WOW !!! - I have been an avid investor since I was a kid and had no idea about this - I am almost embarrassed or mad at myself for not realizing this on my own - thank you very much for the education here. I do enjoy your videos. Dan

I feel that you started with your conclusion and tried to select aspects of the dividend payout life cycle to support your argument rather than taking a holistic look at the value of dividend returns. One thing that needs to be considered is what is the alternative to receiving a dividend from the company. Is the company able to reinvest that capital and achieve a respectable IRR? In many cases, the answer is no. In these scenarios, it is better to return the capital to shareholder rather than eroding the returns from the core business.

Dividends don't increase your wealth, but investing in quality companies that pay them does

This is a pretty important topic Rob. Thanks! I don’t think this video is necessarily a case against dividend stock investing, I actually see it as a case against *blind* dividend investing, or “chasing the yield.” If one invests in moderately or low dividend-paying *growth* companies (think MSFT), then one doesn’t have to worry about the watchouts that you’ve rightly pointed out. Why? Because when I turn my DRIP on for MSFT, I’m picking up more of those shares that have high future growth potential. Yes, DRIP can be a zero sum game that day or week you reinvested, but if this is a quality growing company, you’re good. This is the dividend investing done right - invest in high-quality growth companies that pay some dividend today and don’t chase high yield!

So with dividend investing you get to retain the amount of shares of your company and if you "drip" it buys it back at a lower price (win). You also didn't examine what happens when the market returns and you have retained the amount of shares you have in the company vs the non divided investor who has fewer shares. I think you are missing the boat. 75% of the SP500's growth 1980-2019 came from dividends.

@Rob Berger, I think this video is a tad misleading in the sense that it is a one-sided view. You are looking at dividend payments after the declaration date. To be objective, you also need to examine the share price after dividends are declared. Companies pay dividends to redistribute profits to shareholders. Dividends are issued from a company’s retained earnings. After a stock/mutual fund goes ex-dividend, the share price typically drops by the amount of the dividend paid to reflect the fact that the new shareholders are not entitled to that payment. That said, there are other misconceptions about dividend stocks/mutual funds such as high dividend yield may not always be a good sign since the company is returning so much of its tax profits to investors rather than growing the company through additional investments.

Reinvesting dividends in good companies over the long-term does build wealth especially during down-markets when share prices are reduced and dividends buy more shares.

Even I knew about almost everything you said, you put it in so simple and logic way making me rethink my heavy dividend portfolio allocation. All that matters is total return.

I live off my dividends for years now and as long as you diversify your portfolios and keep investing through good and bad cycles in great companies, you’ll be just fine .

Thank you! I have been searching for this explanation for a long time. You’re the only one who has made it clear to me. Don’t know why it took me so long to grasp the concepts.

Hello and thanks for the analysis. You noted quite often the “value” of the stock or the “price” of the stock (or ETF or mutual fund) goes down when a dividend is paid. I believe what goes down is the book value per share, often held to be meaningless. The book value per share has little if any connection to the “price”of the stock. When the price of a stock increases, the investor has u realized capital appreciation. When the investor receives a dividend, he or she realizes income. The sum of capital appreciation and income represents total return and is considered by many to be meaningful in evaluation an investment

Another thing I will point out is that with each dividend paid, Yahoo adjusts all the Adjusted Close numbers down by the latest dividend all the way back to the beginning of time. E.g. for Nov 20 , 2010, Close = 10.95 which is the actual close, but Adj Close = 9.26, a difference of $1.69, even though only a 0.01 dividend was paid on Dec 01, 2010 Adj Close is only a number that Yahoo calculates to adjust for dividends, splits, and capital gain distributions, to facilitate calculating return from one date to another date. It is not the price of any actual transaction.

As a beginner in investing I would like to thank you very much for the explanation and the examples. It is really easy to understand the way you explain things. The dividend hype and fake assumptions I had are more in control now and I am thankful I came across with this video, because I think the best way for anyone to invest is check the fact instead of letting emotions decide for you.

In the example you used, the div portfolio could improve their position easily by re-investing the div payout at the lower price. This would both increase their future payouts and lower their average share cost. This scenario seems highly favourable to the div portfolio.

