strategy. Exist from accumulation to decumulation stage that is. Moving from 100% equity to something to mitigate sequence of returns risk. Maybe dividends is part of that, but doubt it for me, more likely a few years of fixed income buffer to ride out storms, but when and how to build this buffer and what does it look like. Love the channel and the pod by the way.

[annacomnena]

Dividend compounding is the simplest road to wealth, not necessarily the best, but by far the easiest as it requires little in the way of skill and expertise.

[etiennepretorius]

Excellent video. Security Analysis is a great book. But to appreciate the evolution in investing you should look how Chalie Munger and Peter Lynch moved Warren Buffett from a cigarette bud investor into business moat investing. In moat investing, dividends can be one of the indicators of a sound business…

[welshtony]

My biggest individual stock is one with a good dividends rate and I bought it purely for the dividends rates (Legal and General).
Yes it might be the wrong thing to do but it just feels good.
I am a low income person so will never be investing the money you all invest so that feeling of a payment coming is nice (this next one will be my 1st - I started investing in June)
I am now however thinking of bumping my ETF's up and in fact I made a automate pie in T212 for the ETFs and have S&P500, All world and All world high dividends with a 40/40/20 split currently. Again might not be the best thing to do but I'm still learning and it's better than spending it on junk (in my eyes lol)

[jimbojimbo]

If dividends didn’t exist, the stock market would be essentially like owning bitcoin, property with no income or Art. Just speculation on a principles level. Fundamentally it has to be the goal for any profit making company to provide a dividend at some point.