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My Cereal box read Today - made me chuckle
#1
I happened to stumble upon this blurb from a white paper (circ 2015) This AM
As an increasing number of baby boomers are entering their retirement years, the demand for income-yielding investments will only continue to grow. By 2020, a projected 70% of all investment assets will be held by those in or approaching retirement. In an interest rate environment where nominal bond yields have fallen to their lowest levels in 50 years, investors seeking alternatives to bond income have increasingly been drawn to dividend-paying stocks, with nearly half of dividend income being paid to those 65 and older.

Juxtaposed to WisdomTree Research recently published white paper. (circ 2020)

In our opinion, the evidence in favor of weighting by a fundamental, other than market price, is overwhelming. But we do believe that passive strategies have historically delivered good results. We developed our equity Indexes with the objective of improving the passive approach, by anchoring companies to a less volatile measure than market price, such as a company fundamental. The fundamental we believe to be the strongest indicator of underlying value is the dividend .
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Recently, I posted a comment regarding Geraldine Weiss (Grande Dame of Dividends) who stated the exact same thing back in 1960's and went on for well over 36 years centering her whole investment Philosophy around the dividend fundamental and delivering an average yearly return of over 11% to her newsletter subscribers. Her Investment Philosophy was the belief investors should focus on dividends, rather than earnings because it’s too easy to manipulate earnings figures in financial statements. She felt dividends are “real money” and a hallmark of a blue-chip stock. Her underlying approach was to focus on dividend yield, which is the annual dividend per share divided by the share price. “Folks who ignore the importance of dividends in making stock market selections are not investors. They are speculators.” - Geraldine Weiss

Glad to see the folks at Wisdom Tree Research finally caught up!!! Just goes to show  - if you grab another bag of popcorn, and stay in your seat long enough,  The show does indeed play again. Smile

- Scoot

"There seems to be some perverse human characteristic that likes to make easy things difficult." -- Warren Buffett
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#2
Interesting piece. If I read between the lines a bit she seems to be stating dividend stocks are superior to growth stocks, and passive investing in indexes underperforms a high dividend yield. 2015 wasn't a great time to make those statements and it turned out to be a recipe to grossly underperform. However this is a long game so we'll see. I'd like to believe we will be vindicated.
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#3
"Her Investment Philosophy was the belief investors should focus on dividends, rather than earnings because it’s too easy to manipulate earnings figures in financial statements."

I consider what she said overall re dividend-payers vs growth largely true though it always comes down to what you pick. A good growth stock picker will blow away a bad dividend stock picker.

Focusing on the quoted comment, this much is true but IMO if you dig down into ERs for revenues and cash flows you can get much closer to "financial truth" with a company. I use earnings in my initial screen because this is what I can get. But when it comes time to make an actual first buy I dig into the ARs for the previous five years and look for revenues and cash flows. Lot of companies with good earnings growth fueled by buybacks. I want growing companies and don't consider a company with 10% eps growth and 10% fewer shares to be growing.
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#4
(12-10-2021, 08:39 PM)Scooterd Wrote:  The fundamental we believe to be the strongest indicator of underlying value is the dividend .

Doesn't this lead to buying value traps like IBM and AT&T?

Or heck, ORC?  

ORC is my favorite value trap.  Current yield sits at 17.07%, but -56.35% growth in the past 5 years.
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#5
(12-11-2021, 09:13 AM)ken-do-nim Wrote:
(12-10-2021, 08:39 PM)Scooterd Wrote:  The fundamental we believe to be the strongest indicator of underlying value is the dividend .

Doesn't this lead to buying value traps like IBM and AT&T?

Or heck, ORC?  

ORC is my favorite value trap.  Current yield sits at 17.07%, but -56.35% growth in the past 5 years.
This is just a snippet from an article and her comments may be out of context, but yes.  The underlying dividend fundamentals are what matter, and that has to start with at least a modest amount of future revenue and earnings growth.  If growth is zero for years, your DGI stock will eventually lose it's dividend growth, or you will surrender the dividend in loss of capital.  Most likely both.
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#6
I think you may be calling some things value traps when the verdict is not yet in.

I do not own any of them, but, patience.
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#7
(12-11-2021, 09:44 AM)rnsmth Wrote: I think you may be calling some things value traps when the verdict is not yet in.

I do not own any of them, but, patience.
After 5-10 years patience becomes denial.  We all have to decide for ourselves where that line is drawn.  When the market doubles and your stock has a near zero return, that's my clue I may be in denial.  I've done it a time or two.
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