Appreciate the video and I agree with the concept. However, I thought I'd introduce VIG's strong distribution history to support an argument that could be made about stability during bad times. The only year it cut its dividend was in 2009, following the great financial crisis in which we had almost lost our banking system. In 2008 it paid an annual amount of $1.026 and in 2009 it paid $0.979 . That is less than a 5% cut during one of the most difficult economic times in the history of the US.

Thanks for a very clear explanation of dividend stocks. I own a mix of dividend stocks, value stocks and a global index fund. I know that I wont get a super high value return since the dividend companys are mature and therefore don't grow in size. But I also think that my risk level is lower since these companys know what they are doing and how to make money. My comment is when the market turns up again after a crash, isn't it then an advantage to still own more stocks?

This is a great video! I consider myself a well educated investor but I have to admit that this video really opened my eyes to dividends. Keep up the good work!

I personally have a mix. Truth be told, you have mature businesses that are not in aggressive growth mode. They need to do something with retained earnings and thus pay shareholders a portion of retained earnings in the form of dividends. I hold dividend paying stocks with no intent to ever sell. It will allow me to retire early with dividends that provide a fairly stable cash flow. I also have my 401k, IRA and other investment vehicles - Dividend paying stocks is just one of the tools for me.

Agree. Dividends reduce the price of the stock or fund, but just momentarily. The next trading day the price lands where it lands according to the free will of the market. I don’t sweat this and I know Mr. Berger doesn’t either. 😊

Thanks, Rob, for enlightening me on the difference between the tax outcomes of dividend income and selling stock shares for a profit to create income for retirees. I never thought to compare the two. Receiving income sounds easier than selling stock but as you explain it, dividends create more taxes. Do you have a video on the best way to sell stocks in retirement?

I've backtested several high dividend strategies vs just investing in something like VTSAX and the high dividend strategy always ended up performing poorly over the long term. The high dividends come at the expense of growth and that can be a huge drag. So, yes, it's a huge myth that continues to live on due to a fundamental misunderstanding of how dividends work. Thanks for covering this topic.

Bologna. The government forces REIT’s to pay. If you own real estate you know how that works

The example you gave was correct, however you didn't show what would happen if you reinvested the dividends instead of spending them. Your long-term returns are enhanced because of the power of compounding. Your dividends buy more shares, which increases your dividend the next time, which lets you buy even more shares, and so on.The whole point of dividend investing.

Portfolio to analyze… 20% FLCSX 45% FSKAX 15% FSPSX 5% FIKCX 8% FXNAX 7% FIQTX. Question, why would Warren Buffet select 10 short term gov versus total bond fund? Thanks!!!

This was an utterly understandable and common sense way to describe pros and cons of capital gains vs dividends. Thanks!!

Myself I like dividend growth investing. Have a portfolio with both dividends and growth stocks and dividend growth stocks just so I can add to positions with good companies and still obtain that growth I’ve found that’s helped me a lot

I agree in that one shouldn't make a decision on buying a stock solely based on its dividend. However, most good companies worth owning pay a dividend, or will likely eventually pay a dividend, because they are companies that are earning cash profits to such an extent that they are giving those profits to shareholders when it makes sense to do so. When buying stocks, the criteria used should be centered around the quality of the business and its management.

Rob, excellent report and as always and most importantly food for thought!

This is excellent information and a very different perspective on the topic. I had no idea regarding this fallacy regarding dividends. Thank you Sir for another great video.

I've watched lots of your videos. They're all great. But this video was the most helpful, well articulated video yet! Thank you.

The stock market does not set prices based on the NAV of the stock. It is based on sentiment and expected future returns of the company. Most of what you do is great, but this makes me question your understanding on how stocks are priced

Holy smokes.... all these years studying investing and i still learned something new! Thanks...

Hi Rob Even as a British investor I enjoy your videos. I would query your example of dividend v non dividend regarding sequence of returns risk because surely the point is that the dividend investor ends up with the same number of shares( even though they have lost more value) but importantly these shares can all then recover in value as the market eventually goes up.

HUGELY important video! I’ve been investing and studying investing for decades, yet I only recently learned this important fact. Nobody talks about it, I honestly think most “experts” don’t even know. I also recently discovered your KZfaq channel, GREAT JOB!!!

