Something something time in the market something. Sorry to hear though, honestly.
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“Why Investors Are Right to Love Dividends”*
There’s a bunch of topics discussing the merits of dividend investing versus not. I thought I’d avoid those contentious ones, not stirring the hornet nest … but perhaps I’ll put a stick into the bee’s nest here, as I know there’s stock pickers who have seen the light there’s a diverse set of stock pickers, some of which have not researched all the data yet on dividend investing.
* WSJ article title. Original gift unlocked article link (might expire). Original content:
Why Investors Are Right to Love Dividends
The payouts often aren’t about income, and that’s all right
By
June 30, 2025 at 7:00 am ET
ILLUSTRATION: ELENA SCOTTI/WSJ, ISTOCK
This is an online version of Spencer’s Markets A.M. newsletter. Get investing insights in your inbox each weekday by signing up here—it’s free.
It turns out that caring about dividends can really pay dividends.
Finance professors have long tsk-tsked about investors’ love for cash payouts. But a recent report shows what people actually do with them and why they prefer receiving cash: because it works.
One of the original studies on dividends in the early 1960s said people shouldn’t care about the payouts. Maximizing wealth is the point, and dividends are just part of investors’ total return. Any cash a company pays out reduces its value by an equal amount, after all.
Then the rise of behavioral finance acknowledged people aren’t robots and tried figuring out why receiving checks four times a year is so alluring.
The partial answer was that we put things such as interest and dividends in the same mental bucket as wages—income we feel comfortable spending. We view capital differently and are loath to touch it, even though it’s possible to sell appreciated stock and create your own dividend.
It was still a head-scratcher, though. A 1970s paper called “The Dividend Puzzle” recognized that people prefer them but said the pieces “just don’t fit together.”
A recent study of data of thousands of Vanguard customers by finance professor Meir Statman and Vanguard managers Paulo Costa and Sharon Hillseems puzzling too—at first. It compares people who own dividend-income funds to plain-vanilla equity funds.
Instead of buying the dividend funds for actual income, though, investors were about as likely to just reinvest the money. Both groups mostly did, especially if they weren’t retired yet.
That is a little bit like wanting to drive really fast but buying a Toyota Corolla—possible, but not really what it was designed for. Statman and his team dug deeper. When asked their reasons, many investors said they didn’t need the money now but thought stocks that pay dividends had higher returns and were less volatile.
And they are right. Data from the past 50 years compiled by Ned Davis Research shows that the annualized return of dividend payers in the S&P 500 was 9.2%, compared with only 4.3% for nonpayers, and with less choppiness too.
Dividend payers would have left you with 10 times as much wealth before taxes over that time as nonpayers. They also easily beat an equal-weighted basket of all companies in the index.
It’s like buying that Corolla instead of a sports car because you know it’s reliable and will take you farther.
But don’t confuse cause and effect: One of the best stocks of all time has never paid a dividend. Well, almost never.
Warren Buffett’s Berkshire Hathaway once paid 10 cents in 1967. Buffett quipped that he “must have been in the bathroom” when the decision was taken. Owning Berkshire has been spectacular and probably would have been less so if it had made regular cash payments, even if you reinvested them after taxes.
The secret seems to be that companies paying chunky dividends also tend to have value and quality characteristics. Those are two factors associated with long-term investment success and also describe Berkshire’s portfolio.
“Value” is present because dividend payers have profits from which to pay them. And those payouts are meaningful enough as a percentage of their price to land them in an income fund.
And “quality” is often there because dividend payers are forced to be more judicious about any cash they don’t share. One detail “income” funds miss, unfortunately, is that the same applies to companies that return cash to shareholders in other ways such as stock buybacks or paying down debt.
The original research on dividends was kind of right—there is nothing special about them. But the companies that pay them often are special.
Write to Spencer Jakab at Spencer.Jakab@wsj.com
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Note: probably best to avoid pasting entire articles, a short quote and a link should be sufficient.
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Note: probably best to engage with the content instead of the form. Kthxbye.
Edit: since this seems to have escaped even the most astute readers, I’ll copy quote from the quoted entire article (highlighting mine):
Haven’t paid attention to the geographic / FX split in my portfolio and realized that I had gotten far lower on my CHF denominated stocks than I wanted so am looking to write some puts on Swiss stocks in the coming months to get some premium income potentially leading to a position. Am curious if there’s any posters with any high conviction on certain Swiss stocks (in particular: good div yield ones)? I still have a decent position in Novartis but that’s about it.
Why not buy a Swiss ETF?
