Do you think that the 2nd tier of dividend-paying stocks are the best place to invest?

Two reasons I invest in dividend stocks, passive income and compound interest!

Put simply that is why dividend investors are LONG TERM investors. Not only because of the ex-dividend day readjustment but also because of capital gain taxes. Dividends from stocks that are held for less than a year are considered regular income, if they are held a year and a day they are considered capital gains which for most people are taxed at about 15%. Even better say your have 78,000 dollars in qualified dividends (dividends paid by stocks you have held for more than a year) as your only income. You know how much you pay in federal taxes. ZERO. Hell with the new tax law say you have 102,000 in qualified dividends and you are filing jointly same thing. Zero. because you get standard deduction of 24K and then its zero on your 78K dividends. its the best way to beat the tax man and live very very well. How do I know? My stock portfolio currently makes 122,000 in qualified dividends, retiring next year when I am 57 and debt free. Loving life.

In my Honest Opinion you are the must interesting KZfaqr on this field. Very easy to understand and precise! Also you seem to know what you are talking about and you don't go into speculation. It would be great if you could create a discord for the community to get together and talk more about all the subjects.

Only reason I invest in dividends is to have passive income during retirement.

Using a "Yield" as your metric is going to give you a self selecting group whenever back testing. When the company slips, the yield increases. When the price booms, the yield slips. By grouping on yield, you are moving a company around each year based on it's performance skewing your totals. You need to isolate price and dividend for any historic look. The value of the dividend payers is not solely price or cash flow, its the combination of both, along with the risk mitigation of pulling value out without sacrificing ownership %. Love the analysis and energy, but it suffers from the same flaw of any epidemiological study. You simply can't control for all the necessary drivers to get actual intelligence that is actionable overtime. Another common oversight is that "price" = "Value". Price = emotion of the market at any given time, value is entirely subjective between any buyer and seller.

There's an interesting dynamic which I don't think is covered in this analysis. One of the reasons I like the idea of dividend stocks is the fact that the capital released can be redeployed wherever I think the greatest value is currently being offered at that highly specific moment in time. You can take your capital and shop around for something you think will provide a greater return. When I get a dividend I can take a moment to look at the current price of all the stocks on my watchlist and see what is currently trading furthest below what I perceive to be fair value. I can then sink all my dividends into that particular stock and achieve higher overall portfolio returns from that capital (assuming my assessment of fair value is correct). You get the opportunity to shift some capital from a stock which you might expect to return 10% annually to a stock which you might expect to return 20% in the coming year. With a company which does not pay a dividend you do not have that choice. The company keeps your money and you are locked into that 10% they are able to provide, or you have to sell your stocks and deal with higher capital gains/stamp duty/whatever other taxes may be relevant in your area. But in the kind of analysis which you're doing here, this extra return will not show itself in favour of the stock which paid the initial dividend. This is like a benefit to the performance of your portfolio as a whole, but it is not necessarily traceable to the stock from which the dividend originated because the actual return came from the stock the dividend was invested in. Maybe the company you invest your dividends into will be a dividend payer itself or not, it just depends upon what is deeply discounted that day. But the opportunity to take part in that limited time value sale and shift your capital from a stock with an expected 10% return to a stock with an expected 20% return only comes about due to the dividends paid out by the initial stock. It seems like it's pretty hard to quantify this kind of return, but it's definitely there as long as you are accurately estimating fair value and expected returns.

Some serious research, work and effort has gone into the preparation of this video. Outstanding job, Jimmy!

RTN vs LMT vs GD. ITW and DOV are also interesting, great dividend histories.

I just discovered you a few weeks ago and was shocked to not see you wearing a polo in this video.

I really appreciate how concise your videos are. Never a need to fast forward to find information.

