Random thoughts about stocks, investing, business and philosophy in everyday life
Managements often mouth that paying a dividend is doing something for shareholders. It is precisely the opposite. Instead they are saying, “Sorry, we can’t do anything with it; see what you can do. Good luck!” –Briar Dividend investors often claim that a dividend rewards shareholders. It’s kind of of “money for nothing”. But most of these investors forget that a
Continue readingThis is a very short article based on two much longer articles: Don’t be fooled by your dividend bias – sell shares to create “income” Dividend investing: Don’t be fooled by your dividend bias – marginal rate of return/incremental return Don’t be fooled by your dividend bias: DRIP is inferior to internal compounding On the 30th of April 2020 Royal
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Introduction and summary: My idea with this article is to show that dividends are simply return of shareholders’ capital (a partial liquidation), exactly the same as selling the equivalent number of shares to create “income”. Admittedly, selling shares to support consumption feels a little like sawing off the branch I’m sitting on. Strangely enough, why doesn’t it feel the same about a
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