Link: https://www.etf.com/sections/index-investor-corner/swedroe-dividend-growth-demystified?nopaging=1
Swedroe says: "at least before frictions like trading costs and taxes, investors should be indifferent to $1 in the form of a dividend (causing the stock price to drop by $1) and $1 received by selling shares. This must be true, unless you believe that $1 isn’t worth $1. This theorem has not been challenged since."
I think not enough people realize this on this sub. He later adds: "The evidence is consistent with economic theory—there is nothing special about dividends, with the returns of dividend-paying stocks well explained by exposure to common factors. Dividends are neither positive nor negative, at least from a pretax perspective. For taxable investors, dividends have negative implications relative to share repurchases.
In addition, a focus on dividends reduces diversification because about 60% of U.S. stocks and about 40% of international stocks don’t pay dividends. Thus, any screen that includes dividends results in portfolios that are far less diversified than they could be if dividends were not included in the portfolio design."
I tend to agree with him, but since higher yield usually means lower share price, it is a sensible idea to own dividend stocks. However, I don't believe the expected return will be higher than value stocks not distributing dividends.
When it comes to dividend appreciation, is it possible that stocks with high FCF growth would have a similar return?
Submitted May 29, 2019 at 08:47AM by etienner http://bit.ly/2QxTIYa
