04-24-2015, 11:48 AM
(04-07-2015, 02:30 PM)Kerim Wrote: I would gladly abandon DGI in a heartbeat and take up a pure growth strategy if someone would just lend me their crystal ball for a couple of days. What I have argued, and still believe, is that DG is a far easier strategy, and far more forgiving, than trying to achieve the same results through a pure growth strategy.
Yes, 6 percent is 6 percent whether achieved through capital appreciation alone or some combination of capital appreciation and dividends. But I have far more comfort with my ability to identify companies that will perform well in the latter category. The capital appreciation portion of the return is far less predictable than the dividend portion. The stock price is at the mercy of not just the company specific variables, but the overall market and economy variables as well. The dividend is not.
This. Especially the underlined part.
Everyone who is "against dividends" is always saying that $1000 is $1000 whether it comes through dividends or capital gains. And they even say that it's better do have these "homemade dividends" because you choose when and how much you take by selling some stocks.
But when the ultimate point of the portfolio is to either provide financial indepence or an additional source of revenue, I think it's important to be able to more or less predict what is going to happen. Dividends, especially from bigger stable companies, are pretty much a sure bet. If they are yielding 3%, you know you will get that 3% (or more with most DGI companies) every year for the forseeable future. That is the level of certainty I want to have if my finances will one day depend partly on that income.
Also if I were to depend on selling shares for income, it's very likely that there will come a time when the market crashes and I will be forced to sell at the bottom to pay the bills. With dividends I can always just ride out the storm, no matter how low the market falls there will always be that cash falling into my pocket... month after month.