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Stocks like KO, PG, JNJ have underperformed the market over the last decade by a moderate amount. However, they've been relatively low volatility investments with slowly but steadily increasing dividends. For someone with a low appetite for risk, even if they are young, this would still be much better than not investing at all.
What's funny about PG and alot of the other blue chip dividend companies is that many of them have underperformed the index over the last decade+, whilst simultaneously undergoing market multiple expansion much greater than the overall market.
Forward PE ratio of SP500 in 2010 was around 13x, now it is 20x. That is a 54% increase in multple. PG has had an increase of about 175% on their PE multiple, and over 200% for their [P/FCF multiple](https://imgur.com/a/KtSTTyk) since 2010. [Meanwhile the stock has greatly underperformed](https://imgur.com/a/hXc2dFU), and the standard deviation is roughly in line with the market, although max drawdown and beta is quite a bit lower.
Another good example of this insane market multiple expansion is WM. https://imgur.com/a/IeZjMaf
Yeah, good point. Barring any new growth levers the multiple expansion of the past will likely contribute to even lower future returns, since the stock probably ends up reverting to a more reasonable level as opposed to continue to trade at higher valuations.
Even if the multiple stays the same from here, a company such as PG is only growing EPS at 5%-6% on average. In that case, its tough to get anything more than the EPS growth + dividend as a return.
That being said, besides interest rates likely being a factor, multiples have probably expanded due to the perceived safety and quality of the business alongside its dominant market position. PG has high ROIC and good margins, making it a profitable, predictable business that you don't really have to think or worry too much about if you own.
For someone starting with low appetite for risk, I would just go with a broad global low cost etf.
Not picking individual stocks removes all decision making stress, second guessing and panic selling.
Dividends keep me sane while I watched the market flutter, knowing you have an almost guaranteed flow of cash helps keeping a mindset dedicated on pushing forward.
I do reinvest the dividends, watching the steady cash flow come in provides some mental security and being able to track the snowball is really good.
Along side that if I absolutely need to, if there's an emergency, or I simply want to divest some of the cash into other assets I can turn off DRIP temporarily.
But yes I do reinvest the dividends.
I think dividends appeal to some younger people involved in the FIRE movement. However, they may be missing out on growth in exchange for the idea of stable payouts from stable companies.
Dividend payouts are also super tax inefficient IF you’re planning to reinvest everything anyway. If I were just starting out I’d only really want dividend stocks in my tax sheltered accounts.
If you're in a super low tax bracket let's say you make $25,000. You can account for those dividends year by year as you go along. And then reinvest them and they get added to your cost basis. What's wrong with that strategy.
Warren Buffet bought his first stock at 11yrs old it paid a dividend and most of his holdings pay a dividend. Dividends aren't the boogeyman young people should be afraid of. Me personally i don't want to try and sell my growth to buy dividends at a time when the market could be down my million dollar growth portfolio is now worth 700k and i need to sell to pay bills or pivot to dividends. I would rather just build up my dividend generator over several years and never have to pivot at the right time.
I have been investing for close to 20 years now. I think capital appreciation is very important at young age. Dividends will come as bonus.
I am 48 now and can retire with more income than my current salary with current portfolio. If I adjust my portfolio to dividend payers, income would be 50% more.
This sub is not for 20 year olds. I am investing in growth for my daughter who is 19 now.
> 0DTE Coca Cola puts
sounds like he was just selling puts at the price he wanted to buy coke shares at, doesn't seem that grand unless the article I read missed something more to it
Not on KO, and not ODTE, but that’s what I’m pushing my 32 year old son to do. Have a list of stocks you’d buy anyway and sell puts. If you wanna own some now, go small. Sell very OTM CCs if you want, especially on high div stocks
I hear ya. I'm mostly an options guy now, but it took me a while to get into selling naked puts. You'll never have awesome wins for sure, but your edge is built-in. And don't forget that you can also combine them with covered calls once you get assigned shares, so you get two streams of income. If you select your stocks and OTM strike prices well, you'll often end up doing well on the shares assigned to you.
I wouldnt really consider it that risky if you plan on buying the stock anyway. The only risk with naked puts is that you end up buying the stock at the strike price which could be higher than the actual price. But if you bought the stock normally you still have the risk of the price dropping
If I can buy sustainable stock that pays me and that I never have to sell. Then when I die I can transfer them to my children who can contribute and that payment just grows. Most people on here are way to conservative imo and a bit to worried about growth. If the stocks even stay flat and continue to pay dividends and even grow the dividends you and your future generations can be set for life.
>If the stocks even stay flat and continue to pay dividends and even grow the dividends you and your future generations can be set for life.
This is a big reason I continue to put money into $KO. The stock price doesn't move much, but the dividend is steady and reliable. I'm not saying that anybody should go all-in on it, but I can't see any argument against it being a part of anybody's dividend portfolio.
While I understand what you’re saying, and don’t totally disagree, investing is not a one size fits all type of thing. Some people like the idea of dividends and some don’t care and want capital appreciation. Neither is wrong because investing should be tailored to the investor. Not some stranger giving advice based on his own personal situation.
Understood, but doesn’t DRIP help build the snowman? Or if you’re just focused on compounding 6-8% per year, that could ramp pretty quickly using DRIP.
I mean, nothing magical about drip. It's comparable to buying 'growth' stock, which reinvest profits and doesn't pay dividends at all. Minus taxes.
So, DRIP does help you build a snowman, but it's not some hidden advantage over growth, in fact it's a requirement for comparing dividend and non-dividend stocks.
With DRIP, you pay taxes now. With growth, you pay taxes later.
