Amount capital dividend liquidating share
That is real money leaving the company and that lost value is precisely the same as the dividend itself.
However, just like the gravity of an apple is hard to perceive in the shadow of the earth, so too it can be easy to miss the lost value to KO of the paid dividend against the scale of the company itself. This is why traders pay close attention to the ex-dividend date (this is the date that determines who gets the dividend if the stock is being sold. So, what about Dividend Mantra’s Dividend Growth Investing approach?
When KO pays out that billion dollars in dividends, that is a billion dollars that is gone forever. Or they might have deployed it to great advantage creating more value per share than the .47 they paid out. If you’ve read this far you know I think there are better choices.
It is a billion dollars they could have used otherwise. Basically there are four things (at least that I can think of off the top of my head) that companies can do with their profits. But if the dividend approach is comfortable for you and you go in with your eyes open and willing to accept the downsides, it can get you where you want to be. Track and measure your performance against an index fund like VTSAX.
For the same reason two apples on a table aren’t drawn together. Although, make no mistake, this can and does happen and the crash of 2008 was filled with companies forced to cut or eliminate their dividends. Some observations: As I mentioned elsewhere in this blog, while I am a firm believer in indexing I haven’t entirely given up on trying to outperform with a few individual stocks. Actually, this year my efforts have done pretty well.
It’s not that Newton was wrong, it is that other, stronger forces are at work. You might be interested to know that this was due to a focus on high-dividend stocks.
One of the new blogs I’ve been enjoying of late has been the site of a lively debate on investing for dividends. However, for those who are new to this whole investing thing, they are likely more confused than ever with the conflicting claims. Warren Buffet has, but suggesting that his act is easy or even possible to follow is simply wrong and dangerous.
An intelligent dividend payout policy depends upon several factors, including opportunities for profitable growth, current tax laws, and a host of other considerations.
You will shortly receive a private invitation from the IRS to explain your error in detail.
The good news is, for those in the 15% or lower tax brackets, qualified dividends are taxed at 0%.
But for those in the 25% and higher brackets, money will be owed.
You may not share Dan’s concern with paying these taxes or be interested in the ideas he offers to gain more control over how and when you pay taxes on your investment gains.