I just started investing myself for the first time. I opened a ROTH IRA with TD Ameritrade. Dumped 4k into it and fund it monthly @$350. Im interested in investing in dividend stocks, just trying to educate myself a little bit before I do. Im learning a lot from you UTube guys. 😊

One thing I have learned is that the highest paying dividend stocks are undergoing some kind of distress. Their price per share drops, and the last declared dividend amount remains. This makes the dividend yield go up. However, we usually know that not everything is all right with the company, and in fact some of these very high dividend yield companies may eventually run into trouble before either recovering or something worse. The group you identified as the 2nd highest dividend yield companies tend to do a lot better. They keep a higher proportion as retained earnings which they can reinvest, and the remaining amount they pay out as dividends does put them in trouble. Within this group you can perform an additional two filters: The first filter separates companies that grow dividends over time. In other words, they not only pay dividends, but these dividends are increasing over time, and the second filter separates companies that have paid dividends consistently over some arbitrary period of time (e.g. 5-years). These filtered companies are known within the financial world as dividend growth or dividend appreciation companies, and they are part of specialized ETFs or mutual funds seeking out good dividend growth companies. As a group they are good in weathering out stock market downturns, and as you, also, pointed out they do well in terms of stock appreciation prices.

New investor here. I've probably gone through dozens of videos and forums at this point on the topic of dividend investing. This is the most impartial and concise explanation of dividend investing out there. Thank you so much!

The dividend amount is usually announced well enough in advance and people usually buy up the stock. Especially true with quarterly and annual stocks. So you'll see a $15 dollar stock jump up $3-7 for a $5 dollar dividend, up until ex-dividend date. The stock was never actually worth $18-22, you overpaid for it. Got a dividend, and watched it fall down back to $15. Making $5, losing $7. Had you owned the stock for some time, you would have paid $15, watched it rise artifically, got your dividend, and watched it return to around the same price you paid. If you buy right around the annoucement day, you can take advantage, but most likely face high taxes (because you're probably going to sell right after securing the dividend). If you buy days shy of, or the last day necessary, yeah, you're buying an illusion.

Thanks for the video. This topic reminded me of the different stages of maturity during the lifespan of a company. New companies have high growth and high return. When growth slows, the P/E falls back to earth. During the middle years for a company, it is growing at a slower rate, paying a dividend and it becomes a value stock. Then towards the end of the life of a company, earnings and price go down while dividend yield and payout ratio go up.

Great vid. I do love dividends, since it can make my portfolio generate cash by itself and smooth my share purchases by dollar-cost averaging. Also, I find them to be a bit less volatile in extreme market conditions. However, I think dividends should fit the environment of the company. So tech companies under current market conditions paying dividends are a harder sell than an energy company, a REIT or a utility company. The yields reflect this as well; the top tier is likely a 'dying' industry (e.g. cigarettes) or a company under distress. If you would trim off the outliers (>10% DY, or stocks with a >30% price drop prior to the rebalance date), would this make the top tier a bad performer as well?

Very reasonable, unbiased and logical explanation, much better job than Jeremy.

I’m always learning from your channel. Keep up the good work! Would you happen to know which is a good Vanguard dividend ETF?

I’m confused. A stock “price” is simply the last price paid to purchase/sell a stock. So how does the exchange modify this? It is 100% consumer driven... Edit: unless the stock dividend is sold to the DRIP at a discounted rate to current market.. it would make no sense.

Wow! I know alot of time and energy was spent on this. Thank you!

Just did this with VET but if you're holding long term it shouldn't matter too much

This channel is sooo goood. KZfaq recommended me a video yesterday and I've been watching ever since. This information is gold!

A lot of people also don't understand that the dividend you recieve is based on the number of shares you hold and not based on the amount you have invested. You could own 100 shares bought at $2 each where the divend is $2.80 giving you $280 per year. You can also own 5000 shares bought at $20 each where the dividend is $0.04 giving you just $200 per year

Hi I'm Doug Dividend. Owner of the Dimsdale Dividend!

Thank you for the video. Very enlightening. I was curious as to how the exdividebd date works

Thank you for sharing your hard work Jimmy! I'm loving your channel & hope KZfaq is paying out it's dividends! 😉

4:07 in texas we dont get taxed on dividends

Love your approaches and perspectives, combined with the concise practical research. Keep up the clever ideas. Its good you are doing it, but don't worry too much about surveys of your viewers. You are barking up the right trees on topics.