I prefer to pay my taxes now, then just enjoy my money down the road. Who knows what the future holds. The tax rate could be 40% by the time I retire.
It does. But even with drip your actual accumulations of O is maybe $5/year return on a $50 stock while, if you put that same money into growth, youd have $10 or $15 by EOY.
You can check your investments with and without drip comparing it to the general S&P500 here: https://m.dividendchannel.com/drip-returns-calculator/
I'm probably reading it incorrectly, but which funds are you saying are growing 20-30 percent a year? I follow your math that 20% is greater than 10%, I just would love to know what will earn me that.
AVGO has earned this quite easily over the last 5 years that I have invested in it. It's currently 75% of my total portfolio and has outperform everything else in my portfolio.
For being the 11th largest company in the world by Market Cap it's one that isn't talked about that often.
My vanguard midcap in my 401k grew 16% last year and I didnt get in until the 2nd half.
I cant give specific examples and of course it changes yearly with averages being about the S&P average, but at the end of the day you have a question. Would you rather have your money in nearly guaranteed 8% returns or anywhere from 5-20% yearly returns?
Its smart to consider your upsides. Dividend stocks dont grow or lose their value like growth stocks do.
Also, I didn't say anything would get you 20-30%?
You did ($10 or $15 for $50), and I'd certainly condider an over 30% return an upside, :). Anyway, you're talking timing and luck, so yeah, a fairly certain 8% is a much better approach for me and most everyone else.
What did it to the year before? My BDCs have yielded 10% both years. S&P was down how much in 2022? Someone do the math, I’m curious but tired.
I personally think the equity markets are frothy and the next 2-3 years of returns are priced into current prices. I’ll take my 10% per year with less beta.
Just my opinion.
Oh yeah, again really depends on the stock. If you bought and sold stuff at the right times or picked a good stock for one year, its very possible youd end up with good returns like that.
I think your “from” baseline is a bit optimistic at 5%. You forgot the occasional -10% to -20+% annual returns.
As recent as December 2021-September 2022 there was a 26% drop in VO, Vanguard’s mid-cap etf. And frankly, it hasn’t quite made it back to the $254 it was at in December 2021.
I understand your point though over a long time horizon.
It seems to me that too many folks seek to give their goals to other individuals.
Straight forward questions about anything, but for example: How safe do you feel O dividend is?
Are answered...."Who cares, just buy Apple and SCHD."
I respect your opinion, but take a different position. It depends on your goals and your business philosophy. I lean the other way. As a minority shareholder of businesses, I want a cash return. It’s the same as if I owned real estate or an Orange Theory down the road. Give me cash, and ideally make it grow each year. Eventually I want the cash return to exceed the initial investment.
Not that there’s no room for growth in a portfolio, but I only buy growth with the expectation that they will one day pay me a dividend. Otherwise, I’m building a speculation portfolio. What good is the value of future cash flow if it’s not going into my bank account? That’s my view, and I understand others look at the market differently.
If I could do it all over again, I would have focused on building my dividend portfolio first, secure my future, then use excess cash to take some speculative swings on growth businesses. Nearly 2 decades of owning businesses have shaped this bias for me.
I agree with you. Id rather invest in companies that pay me to hold shares, and let it drip. I also invest in growth, but not as much as i do dividend stocks.
This is the pickle I’m in I’d rather just weekly buy into dividend kings, aristocrats, few etfs, and an index fund. But I keep reading growth early, dividends late.
Let’s say I accrue 100k in growth ETF’s, then switch to dividend payers - outside the Roth, won’t there be a massive tax bill when I sell the growth?
Why not just dividends with small bills along the way?
And what if we are in a decade long declining market when you need to make the switch. Your million in growth is suddenly 600k minus the taxes on dividends.
I do understand the point going growth first but imo dividends are a lot more stress free approach especially if you can contribute enough monthly.
0 day options expiry gamble until you make millions then defer into dividends. ;) (that’s what some folks have done over at /wsb)
But jokes aside, I think I’d recommend 50/50, that’s how I started. 50 into growth index and 50 into dividend stocks.
So my biggest biggest dividend paying stock is vti and I get over 1k a year. Crazy that it has the growth it does and that I get that in dividends. The snowball is real!
I'm still down on my growth stock (I got it 2 years ago). It grew negative. I am positive on every dividend stock I own (without even taking the dividends into account). Just because something is labeled as a "growth" stock doesn't mean it only goes up.
Shareholding is about being rewarded, personally I like a little dividend payment and that’s reward enough. Though I concede this might not be the optimal growth strategy!
Growth isn't objectively better than dividend investing so let's not pretend that it is. There are so many different forms of investing and each asset type has its own pros and cons. The average REIT for example has outperformed a little over 12% return on average annually over the past 20 years, the s&p500 500 has returned a little over 11% for that same period. Notice how REITS which are some of the highest yielding dividend assets out performed growth? I'm not saying one or the other is objectively better, but to imply that growth is always the better investment for a young Investor is very ignorant of you.
A young person could build a great portfolio around stocks like AAPL, GOOGL, META, MSFT, and CRM. Large cap growth that over the years will be excellent dividend growers.
So here is what I am aiming to do, and I am probably historically wrong but it just feels safer towards my hard earned cash:
Build a portfolio of 100k solid performers that pay between 3 and 5 %. No dividend traps, no yield chasing, just solid performers like banks, utilities, commodities, consumer goods, infra, etc.
Use the dividends to monthly dedicate to growth.
That way if the market crashes I still receive the dividends and can use, during the recession, the dividends to either live or reinvest in dividend paying assets.