Hi Rob, Great video (enjoy your other videos as well). I have the same view about dividends. I have discussions with others about this topic and most just do not understand or do not want to admit it. A few other points about dividends. I look at dividends as a withdrawal rate on my capital that is pre-determined by the company paying the dividend (I much rather have my own withdrawal rate). Also, most like to argue that the price adjustment somehow magically comes back immediately to make up the loss in value as a result of the dividend adjustment. My argument back is if that were true, then I could do the following: There are 250 trading days per year. I could just find a stock for each trading day of the year and capture the dividend. In other words, I could just roll my capital from stock to stock and capture the dividend for 250 days a year. In this scenario, if the average yield on a stock is 3%, then in theory I could make roughly 180% in profits (yes, $1 becomes $2.80) each year. However, dividend capture strategies have mixed results at best proving that the price does not make up for the price adjustment for the dividend.

Wow ….I never thought of it that way and I’ve been an investor since the 80’s! Good video! Keep up the good work!

The adjusted closing price is simply a tool that people can use if they choose for analysis reasons. It is not the value of the last transaction on the market that day, which is truly the market-driven closing price. The company did not reach into your portfolio account and pay you with your own money. Instead, they reached into the company's cash reserves and chose to pay you instead of using it for something else. They did not affect their own ability to produce free cash flow, which is what the shareholder is arguably holding.

I tell this to my friends for years and they still do not get the idea.

Rob, Thank you. I enjoyed your video. I think you gave more emphasis on the theory that the companies you invested in, will always be profitable and use the earnings for growth and further increase their value and hence your investment return. That's the best-case scenario for growth-based investment. If companies payout some earnings to investors in form of dividends, Investors can also make better use of the dividends for diversifying their investments. Hence minimizing the risk rather than risking the growth companies to re-invest all the company's earnings. Thank you again for some insights on tax thing.

Thank you for explaining how dividends affect stock price, more specifically mentioning "adjusted closing price". However, IMHO your thesis about Non-Dividend Portfolio being a better performer than a Dividend Portfolio for retirement isn't well argumented. Here is why: If we continue to sell shares every year from the Non-Dividend Portfolio to get $40k, then after some years (20+) we will have 0 shares to sell leaving us without any retirement. While the Dividend Portfolio maintains the same number of shares (if we don't touch it) and it can continue doing that for much longer. Not to mention that when you are forced to sell shares in a bear market at a loss you are essentially cutting a branch from the tree that bears your retirement fruit, i.e. during a bear market with a -20% downturn you would be forced to sell even more shares, leaving you with less shares and a shorter lifespan of you portfolio.

Thanks very much this is first time im hearing this and it changes my mind on dividends by quite a bit

The main reason to invest with Company paying dividends is not the dividends themselves but that the Company is strong enough financially to do so. There is some trade-off of future growth by paying dividends but entire objective of investments is to reduce your risk. Your risk are lower by investing with Companies with strong free cash flow, consistent sales growth & dividends.

If stocks are held over long periods of time, in many cases the dividend percentages slowly increase. So one may, for example start with a 1% dividend, and end up years later with a 4% dividend, including upon the increases in numbers of shares if the dividends were reinvested. Of course, dividends can decrease also. Nothing's certain; I keep some dividend stocks and some without for growth. Sometimes I trade one dividend stock for another that I think will perform better while still providing a decent dividend. It's a moving target. I think with dividend stocks, one hope their share price recovers in a reasonable amount of time, say 1 to 3 weeks. I guess than one might have to consider, well maybe the growth stock increased that much also? I've heard over decades, dividends contribute about 40% of S&P earnings. Interesting and thought-provoking discussion.

Rob, good video, but the key to investing in Dividend Paying stocks is to invest in Stocks that are growing their dividend rate, preferably double digit growth rates and if you do your homework you can find Stocks that consistently pay "Special Dividends" and also grow their regular dividends, this is the key to increasing wealth. As for the Stock price going down when the Dividned is issued, this is truly short term and basically a non event if the company is an excellent revenue creating machine with Moat and Industry leading business....the market is not efficient and people will naturally be attacted to Great Companies that are profitable, have a market edge, and RAISE their dividends.