I would buy Julius Baer
A complete different topic and rather simple question, still related to “Stockpicking”:
Banks/Analysts publishes ratings BUY/HOLD/SELL for stocks. Has anyone try to use those ratings to create a trading strategy?
Tempting to create a strategy with those recommendation. But, of course, selling on strong buy and buying on sell.
But then analysts don’t live in a cloud; they may be wrong, actually they are wrong more often than right; but they may not be wrong alone. Meaning they will not recommend a really good stock until all the others do the same… and then it is too late.
So, to answer: the analyst recommendations have little correlation with what will happen to prices in the future. Therefor I just and completely ignore them.
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And about a year ago there was a little story I got aware of because I hold Supermicro. An analyst of Susquehanna did publish a sell recommendation. Unfortunately just a few days after the position in Supermicro Susquehanna was acquiring after this recommendation reached the threshold to have to declare it to the SEC. Just a few days after their sell recommendation they made hundreds of millions buying the exact same stock.
A typical case of “do what i say, not what I do”.
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I believe most of these ratings handed out by analysts are for price targets. IMO nobody can predict prices, analysts included.
What analysts tend to be better at is predicting company earnings. Price tends to follow earnings (if you’re in the fundamentals camp like me) and thus earnings predictions can be useful (but mostly, as a long term holder, you often don’t need them predictions, just look at a steady trajectory of rising earnings.* Price usually follows some earnings per share (EPS) multiple, depending on how fast the company is growing their earnings.
* E.g. textbook example Johnson & Johnson:
(There exist of course textbook counter-examples, e.g. Tesla:
Best to stay away of these, IMHO. YMMV, of course).
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Does anyone understand what Circle actually does?
It seems to me that their model is following
- clients give them their cash (USD)
- clients get a token
- Circle buys US treasuries and collect interest
- I guess they need to maintain some reserve of highly liquid holdings to avoid bank run.
- I also think it’s kind of interest rate risk game. What happens if interest rates rise suddenly (unless they work with very short term bills), do they need to buy more treasuries to match liabilities?
So somewhat similar to savings account in bank?
Is this the business model? Or they do something else
According to their yahoo finance profile yes, they do: they provide a platform for anybody that wants to issue stablecoin. But yes, I suppose their main income comes from the issuance of their own stablecoins in EUR and USD.
The tokenized treasuries service is not allowed for US citizen due to regulation. The stablecoin may not be that stable after all, because there is no way of knowing what they exactly do with the cash.
Looking for a high-potential stock?
Consider the French server manufacturer 2CRSI. The company has recently signed contracts amounting to twice its current market capitalization, a strong signal of commercial traction. They supply high-performance, energy-efficient servers to international clients, including in the US and UK, leveraging cutting-edge NVIDIA chips.
The addressable market is vast, and the growth potential is significant; the stock has already tripled* since my initial investment. Looking ahead, I estimate an upside ranging from +100% over the next year to possibly +1000% in the longer term (personal view).
Valuation-wise, forward P/E ratios are extremely low, especially when compared to peers like Supermicro (SMCI). Importantly, 2CRSI has the ability to scale quickly without requiring a capital increase in the near term, an advantage in today’s market.
If this piques your interest, I encourage you to dig deeper. (ofc text generated by ChatGPT, that doesn’t call into question the relevance of this paragraph)
Nice LLM summary, now please tag it as such
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I see Circle as a gigantic cash machine because of their USDC stablecoin. Roughly said with their current capitalization of 62 billion USD they earn approximately 4% (all stashed in US treasuries) meaning that company earns around 2.4 billion USD per year very likely without having much costs…
So I started DCAing into CRCL with 1-2 stocks per month as part of my fun portfolio. Let’s see where this one goes to… 
or 
But isn’t this same thing as having a bank account ?
JPM also have a lot of cash where they pay low interest and they also can invest in ultra short term treasuries
I don’t understand how this thing is unique?
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Unique it is not (there is already Tether with it’s USDT stablecoin since 10+ years). Tether/USDT is roughly 3x the market cap size of Circle. But Tether is not on a public traded company on the stock market…
So for me Circle It is more “unique” in the sense that this is a crypto company offering the second most widely used stable coin and the company behind it is on the stock market publicly traded. Furthermore compared to a bank it is making money out of “thin air” (crypto) if I may say and has basically no operating costs if you compare it to a bank like JPM.
USDC has also become the standard stable coin used in Europe as probably all EU crypto exchanges where forced to remove USDT.
I guess this is also a reason why this year there has been a surge of new stable coins popping up from crypto exchangs, crypto currencies, and more. Everyone would like their share of the cake…
No expert here, it’s basically also as risky as crypto I would say and hence my minimal DCA into it and part of the fun portfolio.