Why Dividend Growth Investing Pays BIG!
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- เผยแพร่เมื่อ 23 มิ.ย. 2024
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In this video, we discuss why dividend growth investing can pay big, and also addressing some commonly asked questions that I get about dividend growth investing. Let me know your thoughts in the comments below!
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I am not a Financial advisor or licensed professional. Nothing I say or produce on TH-cam, or anywhere else, should be considered as advice. All content is for educational purposes only. I am not responsible for any financial losses or gains. Invest and trade at your own risk. Some of the links in the description may be affiliate links.
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You can't downplay the value and power of the dividend snowball, using those dividends to increase you income year over year, it's mind blowing if you look at things even 5 years out, do the math, the facts are facts! Awesome stuff man
This is something I'm super into! Cause I legit see the long term potential!!! Only issue is that I need to be patience but I know the long term will pay off. About this week I just earn my first ever Dividends! And turns out this company pay out Dividends monthly so I do want to start investing 💰
this seems foolish to me. You know what else compounds? company growth. Would you rather a stock that appreciates 5% a year with a 3% dividend or a true growth company that appreciates 10-15% a year? Plus you can always sell stock to live off of, and since dividends are taxed when theyre paid even assuming equal growth of your investment, since unrealized gains arent taxed your snowball will be faster without dividends.
@glupshitto5019 I think most dividend investors don't want to sell shares to produce income. A reliable dividend paying company will likely continue paying dividends even during bad times. So you will continue to receive that even if the share price drops. If you invest in growth companies that don't pay dividends, you may need to sell shares for income when the share price is down in a down market.
@@bryanmclaughlin1048 yes perhaps but if you look at the long term which most people are say about 20 yrs the amount that you out perform is substantial. You could have a $1M from a dividend portfolio or a $3M growth portfolio that you can either pull money from or put into high yielding stocks.
*Exlain to me one thing please. You bet on picking dividend stocks that aggressively grow dividends by, say, 10 percent per year (CAGR). But when I looked through your entire portfolio, there aren't many stocks like that. What am I missing? Thanks*
)))
Good question
A high yield account that gives 5%, if you reinvest it in the same account that gives 5% it grows exponentially too. Your dividend growing stocks must grow more than 5% between value growth and dividend to compensate. 5% is near the global growth rate historically, do not reject a bank account giving 5% so easily
Most stocks grow at 7 - 8 % in the US. There are two main problems with the 5 % account. The first one is that assuming a long term inflation rate of 2 %. Maybe this debt snowball of 34 trillion US will all just work itself out somehow so we never need to actually repay it, but that is a bit of a fairly tale. A much more unpleasant reality is that inflation must be 3 % + for a LONG time to delete that debt, and it will be deleted from your return over time. The other problem is that 5 % is at the whim of central bankers. So the second problem is, when do I jump ship out of the 5 % account. Is it 4.5 % ? 4 % ? High yield includes the implicit need to decide when to bail, which hopefully won't be needed with high dividend growth stocks, that hopefully you can hold forever, and never pay the capital gains taxes on, while you will be losing 1 % in taxes on your 5 % account every year, bringing the real return quite close to the current 3.5 % inflation rate. If you are earning a real 0.5 % after taxes, that will take a LONG time to grow your portfolio over inflation, and the inflation dragon is FAR from tamed, as of now.
@@sprinkle61 we can have different opinions on this, but I think we agree on the essential: the 5% yielding account is not so bad and should not be set aside too fast
Is there any statistic how long on average high growth (10+%) dividend companies hold up the high growth before it becomes mediocre(~3-5%)?
Great video, very thorough explanation on why dividend growth is a great way to invest! Congrats on 100k subs
Appreciate it!
I feel like assuming 2% inflation is too optimistic. So is assuming a 3.5% current dividend with 8% price growth and 9% dividend growtth. Most of the stocks with fast growing dividends have current dividends of less than 1%
2 % inflation is definitely the fantasy outcome, but what is the alternative ? At double that rate, high yield accounts can't beat inflation after taxes, and dividend growth stocks are not so hot either. It would mean some kind of exotic inflation hedge like crypto, and that wouldn't fit in this channel, which does not take a Doomer attitude on the world.
😮❤️😳😀. Thanks. We need to hear this so we don’t get caught up in the higher yield risky crap. My option is if you have enough time before retirement or you are young, good stock with huge dividend growth is much better than higher dividend stock. 😊
nice thoughts!!