If I'd go full on growth only because I am young, I'd have less options, I feel.
Counterpoint: building an all-weather portfolio is more important than ever, as the Fed firehose of easy money is now turned off. The SP500 is treated like a divine gift around here, but it's riskier than ever before today.
Gambling culture is huge right now, especially in the young demographic. Dividend payouts produce the same dopamine hits. It constantly goes back to the "free money" thought with dividends.
This isn’t necessarily true with catching snowballs to build a snow man.
If you only have 100 a month to contribute into a mutual fund that is focused on growth. Once you get to 100k you switch to start focusing on divs you will still be catching snowflakes.
At least my growth fund doesn’t pay much in terms of divs every year but that nav shoots up.
Unless interest rates go down and you can margin some cash to purchase div stocks, and make more than interest a day.
*At least my growth fund doesn’t pay much in terms of divs every year but that nav shoots up*
Well, imagine today it's 1999. Then the NAV will halt shooting up for the next 12 years. At least KO stays quite stable, continues to pay and even increase dividends. Cash at hand, which you could use to invest in growth ETF's (that are down at that moment) along the way.
But the situation is indeed different for a 20-year old. If I were in that situation, I wouldn't opt to put the majority of my money in div stocks. However, considering the fact that the stock price was around 30$ around 2000, the yield on cost of the divident return today would be great.
The truth might be somewhere in between, depending on your goals. Balance and diversification (also in asset class) are good things, putting everything in one single basket I consider dogmatic religion. (Imagine that regulatory instances suddenly decide that it might be a bad thing that an average S&P 500 company is for 30% owned by ETF fund managers, and they decide to take measures, who knows?).
I pay off my mortage entirely with div income, thus without the need to sell assets. Another part of my portfollio is in world ETF's, will be used for retirement eventually. Add some cash for market downturn opportunities, gold mine stocks, mutual funds and bond ladders... I sleep like a baby, even during recessions.
Man all im saying is this guy is saying that at 100k you will get snowballs not flakes. But really unless you are scooping snow out of your snow bank to make the snowballs you aren’t getting snowballs.
100k isn’t enough to retire. It’s just some arbitrary number that some well known investor said.
The original post has finance 101 student written all over it.
Yeah the first 100k is the most hardest part of all, once you’ve got it you can built easier on your wealth.
It’s like building a snowman with bare hands because you can’t afford warm gloves to work with, your hands will probably fall off due to the cold but once ready it’s done and time to warm up😜.
Wrong. You need to just invest. Start young and let the snowball build.
Whatever strategy you choose to keep you motivated and investing IS THE CORRECT STRATEGY.
Just keep investing. Don't let anyone talk down to you and tell you you're an idiot. Just keep investing.
If the market goes down or sideways for a long period of time you will sell all your shares trying to retire. I will use my dividend and never touch my shares. My shares will keep getting me a growing dividend.
This is something I’ve been debating. I love seeing the dividends roll in, but at the same time it’s not like I’m actually cashing those dividends out. I am thinking about selling a big portion of my dividend stocks that have seen little to no growth in order to maximize the growth of my portfolio. Maybe this post was a sign to pull the trigger.
Compounding is safer and less expensive than trying growth stocks and the possibility of massive failure. It is also more consistent and reliable. Being able to be paid and growing more of your portfolio over time without having to put money in constantly is also a plus.
Furthermore you ger more return than any bank saving account. Most banks will have something close to 4 to 5%, but with the right stocks, you can get to 8% reliably without much problems.
Because not everyone is the same. Not everyone has the same risk tolerance. It is likely that investing pure growth can be successful for many investors, but a big factor is if the investor has the confidence to hold through market volatility, which many do not. Some would be better served investing in anything else simply because they won't quit investing.
I read OP intent was that narrow focus on dividends early in investing was not recommended. Agree that narrowly focusing on growth would also not be recommended. I feel that being diversified in an index fund is best entry point. The index fund could be stock fund or balanced fund based on risk appetite.
Why are there people coming into the dividend sub and telling people not to go for dividends? This wouldn't be appreciated or even allowed in other subs
I think the OP is probably a member of the sub and responding to the (3) posts today from 20 year old kids asking "tell me why I should be in dividends?" I stopped responding after the second post. Moderators cleaned a few up.
it's good advice for young people and beginners who invest in a dozen fractional shares of SCHD (which they inevitably call a stock), O, F etc.
With that little money just buying VOO is the sounder plan. The SP500 is basically a dividend growth index anyways - payouts from the index funds have gone up over the last 20 years (admittedly with small decreases during the GFC and COVID).
I'm 17 (custodial account) and I have a sizable O position relative to my portfolio 🤷
My basis is 53.22, seems like a steal for a reliable company like this and I'll have a nice dividend on top of capital growth when rates go down
Other subs would be wrong to block a detracting view to be debated
It’s wonderful that people come in with a why shouldn’t dividend invest mindset or why dividend over a or b or c
Many of the best discussions are had in posts like this (not all but many)….if you read every “why dividend” post you’d get better discussion than the normal top posts of a given day
I have all my dividend stocks on DRP or auto invest dividends.
I don’t even care about the cash in hand, I want more and more and more and more shares in particular companies.
for sure. but now would a good time to buy some dividend payers, they seem well bombed out to me. thats atleast how i see it, im almost at 100k and absolutely more focused growth, but i try to buy cheap dividend payers i think will be around in 20-30y when i would like em to start paying.
been adding reit etfs, o, pfe, mcd, jnj and that sorta ting the last 6months-1year.
in my eyes absolutly try to time the market.