Discovered your channel a few days ago and have to say, for someone who is deeply interested in financial markets and investing, it's amazing. Love the long-form content and detailed breakdowns, tons of value here, thank you!

I've been researching how to simplify our investments, generate income (when the time comes) and still remain tax free in retirement with another 20 years to go to full retirement age. While we're firmly in the 12% bracket so we have a 0% LTCG/QD rate, I'm also in the midst of a long term plan to convert ALL of our tax deferred investment to our Roth IRA account slowly over time and under taxable limits. Unfortunately, dividends interfere with this plan since I'm using the form 8880 retirement savers credit and I'd lose that with excessive dividend income. I also don't like how dividends greatly reduce or even eliminate capital appreciation. Currently I'm thinking that a S&P 500 index fund for our taxable investments with it's low dividend yield and reinvesting the dividends for now and then after I'm done with the Roth conversions re-evaluating. In retirement we'd have Social Security, some taxable interest, I could take the dividend income from the Index funds rather than re-investing it (if needed) and then take as much or as little (or none) from our Roth IRA accounts as we wish while still remaining completely tax free, even when there's only one of us left. I like the idea of still enjoying some capital appreciation while getting a little dividend income when/if needed that's easily "activated". No RMDs to deal with, ultimate flexibility and even some "headroom" in our tax bracket to "step up" the cost basis of our taxable investments just in case they change the LTCG/QD rates or if we need to sell a large portion of our taxable holdings, above our tax-free limits. It's a complex issue but with far-sighted tax planning it's possible to move mountains and find the best solutions.

Dividends never matter. It’s just psychological, making investors feel good when they see “free money” in their accounts. It doesn’t matter whether you sell your shares in low market or receive a dividend for income. There’s never free lunch. The best approach is to invest in low cost index funds capturing the entire stock market. Thanks for a great video.

Great job..Rob..good teaching my friend..cheers..

Many companies have stopped paying dividends since the pandemic, too.

Rob, your whiteboard example is flawed and here's why. You assume that paying a dividend reduces the price of a stock permanently but it does not. The price goes down after the ex-dividend date. After that, even if the stock market is flat, the stock begins move back to its pre-dividend price. The healthy company whose stock was worth $50 before paying a $1 dividend will be valued at $49 after the dividend but it accumulates cash during the next three months and the price moves gradually back to the $50 price, when its value is the $49 plus the $1 in accumulated cash that will be paid out to shareholders. After the second dividend, the price drops to $49 and the cycle continues. Second, your example covers only one year. The financial market meltdown in 2008-2009 took the market down 50% and lasted 5 years. Liquidating 4% of your stock portfolio each year during the 2007-2012 timeframe would have been extremely painful, resulting in a serious depletion of your stock portfolio, which you are counting on to provide growth during your retirement years. Third, if your stock portfolio is down 50%, your bond portfolio is down significantly too and you will be liquidating that at a discount. When stuff hits the fan in the financial markets, stocks go down, bonds go down and the value of everything goes down as people flee to cash and treasuries. I saw this in 2008-2009. Fourth, there are numerous studies showing that dividend paying stocks outperform non-dividend payers. Why? Because most companies view dividends as an obligation, like interest, that must be paid, only the obligation is to shareholders. Faced with limited resources, companies that pay dividends are more disciplined about their capital allocation and therefore generally outperform those that don't. Total return is important, buying stocks that pay dividends but never increase in value is not a smart thing. That said, having dividends come in on a regular basis and knowing I will never have to sell stocks to pay the bills gives me peace of mind - and that is very, very important in retirement. The psychologists who study retirees will tell you that the data show that those who have fixed income in retirement are happier and live longer than those who don't. I view my portfolio of high quality dividend stocks as an annuity of sorts, providing fixed income and capital gains. I appreciate your work on this channel and it is very valuable, we just happen to disagree on this point.

You are incorrect, if you by company that grows its divided year on year you initial 4% yield will increase year on year. Look at Mr Buffet, he is getting a 60% plus dividend on many of his original share purchases and that's before you factor in the capital appreciation. You are thinking short team as each dividend is paid, yes the share price drops after the ex div date closes. But you failed to take into account the normal share rise leading into the ex div date, plus the higher than average likely hood that the price retraces in the days that follow. Plus you still get paid when markets go down which cushions the capital hits you take. Another plus is you can take an increasing dividend throughout retirement and not have to sell a single share when the market could be down a lot to fund your life.

