Is there an ETF that only invests in shares that pay no dividends?

Just out of curiosity, do you know any funds that invest in non-dividend paying stock?

I am not talking about accumulating vs. distributing funds, but about funds that invest in stocks that pay no dividend at all.

With my current marginal tax rate, I am not too happy about any dividends I receive. They seem like wasted money.

Most of the good companies pay dividends (because they make a lot of money) and the worst companies don’t pay dividends, because they can’t. What’s more, we are the only country where we don’t pay taxes on capital gain and the only country where we have to pay taxes on accumulating funds, so I don’t see anyone create such fund.

You can either invest in Berkshire or buy every 2 years an old building that need a total renovation.

It’s a stupid selection criterion and i sincerely hope there are none. There’s nothing wrong with divs. But if you still want to shoot yourself in the foot, sure, go to any etf screener and sort by div yield descending If you’re not that dumb, you could tilt your portfolio towards tech/growth, these tend to pay less dividends for fundamental reasons

Dividends have no benefits at all, only downsides.

What downsides?

I can’t think of many, except the taxation aspect. And maybe broker’s fees for dividend processing and currency conversion, if applicable,

On the other hand:

…and some may not know any better than to distribute (part of) of that money to shareholders.

Which (and I remember we have briefly touched upon that with Cortana a while ago) does not have to be a bad sign. Dividend-paying businesses are mostly healthily profitable. And I’d rather have them distribute some of their earnings to me as a shareholder than the company forcedly trying to “reinvest” them into something they aren’t really competent in.

In a way, dividends can make (some) companies operate and allocate their capital more efficiently.

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Wrong. Most companies eventually mature and come to a point where they have more cash than they know what to do with. Divs are a good way to return that capital to shareholders. Would you rather prefer value be destroyed in sub-optimal capital allocation decisions, crazy M&A deals or from continued pumping of capital into their overvalued shares?

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I would prefer stock buybacks.

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So do i. Is it correct to say:
Dividend = buyback - tax ?

Yes, for Swiss investors stock buybacks are more tax efficient than dividends. I think it is true for most countries, but not to the same extend.

Best quote on the topic I’ve read in a while (not to be takien too seriously)

I only invest in companies that give dividends because they know they are inferior to me and I can do much more with the capital than they can

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Yes, but why invest only in companies that choose a tax inefficient payout of the capital?

Guys, before going once again in circles talking about dividends vs buybacks, please read the thread on capital allocation. There is no simple black or white situation where one is better than the other.

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I guess the answer is no. I was hoping this thread wouldn’t end in a religious war about the merits of dividends.

I don’t like dividends because of the taxation aspect.

I recommend Ben Felix’s video on the subject:

To have less dividends, you need to select a growth fund, Berkshire or a leverage ETF

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If the market was a machine it would be the case.

Stock buyback is not an unlimited option.
For example, CH OR allows a stock company only to own 10% of its own shares, 20% under certain conditions. The function of a buyback is rather limited as a div multiplier.

What if they buyback & vernichten the shares? Is it then unlimited, buyback till one share is left? Isn’t that the usual shareholder-friendly process? Just buying back but keeping the shares doesn’t increase the EPS etc. Keeping them in the books increases the likelihood of them being “given” to management, which unless it is a reasonable amount & really is deserved, is actually shareholder-unfriendly.

They have to pay taxes if they do that. That’s why the net price of buyback is lower when it happens (for example BFW Liegenschaften did that “recently”).

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