I'm just starting to learn about all of this, but I've not yet heard anyone say dividends are free money. From my perspective it seems like dividend investing is like buying a paycheck. It's expensive to present me, but will really be good for future me.

buy australian shares. they are good quality companies and typically pay the highest dividends of around 4% to 5%. on top of that they will normally have a capital growth of another 4 to 4.5% on average

Another great video! Somehow, I think there is a link between this and the Dog-of-the-Dow. Similarly as for the Dog-of-the-Dow (i.e. pink the 10 highest yield stock of the Dow 30 on January 1st), if we pick the top 1/3 highest yield stocks of the SP500, would we get better return on a long term basis?

First time here, great stuff👍🏽 can you please do a video about strategies to consider for those in/approaching retirement who have/will have pension and S/S (if there’s any left) and the hi tax burden- i.e. how to invest smartly when the tax man is stalking you, and you’re too far down the pipe to “change” to a sizable dividend strategy for your retirement. I hope this makes sense. Thanks

You should keept the time window width and then shift the start point into the past. It world be interesting to see If the results are the same.

1st time on ur site.. Worked on Wall street for 35 yes. You explained this Very Well..Simple and understandable.Good job, I will return here agin..

Jimmy! Great video, and thank you for doing that research so we don’t have to! I do have one question, though. How do we ensure our portfolios are heavily weighted with the second quartile of dividend stocks? How do we know if a stock falls within the second quartile?

Great video, you must have spent a lot of time researching all the information provided, very much appreciated. I'm an experienced dividend investor but I've learned so much from this video, many thanks.

HCC dividend is now 5 cents and the price is now under 15.00. @2:48 Yes there was a fairly large drop off.

Good video. But doesn’t the stock price usually rebound otherwise all dividend paying stocks will inevitably go to zero?

Great information. I am learning about Dividends and playing around with different strategies, This shows me where to focus my long term goals.

John Bogle's Return= Dividends+Earnings Growth+Delta P/E (R=D+Eg+∆P/E) investment return = Dividends + Earnings Growth (IR=D+Eg) Dividends paid lower to Cost Basis and increases the Earnings Growth

High yielding stock have issues, normally. Low yielding / no div stock have growth, growth is mostly higher valued, goes down harder in a bear market. So a mix of both is the best of two worlds.

Watching this video 3 years after it was posted and the information is still very relevant. Thanks from this dividend growth investor.

Great Video Jimmy! I like your analysis on Dividend Stocks. I wish you do more videos on Dividend Stocks per subscribers request as well as your recommendations. Would like know what you hold in your portfolio. Thanks Jimmy

So what if you have the buy order until dividend is out (and keep it) and open a sell order to rip the benefit of the drop-in price?

I went back and watch and didn’t hear if the dividends were reinvested. Does that make a difference if dividends are taken out for us that depend on dividends for income?

I just looked up and the total S&P only saw a gain of 111% during dec 1999 and may 2019, so how can any of those percent gains from 300%-600 be accurate at all?

A price drop equal in magnitude to the price of the dividend on the ex-dividend date is theoretical; it happens in a hypothetically 100% efficient market. It doesn't miraculously just happen

Not all investors love dividends. Some of us feel that dividend stocks are generally overpriced and growth stocks that don't offer a dividend are usually a better bargain. Why? Because dividend stocks are usually stocks of mature companies with predictable incomes in industries with fairly static markets. Their growth potential is usually quite limited, which is why management feels that they've nothing better to do with their earnings than return them to the shareholders as dividends. The companies are falsely perceived as unusually stable, when in fact they are easily disrupted by new technologies that may obsolete their entire operation. It's usually the newer growth stocks that generally don't pay a dividend that are innovative and bringing the disruptive technologies to market. If you don't need dividends for current income you should seriously consider not being a dividend investor. Invest for growth and innovation instead. Your gains will usually outpace those of dividend investors and once you've built a nest egg at record speed and you're ready to retire you can move into dividend stocks or other income-producing assets. If you are going to insist on being a dividend investor, don't be silly about it and look at how many decades or centuries the company has been around and paying a dividend. Instead, look at whether or not there is technology on the horizon that can obsolete the company's primary product. If it passes that test, compute the cagr for the last 5 years of dividend growth, and then use that cagr to compute the yield on cost of the dividends in 5 or 10 years or whatever your retirement time horizon is, assuming you buy the stock today and hold for that long without reinvesting dividends. If the dividends won't grow fast enough to retire on in your time horizon, then don't buy the stock... it's too expensive no matter what its P/E is.

dividend growth and consistency are more important

I’m all about the high yields. Learned my lesson on stupid high yield with ctl but 5to7 is great if safe big company like T or Bp. Will only get it above 3 is my bottom with exception of bank stocks being high 2s yield. Like 4 to 6% the most.