It would be much better if you compared high yielding stocks like Altria and enbridge that’s has a track record of increasing there dividends for many years at above normal inflation levels. I feel like your assumptions is to the extreme both ways when you compare high yielding stocks and dividend growth stocks.
Thank you for the explanation. I've been investing in ETFs for a while now but I am looking to start getting into dividend investing and this helped understand what to look at
Hi, I've watched a lot of your videos! I was wondering whether you take dividend tax into account. I think it is 30% in the US and in the Netherlands (where I come from), for example, it is 15%. How do you deal with that?
En dan nog een paar procent naar de broker ;)
Just use tax advantaged accounts (roth and 401k). Roth max is $7k / yr and 401k is $23k. Most people will not be able to put $30k / yr into the market.
There are ordinary and qualified dividends. It just depends on how long you hold them. Ordinary dividends are counted as regular income and taxed as regular income. Qualified dividends are taxed as such (assuming single): 0% for the first ~$47k, then 15% for ~$47k to ~$500k, then 20% for earnings over $500k.
This is why u can do this strategy in a ROTH IRA (USA) or TFSA (Canada) ...these are 2 examples of investment accounts that are tax free
Its about 37% tax for stock profits in Norway 😢
What are the best dividend growth index funds that you would recommend?
SCHD and VIG
Do the formulas in your spreadsheets need to be updated frequently?
Great video on why dividend growth investing is the best! Well explained dividendology!
Appreciate it!
its not
In Germany, one pays 30% taxes on each dividend income. Meaning you need to Invest at least 500000 in dividend Stocks to be able to grow the value of the portfolio within your lifetime to a reasonable amount.
Each state is its own separate beast. I hear that if you hold longer than a year, crypto has a very low tax rate in Germany. Now I don't believe crypto will have good returns over 50 years, but the 10 year return could be excellent, and that tax arbitrage may make it worth it to gamble on crypto gains, and then go back to dividends, when the pile is large enough that the payout is still decent after the 30 % haircut.
In France it’s pretty much the same rate. However you can pay almost half of these taxes if you invest within some kind of accounts.
@@levelup2252 which kind of account, In Croatia its also 30% and it kills the mood of investing in div. stoc.
How can it be reduced ?
In New Zealand it can be 33% on each dividend payout. However, if the dividend portfolio is a buy-and-hold portfolio containing only stocks and funds listed on the ASX and NZX, and you re-invest the dividends, then that is the end of your tax liability (no capital gains tax, in that situation) and you can do what you like with the resulting pot once you reach retirement age (currently 65). Because of this a lot of well-established Australian and NZ companies pay decent (5%+) dividend yields, so dividend investing can be a viable retirement savings strategy. This is peculiar to NZ though with no CGT and a special tax treaty with Australia - it does not apply to Asian/European/American stocks that have different tax rules
It's 26.25% for dividend income, or 18,75% when it's from a dividend ETF
Great video.. As always, an excellent presentation and lesson. Thanks so much for all of your hard work. Appreciate your hard work and efforts...
Glad you enjoyed it!
on the subject to AT&T (ticker T) so many people look at the charts and do not understand that they spun off Warner Brothers to make Warner Brothers Discovery (ticker WBD) with first trading day April 11, 2022. It was with that spin off that they cut the dividends. For every share of T that was owned you received 0.24 of WBD. In essence they are saying that 24% of the company value was shifted to the new stock. With that said, T went from $0.52 to $0.2775 quarterly dividend. Clearly more then a 24% reduction. Given WBD performance sing then, I agree it was a total looser overall as the value of WBD has not done well at all. Basically when we see a drop in dividend, we really should look at why, it is not always based on the company not able to afford it.
T was also drowning in debt and not growing FCF
Feel free to add back in the dividend of WBD to get a more accurate dividend picture of the combined entity... Oh, wait, there IS no dividend from WBD, and there never was, and probably never will be, and WBD was a loser stock as well. Yes, the combined entity looks better from a stock value perspective, but even the unit could not sustain the dividend payout, and the results are still a downer.
Hey, I hope you've had a great day! Just quick question, I saw you added European stock LVHM into your portfolio. Do you plan to add or review another good European stocks like ASML or Deutsche Post? Thanks🤝
I'll do more reviews on international stocks in the near future.
