Thanks for watching everyone! If you found this video helpful, then support my channel by giving this video a LIKE and checking out my entire playlist of videos on investing with Fidelity! th-cam.com/play/PLscTZuOqKWIxSG8kRA7uxvJZQkz0q9Hko.html
@@mike-uw6wt I think his point is when you sell those shares you never get them back, so to make up for that you pray the share price goes up enough for it to at least equal the amount sold. Nobody know if the shares will keep going up and if they don't and you keep selling shares you will have a quickly disappearing asset
Unless I'm of age and want the income (and tax burden), I'm likely going to just reinvest it. Besides, selling nondividend stocks are pretty easy these days.
Well said man. Me personally, dividends are a bonus. Most of my investments are targeted more for capital gains. For those who heavily rely on dividends and ignore capital gains, might be in a world hurt. Great vid man!
They aren't losing money per say... I keep getting comments that older people like dividend stocks and they live off the income. It's just a different kind of investment strategy. But it still doesn't out perform a low cost index fund.
Jake I can always count on you to give unbiased investment advice. You’re extremely educated and I appreciate how you always include opportunity cost to provide an in-depth comparison. It has really helped me make the best financial decisions thus far. Keep up the good work, you deserve a larger audience!
Thanks for the high praise Nathan! This is just a part time hobby and I have yet to take the time to increase my production value. I'm humbled by the audience I already have, but I definitely would not turn down more views!
Thanks for calling this out Jake. This is the major flaw in the complete dividend investors' argument. Ok, great, you're getting dividends but are you showing growth? Even worse, are you are losing value? Maybe. Maybe not. But no investing strategy is perfect and that's why I diversify as much as I can. I have growth stocks, dividend stocks, bonds, cash, etc (getting back into real estate when this nonsense is all over). Bottom line is, there's no perfect strategy and if there were this whole system wouldn't work... at all. There are always winners and losers. We all just hope to win more than we lose.
How about this comment? You were born for teaching! I’m a new subscriber and have learned much from you. I like the way you discuss your topic but at the same time give an explanation. 😀
Man Jake thank you for clearing the air there is so much noise out there. You certainly have pointed out the fact that anybody anybody can have a TH-cam channel and say anything they want to say to just try to win a popularity contest and have subscribers what a complete waste of time. I on the other hand appreciate your channel and your professionalism and your knowledge and I'm learning from you so thank you again.
Great video Jake. That is a good rule of thumb that a company had to have doubled over the last 5 or 6 years to have kept up with the s&p500. Using this rule, you can quickly determine whether a company has underperformed or outperformed.
Wow. New to investing. Have done a lot of online and book research and watched a lot of youtube videos including many of yours. I've subscribed to your 'channel' on youtube because your videos are informative and you share what you've learned without any catch. For example, the 5 year comparison and tool /formula you shared in this video is new to me and one that I am adding to my tools to assess stocks before buying! Thank you for sharing.
Good video Jake. I like a company to have both capital appreciate (most important because I'm young) and a dividend (with a low payout ratio). In your example with the 2 companies your kind of right...but kind of wrong. If both companies appreciate 20% and one pays a 10% dividend, the company that pays a dividend is definitely better. The divdend doesn't get paid from the capital appreciate or the gross profit for that matter. It gets paid from the free cash flow. It's important to look at many different things when deciding.....capital appreciate, free cash flow, return on equity, return on investments, etc. But your right, picking a stock specifically for dividend income is not wise.....unless you're in retirement, but thats whole other topic. Lol
Thanks for the comment T&I. That company 1 and company 2 example was a bit rough. I already want to redo this video and clean that up. But I feel like people overall will get the message I was trying to get across. Cheers!
Stocks are just fun for me, a chance to earn (or lose) money after my other investments. First, my wife and I both max out our 401Ks, both max IRAs, and then an additional mutual fund account. I look at stocks as quick money, but if I stick with them for the long run I do review the aristocrat list.
That's awesome Rob! You and your wife are for sure going to be retiring millionaires at that rate! The money I have in my Schwab brokerage account is the same. I am maxing out my IRA and 401K and taking care of business first. The rest is for fun and to learn.
Jake, one of the best videos you made. I 100% agree w/ your thesis. I'm amazed when I hear influencers go on and on about AT&T, 3M, etc. Keep making these type of videos.
There is a interesting analogy, when I was younger I drove a truck, then also went to Truckdriving school. I had driven the way I knew for along time, but was not going to do trailer hauling. I had a heck of a time using what I already knew to then also back up huge trailers. Housewives and you ladies that had never driven anything at all, Learned and we doing better then me and my 8 years of driving. Why? Because they learned this way and it worked. Key if it works then stay the course. Personally dividends, unless you plan on living off of them serve me personally no purpose . i am new to stock. But not at businesses, nor accounting. Having owned my own businesses and done well. I do find your information very credible.