When you have dividends set to reinvestment even with the share price dropping wouldn’t that just mean you’re buying fractional shares at a cheaper price?

Rob, I am learning so much from you. You’re worth your weight in gold!

well!! I have used my DIV's to purchase and diversify my portfolio, and my wealth have grown quite substantially...

I'm glad i found your channel, it's good info to point out since most people (including me) would just see dividends and interest earned as the same thing. Never would've found that significant detail about dividends payouts. As you say, it doesn't make dividend stocks bad, it's just details to be aware of.

Rob, I noticed that the majority of the adjusted close was different than the close price for the dates prior to your example dividend date. Do you have any insight why? What other factors effect "adjusted close"? Thank You for content!

So where & how do i replace my dividend paying stocks ??and generate the same return to live off each month !???

This vidoe is foolishness. Dividend stocks tend to have lower PE Ratios. Paying out a portion of earnings to shareholders. Most Growth stocks have high PE Rations and no earnings

This is such a thorough analysis that cuts through all of the emotion to highlight what dividends are, what they can do, and what they can’t do. I wish I would have watched this before I watched hours of pro-dividend strategy videos from other channels. Well done!

I had *no idea* about this! Thank you!

Discounting shares by the dividend price isn't the end of the world when you consider the amount of reinvesting dividends have caused. I know it's been said but the growth of the s&p 500 is largely due to reinvested dividends. Honestly the idea that a company is transparent enough to subtract the loss of assets to their stock price is something that causes respect and is one of the reasons why great investors like Ben Graham have advized against the average investor buying companies that have not paid a dividend for atleast 10 years. He also specifically warned against growth stocks that pay no dividends because of lack of transparency and disconnect between price and earnings (look at tesla with a p/e ratio of over 600). You may be specifically worried about their investment paying them for "free" but there is a reason companies strive to pay dividends. It leads to more long term holding of stocks, better respect from investors, and more reinvestment into the company driving prices higher. In this respect the dividend causes the price to return to its previous levels meaning that for those who are retired and living off dividends it is essentially free money. I do agree that in a market crash dividends can cause stock prices to decrease faster, but a large disconnect between price and earnings like that which is found in growth stocks that don't pay dividends will go down even faster in a crash than a stock that has a quarterly discount that is ussually paid for by reinvestment... overall if there were a perfect investment strategy everyone would do it... There is always the question of opportunity cost when investing and when running a company on the stock market, I don't blame any one on KZfaq for making a video that is misleading, but I do think it is important to remember people will make decisions based off of information you present so when you make finance videos it's good to present both sides as possible options, unless one is obviously terrible. Also people get emotional if you tell them that they have been investing wrong for a long time, as evidenced by this comment section hahaha.

I wonder how many people would have answered differently now than a year ago. Love my dividends in this economy

Companies have a choice: reinvest profits (stock price goes up) or pay dividends (stock price stays the same - or dips by a trivial amount). Either way, wealth is being generated. You either get that wealth generation in the form of higher stock or in the form of a dividend, but the end result for the investor is the same.

I like your explanation but I have one question. Let's say the value of my stock went from $50.00 to $45.00 dollars after the dividend came out and 1 week later that stock was back up to $50.00 wouldn't you have to say that the dividend in now pure profit?

Interesting and enlightening video, thank you! If folks are still enamored with ‘aristocrat companies’, that’s all well and good, but then you’re talking about stock-picking, which brings some element of risk into the equation, however small. Also, in the scenario you laid out, you were extremely generous with the dividend payout being exactly the same in a down market.

I will add something from my own experience. I once owned a company that paid a dividend. They were not doing well financially so the dividend was at 13% yield because of it. I thought ok it’s a big risk but I will take it until they turn things around and even if they reduced their dividend it would still be an acceptable amount. Well a new CEO came on board and eliminated the dividend. I sold right away @ $6.30 per share. Since then the price crashed and it’s now less than $1.00. In this case it seems the dividend actually increased the share price. Removing it should have increased the price if things are as you say.

Thanks impressive info that I didn't know. I am now a subscriber.