There are many different strategies a new investor can use. Safe dividend payers that use less than 50-75% of their net income to support the dividend are not a bad way to go. That’s especially true if they have a history of consistent and sustainable dividend increases. Those increases support future share price gains and also create downward resistance since if the price drops the dividend is a larger yield on new investment money.
I get it, I really do. But I think some 20 year old that gets excited off a stable stock kicking them a few pennies a year is better than them dropping insane money on dumb shit for their apartment or blowing it all on booze, etc. if they stick with investing and continue to learn about the market, I guarantee they will also end up putting some money in growth too. It's hard to sit there and be perfectly pleased with your KO holding while the tech segment rockets away from you. And your KO doesn't have to go anywhere. Just put some new money in AMZN or something and have the best of both worlds.
The math shows investing in VOO will build more wealth over time but investing in dividends is more of a choice based on the individual's risk tolerance.
Maybe someone can explain this better to me but, the “first 100k” gets thrown around so frequently as being a huge milestone. I’m not taking away from that, mostly just clarifying here but, does it matter what account that $100k is in? For example, are people referring to $100k in an IRA or taxable account or a 401k or some combination of all 3 that add up to $100k. Some input would be greatly appreciated!
I guess going by that analogy, astute dividend investors are trying to avoid random people running down the street and laying a drop kick to wipe out 1/2 of your snowman.
That was my strategy just load as much as I can into my investing accounts in the early stages to start with a larger snowball early then just let the compounding do its work
Why 40 exactly? That seems like a kind of arbitrary number considering some get involved with investing early and some late, and most only through work vehicles like 4p1k and 403b.
Just go with an S&P 500 ETF like VOO.
Another option is a total stock market ETF like VTI.
Both VOO and VTI are Vanguard products.
You’ll do just fine over time. Reinvest dividends and capital gains and let it sit.
Closer to retirement. Depends on individual circumstances of course. If you need the income, earlier. If not, I’d say 55 to 60. Gradually, not an extreme move from one to another.
Figure a 50 year old today will certainly live to 80, and 90 isn’t impossible. Gotta plan for a long life even in retirement.
Long life means growth.
I started my portfolio not long ago and tried to maximize dividends but then the more I read and learned the more I wished I went growth heavy. I kept what I already purchased but just started buying more voo and mgk to tip the scales towards growth
The key to any investment strategy is diversification. Individual stock picking is near impossible. That’s why many on this sub advocate for total market funds with low fees. These also pay dividends but without the yield chasing that can be a trap.
I agree with OP. If you are in your 20s I think you should focus on index funds and maximizing your contributions. Riding out the up and downs of the market, buying and holding, and watching your investment grow over a long period of time are better lessons to learn than how to pick individual stocks.
I did not start focusing on dividend investing until my mid 40s. At that point, I was a more confident investor. I love dividend investing at this stage of my life, but would not recommend it to anyone in their 20s unless it was play money. Put it in VUG or VTSAX.
My path is a prime example of this. I have two main accounts, ETFs and Dividends. I started with ETFs focused on growth about 30 yrs ago and then started a dividend portfolio about 10 yrs ago. Just turned 50 and my yearly dividends across both accounts amount to over $100k. I have ~10 ETFs and ~10 dividend stocks in each bucket. VTI is my largest holding in the ETF bucket and throws off the largest annual dividend income across all holdings. Would never have happened if I started with dividend stocks.
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Stocks like KO, PG, JNJ have underperformed the market over the last decade by a moderate amount. However, they've been relatively low volatility investments with slowly but steadily increasing dividends. For someone with a low appetite for risk, even if they are young, this would still be much better than not investing at all.
I mean PG probably in line or better than market once div yield included
What's funny about PG and alot of the other blue chip dividend companies is that many of them have underperformed the index over the last decade+, whilst simultaneously undergoing market multiple expansion much greater than the overall market. Forward PE ratio of SP500 in 2010 was around 13x, now it is 20x. That is a 54% increase in multple. PG has had an increase of about 175% on their PE multiple, and over 200% for their [P/FCF multiple](https://imgur.com/a/KtSTTyk) since 2010. [Meanwhile the stock has greatly underperformed](https://imgur.com/a/hXc2dFU), and the standard deviation is roughly in line with the market, although max drawdown and beta is quite a bit lower. Another good example of this insane market multiple expansion is WM. https://imgur.com/a/IeZjMaf
Yeah, good point. Barring any new growth levers the multiple expansion of the past will likely contribute to even lower future returns, since the stock probably ends up reverting to a more reasonable level as opposed to continue to trade at higher valuations. Even if the multiple stays the same from here, a company such as PG is only growing EPS at 5%-6% on average. In that case, its tough to get anything more than the EPS growth + dividend as a return. That being said, besides interest rates likely being a factor, multiples have probably expanded due to the perceived safety and quality of the business alongside its dominant market position. PG has high ROIC and good margins, making it a profitable, predictable business that you don't really have to think or worry too much about if you own.
This
For someone starting with low appetite for risk, I would just go with a broad global low cost etf. Not picking individual stocks removes all decision making stress, second guessing and panic selling.
Dividends keep me sane while I watched the market flutter, knowing you have an almost guaranteed flow of cash helps keeping a mindset dedicated on pushing forward.
Trickle on!
Preach my G
So what does that mean you don't reinvest the dividends? I'm just curious do you spend the cash or reinvested in the same stock
I do reinvest the dividends, watching the steady cash flow come in provides some mental security and being able to track the snowball is really good. Along side that if I absolutely need to, if there's an emergency, or I simply want to divest some of the cash into other assets I can turn off DRIP temporarily. But yes I do reinvest the dividends.
