tag:blogger.com,1999:blog-5465015914589377788.post4427301307189867694..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Are Dividends Worth More than Capital Gains?Michael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-5465015914589377788.post-28325400696863637712020-11-03T08:35:07.101-05:002020-11-03T08:35:07.101-05:00The comment above is a reply to Canadian Capitalis...The comment above is a reply to Canadian Capitalist's comment:<br /><br />One hears the dividends-have-supplied-80-percent-of-returns nonsense from experts all the time too. Since, when is 8 > 5 a big surprise?Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-89799423939152005202012-11-22T12:51:13.365-05:002012-11-22T12:51:13.365-05:00@Canadian Capitalist: Debunking this sort of nons...@Canadian Capitalist: Debunking this sort of nonsense can get frustrating. I remember dealing with an insurance salesman who was quite challenged at determining which of two numbers is greater. I had a term life insurance policy that cost me something like $40/month. I told the salesman I'd talk to him if he could find a way to lower it for the same coverage. He then started showing me various mixes of term and permanent insurance, but they were all more expensive. But he didn't seem to want to admit it. I would say, "you know, I'm pretty sure that $75 is more than $40." Then he'd launch into another pitch that ended with a number bigger than $40.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-74452194044437043172012-11-19T13:28:18.669-05:002012-11-19T13:28:18.669-05:00@Patrick: I like it even better after Dan's t...@Patrick: I like it even better after Dan's take. He's a funny guy.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-15163804634080900222012-11-19T12:47:45.635-05:002012-11-19T12:47:45.635-05:00I loved that length/width analogy until Dan came a...I loved that length/width analogy until Dan came along and sullied it.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-23410803235058307612012-11-15T11:02:07.881-05:002012-11-15T11:02:07.881-05:00@Mike: I find it interesting that I sometimes fin...@Mike: I find it interesting that I sometimes find myself in the role of arguing that dividends aren't magical. Readers could be forgiven for thinking that I'm against dividends. In fact, I'm quite happy to see dividend cash dumped into all my trading accounts each quarter. But, I know that each dollar of capital gains is worth just as much as a dividend dollar. But, none of these arguments mean much in the face of someone who has adopted dividends as a religion.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-91650077796888208112012-11-15T09:28:33.390-05:002012-11-15T09:28:33.390-05:00Love the comments.
Of course dividends are worth ...Love the comments.<br /><br />Of course dividends are worth infinitely more than capital gains or any other kind of income. Why? Because they are. It's not for mortals like us to question things like that. ;)Mike Holmanhttp://www.moneysmartsblog.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-72137776662305936382012-11-15T07:48:34.946-05:002012-11-15T07:48:34.946-05:00@Al Cesar: Keep in mind that the $131,469 figure ...@Al Cesar: Keep in mind that the $131,469 figure comes from reinvesting dividends. So, the investor who has this much stock has $0.00 cash in his pocket. If he had kept all the dividends as cash, he have stock valued at $7401 plus cash in his pocket of less than $10,000. So, if you've got stocks lying around with market value of $131,469, I'd be happy to take them off your hands and give you the much more valuable "real money" of $10,000.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-13285318648746801712012-11-14T23:00:55.685-05:002012-11-14T23:00:55.685-05:00"you would have $131,469 by now"
Actual..."you would have $131,469 by now"<br /><br />Actually, you wouldn't. You'd have an asset worth that much based on market value. You'd only have that in your pocket if you sold the asset. During that same period used in the example, the dividends received would be real money received. You would have received $0.00 in capital gains during the same time if the asset was still held. How can they be worth the same?<br />You can only hope that it would be worth that much when ready to sell, and not during another year like 2008.Al Cesarnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-9001979557813203132012-11-14T22:57:56.753-05:002012-11-14T22:57:56.753-05:00@Mark: Rob said enough to make his meaning quite ...@Mark: Rob said enough to make his meaning quite clear as you'll find out.<br /><br />When the time comes, I'll be happy to generate part of my retirement income from selling shares rather than seeking high-dividend stocks.<br /><br />I'm not sure if your use of "risk premium" is just a slip, but I'll launch into an explanation anyway. When a portfolio is insufficiently diversified, it suffers volatility losses. "Risk premium" is the higher expected return of a risky investment compared the the return on a safe investment. So, risky assets enjoy a risk premium, but compounding effects over time produce volatility losses if a risky portfolio is insufficiently diversified.<br /><br />Maybe I'll start a second blog devoted to golf metaphors!Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-47764857854779655782012-11-14T20:04:52.407-05:002012-11-14T20:04:52.407-05:00Compounding is very powerful, maybe that was the a...Compounding is very powerful, maybe that was the argument "Rob" was trying to make? Who knows I guess...<br /><br />Either investors want capital appreciation and some yield (indexing) or they are taking more yield with some capital appreciation (dividends), all things being equal. Of course, to do the latter with dividends, you need to own all those stocks individually, so there will always be a risk premium but that drops off with the more stocks you own.<br /><br />I'm going to read Rob's comments on CCP now.<br /><br />I won't start with all the golf metaphors...that could be an entire blog unto itself :)<br />My Own Advisorhttp://www.myownadvisor.canoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-60297894794254445652012-11-14T19:11:27.032-05:002012-11-14T19:11:27.032-05:00@Canadian Couch Potato: That's hilarious. I ...@Canadian Couch Potato: That's hilarious. I didn't even see the width/length joke when I wrote the post. This reminds me of kidding a friend who uses golf balls marked "long and soft". He says "at least it's long."Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-53373327397536100492012-11-14T18:42:36.573-05:002012-11-14T18:42:36.573-05:00@Mike: Thanks for the link, and for explaining the...@Mike: Thanks for the link, and for explaining the math more clearly than I could. Really, the takeaway message from the data is simply that compounding is powerful, so it's better to reinvest your dividends rather than spend them.<br /><br />By the way, I think the consensus is that width is indeed better than length. Canadian Couch Potatohttps://www.blogger.com/profile/07769920669423671471noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-25167902972531532582012-11-14T16:30:15.807-05:002012-11-14T16:30:15.807-05:00@Big Cajun Man: It definitely takes some dancing ...@Big Cajun Man: It definitely takes some dancing monkeys to make it seem like some dollars are worth more than others.<br /><br />@Potato: Glad you liked that one. Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-43086023621904875352012-11-14T07:11:13.333-05:002012-11-14T07:11:13.333-05:00"don’t let people with bad math confuse you a..."don’t let people with bad math confuse you about investing."<br /><br />I think I'll get some T-shirts made up with that slogan...Potatohttp://www.holypotato.netnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-1270164639389530282012-11-14T06:46:47.890-05:002012-11-14T06:46:47.890-05:00Well put, dividends are very nice, especially the ...Well put, dividends are very nice, especially the ease of reinvesting them, however, as your explanation says, you are adding to the principle, there is no Magic Dancing Monkeys here.Big Cajun Manhttp://canajunfinances.comnoreply@blogger.com