Don’t know if you’ll ever see this question cause it’s an older video, however in response to new to me info re dividends my question is: Is it better not to reinvest dividends back into individual stocks in a taxable account or does it matter? Thanks!

Thank you very much for making this video and highlighting this very important aspect. I heard the stories and saw the videos of people living off their dividend portfolios. I was on the fence about considering the same until I watched this. I'm now content to just carry on with my total US & total international funds

Rob, what you failed to mention in this video is that when the market goes back up (and it always does) the guy with the most shares has the most money, even though they withdrew the same amount hence he was protected from the downturn.

I'm here for the comments...

In your portfolio examples, a difference I see is that the "dividend" portfolio would lower the cost basis per share, while the "non-dividend" portfolio would stay at the same cost basis. Wouldn't a lower cost basis put you in a better position for slightly higher returns in the long run? Admittedly, a nominal cost drop on a given share would slightly increase the appeal to buyers (moving, e.g., P/E) and increase the chances that the asset would recoup the loss. If that were the case, moving the money from stock valuation to dividend would have worked in your favour. Is there any obvious flaw in this argument?

Thank you for this video. I think many people fixate on dividends and don't understand the math behind why total returns are what actually matter. It isn't a complicated topic, but thanks to all of the misinformation out there, too many people have the wrong idea about how to measure a stock's performance.

Rob great video technically correct, though stock pricing is not technical, it’s based on what people are willing to pay for them. So even though the end of the day the price went down the next day start is not the same whether that early market trading or not. So it appears though we got free money and if reinvested we got more shares. But definitely an awesome video to ponder and would say those super high dividend stocks/funds, you have to wonder why they couldn’t invest that money more effectively then to return it to us.

I know a number of "dividend investors" and I'm gonna send them this video!

Where to begin! Yes, the dividend payout does indeed reduce the per share price when paid, however Mr. Market controls adjusting share price movement constantly. Share prices going down do indeed attract buyers who may be dollar cost averaging and adding more shares to their holdings. Dividend recipients my choose to DRIP back into the underlying stock (or REIT or BDC) to grow their portfolio organically or look for value elsewhere. For an IRA, retirees tend to use their growing dividends (yes, stocks of quality companies do grow their dividends) to fund their annual RMD obligations without having to sell shares of stocks to do so for as long as possible -- and use excess dividends to (again) grow their portfolio organically. In retirement, we retirees tend to look at growing dividends from our holdings as income (cash flow) to supplement Social Security, pension(s), and annuities. Total return has meaning on paper, but you can't spend or reinvest total return unless you physically sell your holdings. With growing dividends -- the cash flow is there to reinvest and fund your retirement. The key to successful DGI (dividend growth income) investing is to own quality companies that have a track record of paying and growing dividends over many years (Dividend Aristocrats, Dividend Kings, etc.) and use dividends to grow the portfolio from within. GLTA

It seems dividend stocks attract a lot of attention, causing market buyers to purchase them - potentially over non dividend stocks. Does this not cause stock prices to rise potentially more than non dividend stocks simply because of the attractiveness of them (even if dividend stocks are only paying you your own money)?

In bear markets growth (non-dividend) stocks usually lose much more value than value stocks. So while theoretically the dividend vs non-dividend case may not be different, in reality it's more complicated. The core idea here that paying dividends is basically the same as selling long term gains is important to be aware of, it's true that they are not "free."

Thank you Rob, I have been really learning to be more critical of investments because of you! I am a big fan of dividend investing (even as I am not yet retired) and re-investing it to gain more shares... question: does your video apply to REITS? Thanks again.

You improperly conflate price and value.

Rob, my brain hurts with your whiteboard drawings BUT, it makes complete sense. Thanks for this.

but you lost 20 shares in ur example Rob and at the bottom

Some investors have a need for cash flow and therefore value dividends. Every investors desired financial needs differ dependent on their situations.

I'm living on dividends and the beauty is the number of shares I own has not decreased. I see dividends like water in a pot. The water is the equivalent of a stock price. As a company earns money, the water in the pot increases. When the company distributes some of those earnings, the water in the pot temporarily decreases. The water in the pot will refill as the company earns more money. As long as you don't sell all of the water, and the company continues to earn money, you will never run out of money if you just withdraw the dividend. If you start withdrawing entire shares, you could run out of money if the stock market drops too much and you sold too many shares.