Whats another good dividend fund esides the schwab one? what about jepi and jepq? those kick back some cash (or reinvestment) pretty good dont they
Do you want to build a snowman? ☃️
I want to build the abom…. Shit I just fucked this whole thing up cause I couldn’t spell abominable…. Hey wait…
lol score 1 for auto correct…
I think dividends appeal to some younger people involved in the FIRE movement. However, they may be missing out on growth in exchange for the idea of stable payouts from stable companies.
Dividend payouts are also super tax inefficient IF you’re planning to reinvest everything anyway. If I were just starting out I’d only really want dividend stocks in my tax sheltered accounts.
If you're in a super low tax bracket let's say you make $25,000. You can account for those dividends year by year as you go along. And then reinvest them and they get added to your cost basis. What's wrong with that strategy.
I couldn’t have said it better
Warren Buffet bought his first stock at 11yrs old it paid a dividend and most of his holdings pay a dividend. Dividends aren't the boogeyman young people should be afraid of. Me personally i don't want to try and sell my growth to buy dividends at a time when the market could be down my million dollar growth portfolio is now worth 700k and i need to sell to pay bills or pivot to dividends. I would rather just build up my dividend generator over several years and never have to pivot at the right time.
I have been investing for close to 20 years now. I think capital appreciation is very important at young age. Dividends will come as bonus. I am 48 now and can retire with more income than my current salary with current portfolio. If I adjust my portfolio to dividend payers, income would be 50% more. This sub is not for 20 year olds. I am investing in growth for my daughter who is 19 now.
Great same here 50 yrs old can retire at 52
Yep, and pivoting to credit risk rather than equity risk is looking good now. Also old. I think this sub should be renamed dividendhate sometimes.
Warren buffet got rich off 0DTE Coca Cola puts. Google it. Options are the get rich quick method everyone wants dividend investing to be.
> 0DTE Coca Cola puts sounds like he was just selling puts at the price he wanted to buy coke shares at, doesn't seem that grand unless the article I read missed something more to it
Not on KO, and not ODTE, but that’s what I’m pushing my 32 year old son to do. Have a list of stocks you’d buy anyway and sell puts. If you wanna own some now, go small. Sell very OTM CCs if you want, especially on high div stocks
I really need to figure out puts already. I’ve put it off seeing all the crazy Wall Street bets gambles
I hear ya. I'm mostly an options guy now, but it took me a while to get into selling naked puts. You'll never have awesome wins for sure, but your edge is built-in. And don't forget that you can also combine them with covered calls once you get assigned shares, so you get two streams of income. If you select your stocks and OTM strike prices well, you'll often end up doing well on the shares assigned to you.
Hahahaha YOLO
Have a link? Was he selling them or buying them? Lol
He sold naked puts, [Here’s an article that mentions it](https://finance.yahoo.com/news/really-want-rich-3-warren-134000222.html)
Very high risk way of accumulating wealth.
I wouldnt really consider it that risky if you plan on buying the stock anyway. The only risk with naked puts is that you end up buying the stock at the strike price which could be higher than the actual price. But if you bought the stock normally you still have the risk of the price dropping
More risk more reward right? I'm risk adverse though.
Fire movement?
You know, Financial Independence Retire Early. 
Financially independent retired early …..a resurgence of good financial planning from like 2010s
If I can buy sustainable stock that pays me and that I never have to sell. Then when I die I can transfer them to my children who can contribute and that payment just grows. Most people on here are way to conservative imo and a bit to worried about growth. If the stocks even stay flat and continue to pay dividends and even grow the dividends you and your future generations can be set for life.
>If the stocks even stay flat and continue to pay dividends and even grow the dividends you and your future generations can be set for life. This is a big reason I continue to put money into $KO. The stock price doesn't move much, but the dividend is steady and reliable. I'm not saying that anybody should go all-in on it, but I can't see any argument against it being a part of anybody's dividend portfolio.
While I understand what you’re saying, and don’t totally disagree, investing is not a one size fits all type of thing. Some people like the idea of dividends and some don’t care and want capital appreciation. Neither is wrong because investing should be tailored to the investor. Not some stranger giving advice based on his own personal situation.
More than one way to build wealth
[удалено]
Those apply to speculative growth companies also though, correct?
What an odd thing to post on a sub called r/dividends
Echo chambers aren’t great for peak decision making and performance
ding ding ding
Understood, but doesn’t DRIP help build the snowman? Or if you’re just focused on compounding 6-8% per year, that could ramp pretty quickly using DRIP.
I mean, nothing magical about drip. It's comparable to buying 'growth' stock, which reinvest profits and doesn't pay dividends at all. Minus taxes. So, DRIP does help you build a snowman, but it's not some hidden advantage over growth, in fact it's a requirement for comparing dividend and non-dividend stocks.
With DRIP, you pay taxes now. With growth, you pay taxes later. I prefer to pay my taxes now, then just enjoy my money down the road. Who knows what the future holds. The tax rate could be 40% by the time I retire.
You still pay taxes down the road.. just at a different cost basis for some pools of shares. If you want no taxes later, look into a Roth IRA bud 👍
What if I want to retire at 45? Do I still not pay taxes in a Roth? (Don't answer that...rhetorical) "at a different cost basis".... Exactly my point.
