Not the dividend itself is so or more important for everyone.
we pay tax anyhow anywhere, not reciving dividend is not otimising taxation
if you say that it must be like that, and if enough people say the same it becomes to be the only truth
Not want to be the “knowing all better and evrything too” but your last statement is like comparing the best performing index fund with the most shitty stock pikker on Earth. Yes, the winner is the ETF investor. Sure. In Switzerland at least.
So go buy a day before the ex-dividend day and sell on the ex-dividend day. How well do you think that strategy works?
I think I gave already my view. I already gave some sources too in order to see where I was coming from.
My main message in the subject of “picking vs ETF” is that you can not start with this decision before you come clear with more important things.
On paper, everything you are arguing around your inputs and favouring ETF over others is very much nice. The only problem is that the real ife is not running on your well based spreadsheets.
So anyone goes out investing in ETF only because those are the ultimate investing tools according to your opinion I am fine with it. However I am not agreeing with your input. And if there is time and willingness to learn another view but yours, I can share my view. If there is no interest, it is also fine.
But if you just want to win any discussion for the sake of demonstrating your view and you believe and the superiority of those, well it does not really welcoming me to the debate.
did I suggested such strategy? did I even mentioned those specific days? did I even call such thing “strategy”
Why do you ask all of these?
Either this strategy works or the stock price falls exactly by the dividend on the ex-dividend day.
It’s not matter of view, but facts. I’m sympathetic to value investing and quant investing a la Medalion, etc. The fact is they can be effective for small elite of active investors (not necessarily professional fund managers). However, for non-elite investors active strategies don’t make any sense because they give worse risk-adjusted results over long term. It’s matter of fact, not opinion and it’s well-established knowledge in both academic finance and in investment community.
This thread is just useless. Regarding dividends, a good post from Bogleheads:
In Switzerland where we pay only taxes on dividends and not on capital growth, dividends are just not a good thing. If I could, I would completely avoid them. There are no real gains in dividends, just taxes.
The value of dividends is that the company doesn’t have to destroy shareholder value by deploying that money internally into suboptimal projects. Even an S&P500 company that ran out of ideas what to do with the money and just invests it into S&P500 is going to underperform it due to corporate tax drag.
If the company can deploy money internally in projects promising good returns (generally, growth companies), it’s better to not pay dividend. But if they have no clue what to do with the money (generally, value companies, utilities, real estate, etc.), it’s better to pay and let investors redeploy the capital more efficiently.
What about buying back stocks?
It solves the problem of excess cash, but they are not as easy to evaluate as dividends.
On one hand, at instantaneous timescale, they should not affect the value of the company: each share represents a larger ownership in the company but this is exactly offset by the loss of cash behind each share, which was spent on the buybacks.
On other hand, they put buying pressure on the market, eps increases (so company starts to look cheaper based on P/E alone), there are psychological effects - “managements believes in the company”, etc. There’s a question whether the company is under- or overvalued. If undervalued buybacks are arguably good, if overvalued - bad, but value is subjective thing, different models/analysts will say different things…
At a value based company dividend paid off from free cash but not from or instead of capex. Dividend payments are not capital allocation but paid off after all other costs. Once the company trys to pay off dividend from capital what should have been allocated differently, or from debt, or from other than free cash, it is following your logical based explanation and will be not considered as value based organisation anymore, so I will not invest in it. Not all companies can pay dividend and not all will pay dividend and that is good as it is.
So dividend pay off does drag a badly managed company but does not drag a value based firm.
JNJ vs BRK.B
Following the logic you describe, company pays less or no dividend is a better deal.
At the same period of time WMT paid way less dividend comparing to JNJ so they should perform better than JNJ. But they didn’t.
It is a valuable effort but I do not think you can avoid tax anywhere.
Yes, in CH the dividend pays higher tax but you do not taxed on capital, so at the end of the day it is about the same as anywhere else.
I understand you try to invest only in ETF , specially which does not or pays only few dividend and you consider that as tax optimisationhan. I see this as a lost or bad focus. The tax optimising shall not be your main track.
I agree.
But I do not agree with that when the above statement copy past for the value investing as such and concludes the same in total.
I am not even arguing that investing in to ETF is good or bad. Especially I think there is a space for both, value and ETF investing.
Again, dividend, in the case of a value based firm with good management, is not paid before those promising projects have been already capitalised but only after. From free cash only.
It’s an interesting empirical question actually. How many amateur value investors are outcompeting amateur etf investors. I doubt it’s a big number because winner active investors by definition outcompetes the index return by the amount of the losses of loosing active investors subtracted by fees and taxes. It’s pure aithmetic. Winners outcompetes index because stupid day traders exist and because most investors act on emotions selling low and buying high.
And that is already priced into the stock price. You can’t exclude all other investors.
Not sure about the history of the ETF, I guess about 25 years. 20 years ago the internet and the online purchasing was not in the condition as today. Same appy to access and investing in to ETFs.
The regular (dummy) investors (including myself) we probably have a 10 years old story of the ETF thing.
Now we try to put out historical data, backdating the success of ETF and explaining our or someone elses success in it. However 10 years ago we have not been that secure in the answers. Now we are almost sure that the ETF is better than anything else. I do not know. It might turn out another successful decade. It might turn out that the ETF is definitelly the ultimate and superior investing tool. We will see it.
Indexes have been around quite some time. Index funds are also already 50 years old. ETFs are just index funds that you can trade.
Its true, and still the ETF (indexes) are only as valuable as the underlaying businesses are valuable. With this statement I am not saying how much you can earn tomorrow by investing in ETF today. I am only referring to the real or intrinsic value of the thing. I mean the value of it, and not the actual or tomorrow price of it.
Don’t worry, I don’t get it either. A company may choose to pay high dividend, or reinvest (like Berkshire Hathaway, which never paid dividend and so one piece costs 342’000 USD). I guess companies paying high dividends are usually more mature, have a functioning business model and steady profit. They should deliver a more steady return, especially during bear market. But you will miss out during the bull market.
However, Berkshire loves dividends from companies they invest in. They have accumulated $128 Billion cash to date!