I'm a great fan of your videos. Thanks for sharing the work you do. My approach to dividends is a little different. I first group stocks based on their 5-yr average growth. For the 21 stocks in the 25-50% growth group, the average dividend payout is 2.0%. For the 23 stocks in the 50-100% growth group, the average dividend payout is 0.9%. And for the 11 stocks in the >100% growth group, the average dividend payout is 0.1%, and actually only 2 of those companies pay a dividend. This shows me the higher the dividend, the lower the growth, and the higher growth pays a lower dividend if at all. Respectfully, that's the opposite of what you just showed. Your comments would be greatly appreciated. Thanks, Dan

I'll be retiring shortly and have a fairly healthy retirement account. So, using good sound "stock picking" criteria, if I plan to use (let's say) 15 fairly high yielding dividend stocks to help pay my bills during retirement why would I care that the stock price is reduced by the dividend amount? In my case, the real reason for owning the stock is to use the dividend, not hope for large returns.

watched halfway to pause the video to like it first before resuming. many thanks jimmy

You did a 20 year, 10 year, and 5 year chart. Do a 30-year chart to see if the same pattern holds true for 30 years.

I avoid any stock that pays over 7%. I'm a buy & hold investor. I have quite a few of the 2nd tier dividend payers for a very good reason.....reliability.

Well this was so insightful on so many levels! My portfolio is heavy on dividend stocks but from the beginning I balanced it with ETFs geared towards long term growth and not dividends. I think your concept made sense and it was well thought out and explained. So for me… My take away is that I can continue to do it and invest but I should be wary of the limitations in growth. I think I will continue to do it and invest because the actual cash I can receive give me a short term alleviation from month-to-month expenses. I’ll definitely make sure to rebalance slowly in the favor of some non-dividend yielding ETF’s focused on return on investment.

so you should understand the x dividend date before buying a dividend stock. because if you dont you will pay 40$ they will pay a 5$ dividend and you will have just purchased a 35$ stock for 40$?

It's not so bad when a stock goes down because a dividend got paid out. Just buy more shares with the money you get from the dividends.

Reduction in stock price is usually very little as demand ultimately creates the price of stocks.

If what your saying about the drop off is true at 2:51 would you be able to buy (insert name here) at a discount?

I am not a fan of dividends and actively avoid stocks that pay them. Why be happy with 13% versus making 40% - 45% by buying good stocks?

Noticed GE on that list. Should remeber to caution people to do their research.

you should use Dividend Payout ratio not yield. Because bigger yield doesn't necessarily means the company gives larger portion of their income.

So what I am hearing is those 2nd best performing stocks can also be known as "growth stocks" due to some payout but money still going towards the businesses endeavors, ventures etc. I am curious what stocks belong in that top 25%, are they a bunch of reits, does in consist of yield traps, or is it companies like $KO that are old and just pay out more? All responses to my comment are welcome.

No matter HOW you look at it.....Receiving dividends is A LOT better than having to get up, get dressed, go to a job that you hate, clock in, obey the Task Master, clock out, deal with traffic, then repeat for the rest of your life.

if there is no difference between getting a dividend or selling the equivalent amount of stocks, why there is so much interest about that (you made at least a couple of dozen of videos on the topic)?

Hi, is there a quick way to judge whether a company debt is healthy (i.e. used to generate more growth) or a warning sign (i.e. fragile in face of a recession as in now)? would the net debt/capital, Net Debt to EBITDA, and positive cash flow in relation to the sector be helpful? for example companies like GPC, 3M, UPS, CVS, GD, BNS, MMP, PH, RY, and TD are large and mid-cap with high one/both ratio(s) but they were still able to maintain/increase their dividends even during recessions?

Thank you for this breakdown of dividend stocks. Very informative.