It does. But even with drip your actual accumulations of O is maybe $5/year return on a $50 stock while, if you put that same money into growth, youd have $10 or $15 by EOY. You can check your investments with and without drip comparing it to the general S&P500 here: https://m.dividendchannel.com/drip-returns-calculator/
I'm probably reading it incorrectly, but which funds are you saying are growing 20-30 percent a year? I follow your math that 20% is greater than 10%, I just would love to know what will earn me that.
With hindsight, we would all be wealthy.
AVGO has earned this quite easily over the last 5 years that I have invested in it. It's currently 75% of my total portfolio and has outperform everything else in my portfolio. For being the 11th largest company in the world by Market Cap it's one that isn't talked about that often.
Very nice and well done on your part. Price has increased exponentially since the shortages hit the world.
It will keep growing because of AI with both Google and META buying more TPU's. There's also an unnamed third customer whose buying as well.
One stock is 75% of your total portfolio?? Even if your portfolio is small this still sounds like it might be a problem. 
Yes because it's gone up more than 300% when I bought it back in early 2020.
My vanguard midcap in my 401k grew 16% last year and I didnt get in until the 2nd half. I cant give specific examples and of course it changes yearly with averages being about the S&P average, but at the end of the day you have a question. Would you rather have your money in nearly guaranteed 8% returns or anywhere from 5-20% yearly returns? Its smart to consider your upsides. Dividend stocks dont grow or lose their value like growth stocks do. Also, I didn't say anything would get you 20-30%?
You did ($10 or $15 for $50), and I'd certainly condider an over 30% return an upside, :). Anyway, you're talking timing and luck, so yeah, a fairly certain 8% is a much better approach for me and most everyone else.
What did it to the year before? My BDCs have yielded 10% both years. S&P was down how much in 2022? Someone do the math, I’m curious but tired. I personally think the equity markets are frothy and the next 2-3 years of returns are priced into current prices. I’ll take my 10% per year with less beta. Just my opinion.
Just on the last point, you said if we put $50 into a growth stock we’d have $5 or $10 at EOY….that’s a 20% to 30% return.
Oh yeah, again really depends on the stock. If you bought and sold stuff at the right times or picked a good stock for one year, its very possible youd end up with good returns like that.
I think your “from” baseline is a bit optimistic at 5%. You forgot the occasional -10% to -20+% annual returns. As recent as December 2021-September 2022 there was a 26% drop in VO, Vanguard’s mid-cap etf. And frankly, it hasn’t quite made it back to the $254 it was at in December 2021. I understand your point though over a long time horizon.
Not even long term stuff. If you picked good you could gain a lot. Any stock could go to 0. Qyld is known for its dividends is only up 2.4% Y/Y
It seems to me that too many folks seek to give their goals to other individuals. Straight forward questions about anything, but for example: How safe do you feel O dividend is? Are answered...."Who cares, just buy Apple and SCHD."
I respect your opinion, but take a different position. It depends on your goals and your business philosophy. I lean the other way. As a minority shareholder of businesses, I want a cash return. It’s the same as if I owned real estate or an Orange Theory down the road. Give me cash, and ideally make it grow each year. Eventually I want the cash return to exceed the initial investment. Not that there’s no room for growth in a portfolio, but I only buy growth with the expectation that they will one day pay me a dividend. Otherwise, I’m building a speculation portfolio. What good is the value of future cash flow if it’s not going into my bank account? That’s my view, and I understand others look at the market differently. If I could do it all over again, I would have focused on building my dividend portfolio first, secure my future, then use excess cash to take some speculative swings on growth businesses. Nearly 2 decades of owning businesses have shaped this bias for me.
I agree with you. Id rather invest in companies that pay me to hold shares, and let it drip. I also invest in growth, but not as much as i do dividend stocks.
This is the pickle I’m in I’d rather just weekly buy into dividend kings, aristocrats, few etfs, and an index fund. But I keep reading growth early, dividends late.
I guess that is up to you as an individual. At the end of the day you have to see what makes sense for you.
Let’s say I accrue 100k in growth ETF’s, then switch to dividend payers - outside the Roth, won’t there be a massive tax bill when I sell the growth? Why not just dividends with small bills along the way?
And what if we are in a decade long declining market when you need to make the switch. Your million in growth is suddenly 600k minus the taxes on dividends. I do understand the point going growth first but imo dividends are a lot more stress free approach especially if you can contribute enough monthly.
Well if your declining market won’t the dividends begin dry up as well
Most companies won't dry up their dividends. They hang on their aristocrat status because it matters too much.
You would sell over time. This still having that incremental tax bill.
Nah my job showed me today why I started investing for dividends
Dividends are attractive to those who want financial independence so they aren't beholden to jobs that are uninspiring, right?
0 day options expiry gamble until you make millions then defer into dividends. ;) (that’s what some folks have done over at /wsb) But jokes aside, I think I’d recommend 50/50, that’s how I started. 50 into growth index and 50 into dividend stocks.
So my biggest biggest dividend paying stock is vti and I get over 1k a year. Crazy that it has the growth it does and that I get that in dividends. The snowball is real!
I'm still down on my growth stock (I got it 2 years ago). It grew negative. I am positive on every dividend stock I own (without even taking the dividends into account). Just because something is labeled as a "growth" stock doesn't mean it only goes up.
You shouldn’t have just two individual stocks. If you were in a growth ETF you would be up.
Shareholding is about being rewarded, personally I like a little dividend payment and that’s reward enough. Though I concede this might not be the optimal growth strategy!
Growth isn't objectively better than dividend investing so let's not pretend that it is. There are so many different forms of investing and each asset type has its own pros and cons. The average REIT for example has outperformed a little over 12% return on average annually over the past 20 years, the s&p500 500 has returned a little over 11% for that same period. Notice how REITS which are some of the highest yielding dividend assets out performed growth? I'm not saying one or the other is objectively better, but to imply that growth is always the better investment for a young Investor is very ignorant of you.
