01-27-2014, 08:12 PM
I'm saying that it doesn't matter where the cash flow comes from. Whether it comes from selling appreciated shares or comes from dividends is irrelevant. But, as expressed earlier, dividends do IMO have an advantage in down markets. That key difference is why most of my holdings are in fact dividend stocks. However, IMO, the love of dividend stocks should not preclude someone from allocating some weighting to growth stocks which will likely perform better over the long haul.
A retired investor who has the right risk profile may very well be better off with a portfolio which has an emphasis on growth stocks, or at least one where dividend yield is only a minor consideration. One must keep in mind that the main reason that growth stocks pay far less in dividends is because reinvesting in the business is the smartest and best use for that cash. The biggest total return will always come from companies with the greatest sales and earnings growth. The paying of dividends takes away from that effort and therefore hurts overall performance, except in more mature companies which can't find a productive home for the cash.
A retired investor who has the right risk profile may very well be better off with a portfolio which has an emphasis on growth stocks, or at least one where dividend yield is only a minor consideration. One must keep in mind that the main reason that growth stocks pay far less in dividends is because reinvesting in the business is the smartest and best use for that cash. The biggest total return will always come from companies with the greatest sales and earnings growth. The paying of dividends takes away from that effort and therefore hurts overall performance, except in more mature companies which can't find a productive home for the cash.
Alex