@@Dividendology Great, thank you!
What about ETFs? Do u include them in your portfolio?
Those are included
He has SCHD, not sure what else
dividend growth is a false equalency. if a stock paid 30 cents and then jumped to 90 cents, it would be a huge growth, but this isn't going to continue past 6% for most stocks. Free cash flow is more of an indicator of a company's health more than a guarantee of return.
Thank you for giving us the potential to change our lives. Recently subscribed to your patreon & copied over your spreadsheets to be customized for myself over in Australia. Planning on sticking to the ASX for now for tax simplicity.
Don't suppose you have any recommendations?
That’s awesome! And I actually plan on covering more international stocks in the future!
Thank you for sharing your knowledge. This channel has been highly educational.
Thank you!!
What's your opinion on roth ira and 401k. Also, I am not seeking financial advice, but what what allocation of your cash you contribute to those if you do use them?
Those accounts don't make sense for dividends, 100 % growth all the way, because of the tax treatment, since you can't take dividends out, and there is basically no cost to sell, you might as well go full growth, and only diversify when you are actually drawing the account down decades into the future.
19 here, been watching alot of your videos, spent alot of time learning about stocks and ive finally taken the dividend portfolio route thanks to you. Time to start making a snowball🔥
That’s awesome! Best of luck!
That's all well and good but there is no guarantee that a dividend growth stock will continue to grow for 25 years to get above your expenses line
Look at Walgreens (WBA), was considered a "dividend aristocrat" with decades of dividend growth. Now they massively slashed their dividends and their stock price is down, a lose-lose situation.
Can we just copy your portfolio? Is there s list somewhere?
That's not a good idea you should do the research yourself and make sure you understand what you are buying and why.
Just buy a dividend growth etf and cut the lights out and go to sleep
Congrats on seeking alpha post. Im long vici
Thanks!!
Thanx. One of your best video.👏
thank you!!
It always depends on the company I’d say 🤔 not every „high“ dividend stock is bad. My MAIN Street Capital stocks got me through some tough times and the dividend growth was above inflation. I agree that Hersheys and CCEP were a lot faster in their dividend growth rate, but those dividends wouldn’t have been able to sustain me during the lockdowns for example. They will be insane in 20-30 years though. But that’s far in the future when I’m old and grey…and if the company is still around then 😂
TL/DR I guess it highly depends on the current situation and aims of the investor ☺️
Everything always depends on the individual investor!
I can only pray MAIN goes on forever
@@FrappuccinoDrinks so far I haven’t seen any alarming signals :) they are doing a really good job investing your money for you! If inflation is up then they also get paid back more…and they invested into bonds not too long ago, too.
And during the last recession 2008/2009 and during the lockdowns they paid out their usual dividend without any decreases, too. They have a very conservative, defensive portfolio.
I don’t think you can go „wrong“ with MAIN in the short term. Long term goals might look different, but for me personally this additional layer of safety through my dividends give me a lot of confidence.
Edit: It just feels nice to be able to pay all your groceries per month with your dividends.
seeing a lot of people in the comments where this info is in one ear and out the other...good luck in 25 years my guys...cant help everyone I guess
What a website do you use for analysis?
Seeking alpha! Link in description!
Cool. I invest in crypto memes. Before the crypto bull run. This is a good long term strategy though.
My opinion on crypto is that it eventually is adopted, which will cause its long term returns to be similar to inflation, basically like a high yield savings account, but without any payouts. But for now, it should beat this idea for at least 10 years, or so, but nothing grows to the sky, especially if it has no earnings or dividends.
Meta dividend is not for normal people. It's actually for mark zuckerberg to cash out tax efficiently.😅
That goes for every stock though. You think apples dividend is for the average person and not the CEO and main share holders? How about Microsoft, or Pepsi, or coke, or Walmart, or Starbucks? That's why we invest, to get a piece of the pie that the owners are taking. Sure, it's just crumbs, but it's better than nothing.
I mean I owned it before he declared a dividend. For at least 3 years. I agree with you but it is also for everyone else.
Why is a dividend more tax efficient?
If he holds his shares without selling he pays zero tax because he can borrow against his shares, effectively without ever paying back the loan.
It doesn't really matter who the dividend is for, as long as we get it as well...
@@TBasianeyeswithout ever paying back the loan? So it just goes away when he dies?