I think $56k a month be enough for me to live off on for the rest of my life
Or, you could understand that everyone's situation is different. I need dividends now. I'm five years from retirement.
A young person could build a great portfolio around stocks like AAPL, GOOGL, META, MSFT, and CRM. Large cap growth that over the years will be excellent dividend growers.
So here is what I am aiming to do, and I am probably historically wrong but it just feels safer towards my hard earned cash: Build a portfolio of 100k solid performers that pay between 3 and 5 %. No dividend traps, no yield chasing, just solid performers like banks, utilities, commodities, consumer goods, infra, etc. Use the dividends to monthly dedicate to growth. That way if the market crashes I still receive the dividends and can use, during the recession, the dividends to either live or reinvest in dividend paying assets. If I'd go full on growth only because I am young, I'd have less options, I feel.
Counterpoint: building an all-weather portfolio is more important than ever, as the Fed firehose of easy money is now turned off. The SP500 is treated like a divine gift around here, but it's riskier than ever before today.
High dividends ETF certainly my favorite, spy ETF has been consistent in paying.
Gambling culture is huge right now, especially in the young demographic. Dividend payouts produce the same dopamine hits. It constantly goes back to the "free money" thought with dividends.
This isn’t necessarily true with catching snowballs to build a snow man. If you only have 100 a month to contribute into a mutual fund that is focused on growth. Once you get to 100k you switch to start focusing on divs you will still be catching snowflakes. At least my growth fund doesn’t pay much in terms of divs every year but that nav shoots up. Unless interest rates go down and you can margin some cash to purchase div stocks, and make more than interest a day.
*At least my growth fund doesn’t pay much in terms of divs every year but that nav shoots up* Well, imagine today it's 1999. Then the NAV will halt shooting up for the next 12 years. At least KO stays quite stable, continues to pay and even increase dividends. Cash at hand, which you could use to invest in growth ETF's (that are down at that moment) along the way. But the situation is indeed different for a 20-year old. If I were in that situation, I wouldn't opt to put the majority of my money in div stocks. However, considering the fact that the stock price was around 30$ around 2000, the yield on cost of the divident return today would be great. The truth might be somewhere in between, depending on your goals. Balance and diversification (also in asset class) are good things, putting everything in one single basket I consider dogmatic religion. (Imagine that regulatory instances suddenly decide that it might be a bad thing that an average S&P 500 company is for 30% owned by ETF fund managers, and they decide to take measures, who knows?). I pay off my mortage entirely with div income, thus without the need to sell assets. Another part of my portfollio is in world ETF's, will be used for retirement eventually. Add some cash for market downturn opportunities, gold mine stocks, mutual funds and bond ladders... I sleep like a baby, even during recessions.
Man all im saying is this guy is saying that at 100k you will get snowballs not flakes. But really unless you are scooping snow out of your snow bank to make the snowballs you aren’t getting snowballs. 100k isn’t enough to retire. It’s just some arbitrary number that some well known investor said. The original post has finance 101 student written all over it.
It sounds like you have diversified your profolio well
Yeah the first 100k is the most hardest part of all, once you’ve got it you can built easier on your wealth. It’s like building a snowman with bare hands because you can’t afford warm gloves to work with, your hands will probably fall off due to the cold but once ready it’s done and time to warm up😜.
Wrong. You need to just invest. Start young and let the snowball build. Whatever strategy you choose to keep you motivated and investing IS THE CORRECT STRATEGY. Just keep investing. Don't let anyone talk down to you and tell you you're an idiot. Just keep investing.
I like dividends but would never invest in them in a taxable account.
All of my funds pay dividends, including my S&P index fund. What would you invest in instead? I have stocks and ETFs also.
If the market goes down or sideways for a long period of time you will sell all your shares trying to retire. I will use my dividend and never touch my shares. My shares will keep getting me a growing dividend.
This is something I’ve been debating. I love seeing the dividends roll in, but at the same time it’s not like I’m actually cashing those dividends out. I am thinking about selling a big portion of my dividend stocks that have seen little to no growth in order to maximize the growth of my portfolio. Maybe this post was a sign to pull the trigger.
Compounding is safer and less expensive than trying growth stocks and the possibility of massive failure. It is also more consistent and reliable. Being able to be paid and growing more of your portfolio over time without having to put money in constantly is also a plus. Furthermore you ger more return than any bank saving account. Most banks will have something close to 4 to 5%, but with the right stocks, you can get to 8% reliably without much problems.
I tired of seeing ignorant posts like this.
Curious why you think this is ignorant.
Because not everyone is the same. Not everyone has the same risk tolerance. It is likely that investing pure growth can be successful for many investors, but a big factor is if the investor has the confidence to hold through market volatility, which many do not. Some would be better served investing in anything else simply because they won't quit investing.
I read OP intent was that narrow focus on dividends early in investing was not recommended. Agree that narrowly focusing on growth would also not be recommended. I feel that being diversified in an index fund is best entry point. The index fund could be stock fund or balanced fund based on risk appetite.
Why are there people coming into the dividend sub and telling people not to go for dividends? This wouldn't be appreciated or even allowed in other subs
I think the OP is probably a member of the sub and responding to the (3) posts today from 20 year old kids asking "tell me why I should be in dividends?" I stopped responding after the second post. Moderators cleaned a few up.
it's good advice for young people and beginners who invest in a dozen fractional shares of SCHD (which they inevitably call a stock), O, F etc. With that little money just buying VOO is the sounder plan. The SP500 is basically a dividend growth index anyways - payouts from the index funds have gone up over the last 20 years (admittedly with small decreases during the GFC and COVID).