Direct quotes from Fidelity Dividends have accounted for 40% of stock market returns since 1930 and 54% during decades when inflation has been high1. When inflation has been high, the stocks that have increased their dividends the most have outperformed the overall market. Dividend payments may help make a stock's total return less volatile.

Technically correct if market valuations were equivalent to book value, however that's rarely, if ever, the case. Stocks are typically valued based off of expected future earnings, which is why you rarely see a dividend actually result in a reduced price. Those adjusted price values don't actually mean much of anything, all that matters is what the stock opens the next day. I'm not advocating for a high dividend portfolio, it has tax implications and other things, but it's not really a zero sum game either.

19:25 "I heard dividends are, like, the BOMB." 🤣🤣🤣 But seriously, once I bought a super high-dividend REIT. It was a horrible experience since the share price went continually down. Now I have some idea what was happening.

The S/P price index w negative 24% from 2000- 2010. The S/P price index minus dividends accounts for 40% of the S/P return over an average rolling 10 year period

Love your videos! Keep up the amazing work!

Rob: The small reduction in share price due to dividends is only temporary . Unlike your bank account analogy where you permanently lost 100 dollars, the small reduction in share price will be quickly revalued by the market if the company is healthy. The investor will then have more shares or more cash in hand .

Great presentation, thank you. I suspected that there are no “free” rides in the stock market without accepting risk.

You need to do the math over the long term. Prices rebound post the dividend date. In addition, taxation is different. Qualified dividends are taxed at 15% while long term capital gains are taxed at 20%. Please don’t base your analysis on short term data without doing the detailed math. A properly structured dividend portfolio can provide a stream of income. You do your viewers a disservice by looking at the short term and disregarding the long term analysis. Keep growing and learning. Much love for your efforts & best wishes.

I was up 58% on my tobacco holdings in 2022, paying 9% dividend yield too. Not all dividend stocks are equal.

What about the fact that dividends allow you to purchase more shares and thus have more votes whereas if you were to sell share to create your own dividend your amount of shares would decrease and you'd have less votes in the company

Rob. I think that a more Holistic Analysis would be to compare the Total Return (Capital Appreciation & Dividends & Interest (if applicable) of Top Dividend paying Stocks vs Top Non - Dividend Paying Stocks,. I think that you will find that the Capital Appreciation of the Stocks are similar, so getting paid the Dividend is a Bonus. I do understand that its payed out of the Earnings.

Dividends arent free, but they do indeed increase your wealth.

Very interesting Rob. You know way more than I do but after the dividend is paid, the amount is replenished by earnings. In the savings example, the amount never goes back up to 100% because that's all you have...but the dividends are created by earnings. Please show me where I'm missing something. BTW, dividend growth investor here.

Berkshire doesn't pay a dividend but Buffett always invests in dividend stocks. Why ? So he can invest the money as he wants

Thank you for sharing your knowledge Rob.

Just because a company reduces the stock value then pays the difference, doesn't mean you dont gain any wealth. If you bought 1 stock at 10.00, then it was mechanically lowered to 9.90 in order to pay you 0.10, it does not mean they are using your own money to pay you. You're stock absolute value is still 10.00, regardless of how much it is reduced to pay you dividend. (Absolute value is the price you payed for all your stocks (averaging them out if you bought more later) versus the current value) All the examples you show, the value returned to normal and is higher than before. You still make money. The whiteboard example is off, it should be 500k vs 460k. 1mil each port, the div port gains 40k, (the 4% yield is moot, what matters is the total value distributed for that 1 year). So both port would end up as 1.04mil vs 1mil. The stock lost value and the portfolio is now 540k (40k from divs, yes its still there, its absolute, you gained that in the year) vs 500k for the other. They both are told to sell 40k worth of stock, 540k becomes 500, vs 500k becoming 460k Div portfolio vs non div portfolio 500k vs 460k The take away from all this? Stocks that pay dividends are still a better choice, you get a small monthly/quarterly distribution AND you have the option to sell the stock when it goes high and buy more when it is low (the same thing you would do if you bought a stock for appreciation value).