Right now i have a dividend portfolio. The hardest part right now is seeing my portfolio grow little by little when it comes to price appreciation. When the stocks that are in the news like nvda,amd, other tech companies blast off to the moon and the sector of growth stock are getting pumped. Its hard to stay the course on my portfolio. Anyone have that feeling.
Not yet
This will be a great evergreen video.. I've watched many, hardly anyone is able to explain why dividend growth is so important and why you should watch out for AT&T and Verizon kinda stocks.
Webull don’t give you dividends what financial website or apps should I use
Webull does. It's the brokerage I use. Once you buy the dividend stock, the dividends are given to you under cash balance, buying power, and settled cash.
I am super curious about bequeathing a divvy portfolio to someone else, starting that generational wealth game.
It seems that, within two generations, someone could be set for life with a simple inheritance
@Xairos84 I was wondering the same thing. Unfortunately from what studies have been conducted it’s seems rather unlikely as statistically “an estimated 70% of generational wealth doesn't make it past the second generation, and 90% disappears by the third.”
It seems most of the next generation has the idea to take the cash and buy a huge truck and boat, and then be broke again in 2 years, see every lottery winner, and most sports stars.
The biggest risk of all is to take none. (M. Hobson)
very true!
Prize growth of 8'5% and dividends growing even faster. Yeah, like a dream
Bro please make a video were you calculate Berkshire Hathaway intrinsic value using Dcf❤🎉.
greatly explained
Thanks!
If the company can reinvest the FCF back in their business and get me a higher rate of return, I would prefer that they do just that. That's why I love BRK.
If you put that 158k into a 5.1 apy account, wouldn't you get almost double? Seems like your money isn't working for you. I made 5300 ytd with 35k?
AT&T um...aren't you ignoring the spin-off which is part of the price dropping since 2015 as well as the dividend cut.
Great information again thank you from europe
Thanks for watching!
🌈🌈🌈I just bought Realty Income stock today.
Another reason why I am currently focusing on monthly dividend stocks is because every bill we get with our expenses is due monthly.🌈🌈🌈
The banks can totally cut those interest payments! Savings are about 5% for thebpast few years but maybe 4 years ago they were about 1-2% at most.
The difference is savings accounts don't offer a piece of ownership in a company. Savings are like bonds in that you're going to get interest payments but if the company appreciates by let's say 10% over the year you're not entitled to that 10% just whatever is that interest rate in that account/bond.
I was wanting to build myself a strong dividend portfolio, but in my current situation I’m wanting money sooner rather than later to buy a house. So I’m going all in on growth stocks and ETFs
Best Video!!
Glad you think so!
Why are you reuploading videos?
Not sure what you’re talking about?
My strategy is to buy crypto memes and sell after 10X.
The meme's are like penny stocks, the trick is to get enough of those 10x to pay off all the go strait to 0 memes.
You are the best!! Sou um seguidor teu de Portugal ✌️
thanks so much!
Second
what is the company decides to stop paying dividends, thats why S&P 500 is always better than your 3% dividends.
First
🎉👑
you invested 150 000 to get only 420 per month? do you really think that is okay? you could have bought so many things with those money. you could have invested in S&P500 and now you could have had over 250k lol. now you just make the minimal salary per month for Easters Europe :D this really sounds like a joke
the way he do it, i guess he will need 15mil to be able to retired instead of 1.5mil or less lol
With dividend growth you also get capital appreciation. So yes over time his portfolio will go up into the millions and he'll generate that $6k per month if he gave it enough time. It's exponential growth, not linear. Will he have to invest millions to get to his goal? No, not at all. The power of compounding will eventually do most of the work for him while he contributes over the years. Einstein said compound interest was the 8th wonder of the world. Buffet said those that understand it earn it, those that don't pay it. ✌️
I can't bring myself to invest in single stocks. Just sticking with the well known dividend growth ETFs...
Don’t be me man lol. I was the same. Had $25K of AMD back when it was below $9. Had 2800 shares 😂 if I had just left it alone, would be up almost half a million just on that one stock. Had 500 aapl too. Wouldn’t even be working if I just bought NFLX instead of having the dvd subscription back in college. Hindsight is a B 😂
Dividend investing is pointless.
Could you please share your experience? Why it's pointless?
He just mad he didn't invest sooner
420 a month bro….just get a better job