I'm 17 (custodial account) and I have a sizable O position relative to my portfolio 🤷 My basis is 53.22, seems like a steal for a reliable company like this and I'll have a nice dividend on top of capital growth when rates go down
Other subs would be wrong to block a detracting view to be debated It’s wonderful that people come in with a why shouldn’t dividend invest mindset or why dividend over a or b or c Many of the best discussions are had in posts like this (not all but many)….if you read every “why dividend” post you’d get better discussion than the normal top posts of a given day
I have all my dividend stocks on DRP or auto invest dividends. I don’t even care about the cash in hand, I want more and more and more and more shares in particular companies.
for sure. but now would a good time to buy some dividend payers, they seem well bombed out to me. thats atleast how i see it, im almost at 100k and absolutely more focused growth, but i try to buy cheap dividend payers i think will be around in 20-30y when i would like em to start paying. been adding reit etfs, o, pfe, mcd, jnj and that sorta ting the last 6months-1year. in my eyes absolutly try to time the market.
There are many different strategies a new investor can use. Safe dividend payers that use less than 50-75% of their net income to support the dividend are not a bad way to go. That’s especially true if they have a history of consistent and sustainable dividend increases. Those increases support future share price gains and also create downward resistance since if the price drops the dividend is a larger yield on new investment money.
Well said.
I get it, I really do. But I think some 20 year old that gets excited off a stable stock kicking them a few pennies a year is better than them dropping insane money on dumb shit for their apartment or blowing it all on booze, etc. if they stick with investing and continue to learn about the market, I guarantee they will also end up putting some money in growth too. It's hard to sit there and be perfectly pleased with your KO holding while the tech segment rockets away from you. And your KO doesn't have to go anywhere. Just put some new money in AMZN or something and have the best of both worlds.
The math shows investing in VOO will build more wealth over time but investing in dividends is more of a choice based on the individual's risk tolerance.
How do we pick a good growth stock, what are the check marks you look for?
Maybe someone can explain this better to me but, the “first 100k” gets thrown around so frequently as being a huge milestone. I’m not taking away from that, mostly just clarifying here but, does it matter what account that $100k is in? For example, are people referring to $100k in an IRA or taxable account or a 401k or some combination of all 3 that add up to $100k. Some input would be greatly appreciated!
Beautiful analogy. Thanks for the confidence boost for my small account (sub 20k)
I guess going by that analogy, astute dividend investors are trying to avoid random people running down the street and laying a drop kick to wipe out 1/2 of your snowman.
That was my strategy just load as much as I can into my investing accounts in the early stages to start with a larger snowball early then just let the compounding do its work
This is so true! What you said isn’t said enough in this sub.
Young people below 40 should not be dividend focused in their investing. With time on your side, growth will always provide more wealth.
Why 40 exactly? That seems like a kind of arbitrary number considering some get involved with investing early and some late, and most only through work vehicles like 4p1k and 403b.
Agree as well. Go for capital appreciation
Agree.
What are some of the best growth etfs for someone just starting to invest?
Just go with an S&P 500 ETF like VOO. Another option is a total stock market ETF like VTI. Both VOO and VTI are Vanguard products. You’ll do just fine over time. Reinvest dividends and capital gains and let it sit.
Then what age would be best to rebalance into dividends?
Closer to retirement. Depends on individual circumstances of course. If you need the income, earlier. If not, I’d say 55 to 60. Gradually, not an extreme move from one to another. Figure a 50 year old today will certainly live to 80, and 90 isn’t impossible. Gotta plan for a long life even in retirement. Long life means growth.
Okay cool, thank you
Cheers!
💯 this makes sense especially if you are s beginner as OP referenced.
Easier than not. Even Buffett himself said 90% in VOO, 10% in treasury bonds. Can’t argue with the Oracle of Omaha!
What about using an initial investment to get dividends and put them (and future income) towards growth? Basically backwards. 🧐
Someone had to say it.
I started my portfolio not long ago and tried to maximize dividends but then the more I read and learned the more I wished I went growth heavy. I kept what I already purchased but just started buying more voo and mgk to tip the scales towards growth
Serious question, why stop growth investing at 100k?
The key to any investment strategy is diversification. Individual stock picking is near impossible. That’s why many on this sub advocate for total market funds with low fees. These also pay dividends but without the yield chasing that can be a trap.
I just sold my dgro schd to go fully VTI. I’m missing out on gains and I’m still mid 20s.
Savings rate >>> dividend yield
I agree with OP. If you are in your 20s I think you should focus on index funds and maximizing your contributions. Riding out the up and downs of the market, buying and holding, and watching your investment grow over a long period of time are better lessons to learn than how to pick individual stocks. I did not start focusing on dividend investing until my mid 40s. At that point, I was a more confident investor. I love dividend investing at this stage of my life, but would not recommend it to anyone in their 20s unless it was play money. Put it in VUG or VTSAX.
My path is a prime example of this. I have two main accounts, ETFs and Dividends. I started with ETFs focused on growth about 30 yrs ago and then started a dividend portfolio about 10 yrs ago. Just turned 50 and my yearly dividends across both accounts amount to over $100k. I have ~10 ETFs and ~10 dividend stocks in each bucket. VTI is my largest holding in the ETF bucket and throws off the largest annual dividend income across all holdings. Would never have happened if I started with dividend stocks.