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Today, I’m going to channel my inner “RDQ” and raise some peoples ire:
About one month ago, there was a post about dividends. It contained quite a bit of what I will politely call, “magical thinking”. Despite my linking two excellent articles which debunk the dividend myth, clearly subsequent posters did not bother to read either of them and persisted in posting the dividend dogma that commonly persists. I even resorted to asking Jonathan to chime in (which he kindly did) as too many folks seemed to still not be “getting it”, to my dismay.
In an effort to never give up the good fight (LOL), a new post dropped this morning elsewhere, and I have attached the link above, in an effort once again at dispelling the false ideas people have about dividends.
Please feel free to use your down arrow votes aggressively and make my day !
I’m not sure that my comments even apply to the article but I’ll comment anyways.
Since getting closer to retirement the thought of dividend investing or growth investing articles did exactly what I read HD for.
It challenged my thoughts that I’ve always had to invest for growth and sell a regular dollar amount to meet our needs.
Now retired I’m still not convinced for the need of dividend investing so I continue to invest in two broad market and one growth etf.
The preference I do have is for each of us not to get snippy with each other but to see value in our differences of opinion
The bulk of my portfolio is invested in index ETFs, but I did invest some cash in Div King/Aristocrat dividend stocks back in March, 2020. I like the convenience of not having to decide what stock to sell, especially during a down market, to pay for a home project or trip. And we did invest some of the dividends in two ETFs during the dip earlier this year.
For index investors like myself, this theory is irrelevant. If you happen to have $1M of VTI in your taxable portfolio, you will receive $10,900 in dividends this year. You didn’t buy VTI to get these dividends. You bought it as a part of your asset allocation scheme. Likewise all the other index equity ETFs pay some amount of dividends. Unless you buy an ETF that has the purpose of maximizing dividends, the dividends that these equity ETFs pay is incidental to your ownership.
However, to you, these dividends from your taxable account represent incoming cash flow. This cash flow is just as valid as $$ from a pension, SS, earned income, or a gift from someone. Cash is cash. You can spend it, reinvest it, or save it.
There is no reason to denigrate dividends that originate from within equity index funds. In retirement, they are just another cash flow source.
Here’s a take on the dividend irrelevance theory: https://www.whitecoatinvestor.com/dividend-irrelevancy-theory/