Good job

I've never noticed this little dip even though I hear about it so often. All of my dividend stocks are up 10 - 40%, some were up 40%+ but I sold them, and I've only been doing dividend investing for two years and didn't buy at the bottom of Dec 2018, so a temporary small dip doesn't matter to me.

Dividend is not a free lunch if you look especifically to the ex date, but is surely part of total return for any stock investiment (dividend + capital gain). So its obvious that a certain amount of "guaranteed" returns will result, on average and on the long run, in better performance over investments that rely only on market fluctuation.

Very well done. I like your rigor and I like your enthusiasm.

Do a breakdown on buying when the stock dips for one purpose dividends. I frequently on some stocks will buy when this dip occurs. In many cases these stocks almost always rebound and money can be made following this or you can just continue to hold and collect dividends. For me, in many decent companies this has become an income......

Thanks for a very intriguing discussion of dividends. What metric would reflect that "efficiency" of earnings or capital to return reflected in the 0%ers & the 2nd quartile group? And, how much variance in returns can be attributed to sector/industry effects?

I appreciate how you explained the way dividends work.

Hi Jimmy (or anyone that can help), I couldn't find any answer on one of the question pertaining to dividend: Does a stock price of a company correlate to its dividend yields during bear market ? Meaning, if a $100 stock pay an average $4 dividend (4%) drop to $80 during a bear market or recession, does the dividend of such company typically adjust to result in a 4% ($3.20) ? Thanks !!

Have you ever tested the right time to enter the dividend stocks, like waiting for a certain level dip rather than just buying at a random time? Or waiting for year end?

are the charts with the dividends going back into the stocks or just how much money you’d make total?

So ex dividend date is a good day to buy at a discount?

Enjoyed your video ,very informative ,just started building a portfolio and will be using this info to build a strategy for buying dividend yielding stocks especially after they paid out earnings . Also the info may be very profitable incorporating some option trading at the time too. Thx

I'm new into the stock market, the first stock you talked about it pays $4 per month?

Does the reduction of the Dividend on the stock price applicable to all stock exchanges all over the world?

Do ppl by puts just before dividend price adjustment comes and the reduction happen? Is right after dividend pay out the best time to buy shares cheaper? Sorry if dumb questions. I know nothing and am getting educated by you before I invest

Excellent analysis approach, thank you.

Would you say its better to buy stock on the xd date?

Hi Jimmy What constitutes a qualified dividend? Owning a dividend stock more than 60 days, not cashing a dividend stock? If dividends are distributed to my account can I DRIP them and still avoid paying taxes on them?

thanks u sharing. interesting findings

Who are the components for the dividend yield categories, though? For example, could it be that certain sectors pay certain yields but were also especially affected by non-dividend related macro factors that particularly hit those sectors hard (e.g. price of oil, inflation, regulatory changes)?

a video review of Lowes (LOW) would be nice. Can you do it, please?

Can you look into aristocrat stocks and would it be worth a long term investment?

Thanks for the video! I’ve been watching your Chanel starting with investing basics playlist :-) it’s really helpful! A few questions I have. Where do you go and mine the data on the dec 31 that you mentioned? Was the rebalancing done manually or was there an automated process you use? Also question about S&P500 ETF like VOO, is it diversified enough. I’ve been cruising on 401k for several years now and wonder if it’s good for long term retirement saving.

Is there a text version of your list at then end of this video?

Jimmy thanks for the Video. Every time I watch it I get something new out of the video. I have watched it four times. As an investor this is very informational. Thanks

If it is true that a stock’s price falls by the amount of the dividend when it is paid out, does that mean we can buy at that lower price immediately after that payout? Also does it mean that we would get a lower price if we sold immediately after the payout?

Great video! Thanks ! Any chance to get a link for the list of these dividend stocks ?

What if you use the dividends to buy more shares? Wouldn't it work kind of like compound interest that way but with shares, assuming the dividends were regular? More shares would mean more shares to pay out dividends in the future.

Great video for the layman. Thanks

can we get a copy of the second quartile list, It would nice to see who pays at least 2.3% (inflation). Interesting concept to shield against recessions. Did you account for dividend growth rate for each year?

I would have liked to see those stocks in the 2nd percentile, then see which are dividend kings, or stocks that have history of dividend increases.