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Heartland Advisors: Dividends: A Review of Historical Returns
#1
I apologize if this has already been posted.   Really good study(attached).

http://www.heartlandadvisors.com/Insight...al-Returns

Happy New Year everyone!

Cheers!


Attached Files
.pdf   Heartland Advisors : Value Investing Market Insight White Paper Dividends | Heartland Advisors.pdf (Size: 525.14 KB / Downloads: 5)
There are people who use up their entire lives making money so they can enjoy the lives they have entirely used up
Frederick Buechner
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#2
I'm not sure if we've discussed it before, but fine even if it is a re-post. Great reading. Thanks!
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#3
Interesting read but talks only generalities like: "Over the full period, all portfolios of dividend payers outperformed the portfolio of non-dividend payers. Other features are important to highlight. Generally, higher dividend-yielding quintiles outperformed lower-yielding quintiles".

Nothing wrong with that, but for those seeking to develop a portfolio of DG stocks it would not provide much guidance.
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#4
Kerim, if we didn't discuss this particular article, I'm pretty sure we discussed one of the others. I know Tweedy-Browne came to similar conclusions, Jeremy Siegel ("Stocks For The Long Run" author) had a paper about it and I'm pretty sure Fama & French had a study on it too. It looks like Heartland may have taken some, if not all, their data from French's data set too. I'm sure something similar is in the Investor Resources section but I'm too lazy to look for it right now.

Cannew, I'm not sure the article's intent was to offer guidance on portfolio building other than to point out the advantages of dividend-paying stocks in the portfolio. It may just be technical marketing material to support the products or portfolio pitches they're giving their current customers also. Regardless, in my opinion, the strategy is sound although I'm a bit biased.

A couple things stood out to me which, if there are any "newbies" reading this, doesn't hurt to reinforce:

Quote:"Research conducted by Wolfe Trahan Quantitative Research on the S&P 500 confirms that "the effect of dividends is most noticeable in flat or down markets, as they help to mitigate price losses and provide a safety cushion for portfolios."

That steady stream of income from reliable dividend payers adds to returns or subtracts from the losses, even if only on paper. That was evident as my dividend income went up around 14% in 2015 from both dividend increases and repositioning my portfolio a little despite 2015 being a "flat year" for valuations overall.

Quote:This idea can be extended to dollar-cost averaging, a classic value investing discipline that advocates investing a fixed dollar amount at regular intervals. If dividends are regularly reinvested, more shares can be purchased during down markets than during up markets, reducing the average cost basis of shares held over time.

To anyone reinvesting during and coming out of the Great Recession, this was quite evident. My share count (and income stream) increased at a much faster rate than of late. One reason I get more excited by a burp from Mr. Market like today than I do of the relentless march up in prices as we saw in 2013 & 2014.

I think one other thing pointed out by the article was the importance of not only diversifying by sectors and industries but also in yield. This implicitly also extends to payout ratios and P/E ratios.

Thanks for sharing that, Rob.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan


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