Thanks so much P C! That is high praise! I seriously am not an expert. I'm just a guy who likes to learn and I'm going to explain and teach stuff how I understand it. Hopefully other people learn something useful as well. Cheers!
Good video, I agree capital appreciation should not be completely ignored. However, I do have a few things I disagree with. First, what about dividend growth? Sure, if you are looking at a purely 3 or 4 % dividend from year 1 and the dividend doesn’t grow, nobody relying on this dividend only will have beaten the market. But if the company is consistently growing its dividend and you are reinvesting that dividend, in several years, you can reach a point where you are netting 10 or even 20% yield on cost from your out of pocket investment. In that case you are most certainly beating the market, even if the stock value doesn’t move. In fact, if the value of the stock goes down that helps you reach a higher yield on cost faster. Another thing, you don’t necessarily need to sell your stocks as you suggest, at least not with dividend stocks. You can pass them on as an inheritance, so that future generations live off the dividend income, which is why i think people put so much emphasis on dividend aristocrats. And in that case, capital appreciation truly becomes less important. Finally, although you’re right in saying that capital appreciation is also passive, for a growth stock, once you sell, thats it, you have locked in that value and you wont be earning any more money. Which is fine if thats what you want. But with dividend stocks you will keep earning income, and as long as the dividend grows you will keep making more and more income, and once again, there really isn’t any need to sell. So in that sense, I do think dividend stocks are more passive. Overall though, I agree with you though, I also prefer stocks that have shown capital appreciation and dividend growth, and I look at companies with similar profiles to those that you are interested in. There may be more fruitful strategies, I just like this one the best!
Hey Daniel, thanks for the comment and thanks for the reply! First, I'm not that impressed by the dividend pay out per share and dividend "growth" that I see from companies. These companies get cute with the numbers and will increase their raw number payout by a single penny more than the previous year to keep themselves on the list. But dividends re-invested go almost nowhere without capital appreciation. Let's pretend a stock has a 5% dividend yield on a $1000 in stock. year 1 - $1050 year 2 - $1102.50 year 3 - $1157.63. The number of shares is irrelevant. This can never catch up to a simple index fund earning you the market average of 9.8%. As for selling stock, it isn't a big deal unless you only own a couple shares and selling a couple shares wipes you out entirely. Let's say you own $10,000 in a stock that grows at 10% a year and every year you want to live on 10% of that stock being sold. The valuation of that stock would then never go up collectively. Yes, the number of shares decreases as the stock price goes up, but it doesn't matter. The valuation is the same and it earns you more than a dividend stock that never grows and only earns you 5%.
Your argument is good except for one thing you didn’t mention. You are working on the assumption that non dividend paying stocks always go up. unfortunately they do go down, and when they do that money is gone. if dividend paying stocks go down you can collect the dividend until they rebound. Also the dividend yield actually increases when the stock price goes down.
This is true, but i meant to focus on dividend stocks versus S&P index funds. If an S&P 500 index fund has lost all its value, then the US economy has collapsed and all our money is worthless anyways.
Another aspect which has been totally ignored is that if you reinvest your dividend (which most do) every month/quarter then your number of shares and dividend amount will keep compounding.
I'm 50/50. Capital appreciation is very important which is why I hold Growth ETFs. But I also love the power of compounding. The dividends provide a stream of income that I can then reinvest into shares that will pay out more dividends and so on. Plus it's nice to get income without having to reduce your shares in the company.
You make great points dude, really impressive as long as there is a little bit of growth I’m happy enough but I do have dividend growers in my portfolio too
Jake Broe,.....I kind of agree with you respect to the other mentioned TH-cam creators(who I watch from time to time).I have serious money in mutual funds and Roth Ira's spread out over multiple growth and dividend stock mutual funds , but mostly S&P 500 index and, at the end of the day their''holdings'' are all very similar. I am not going to waste too much time worrying about a little difference here or there in returns. Just continuing to fund the 401k, HSA,....and Roth and sleeping like a baby every night. It works for me.
Awesome, Tony! I am doing the exact same thing as you with my 401K and IRA. I'm basically just buying individual stocks in my brokerage account with my fun money. Feels like gambling honestly.
@@HKX_ORANGECHICKEN , it is a Health Savings Account. You can set aside money in to a tax free investment account and then anytime in the future pull it out to pay for medical expenses. It is tax deductible going in, tax free year to year, and tax exempt coming out. You just have to spend it on medical costs.
@@JakeBroe I think you have to spend it yearly though..... but with stocks I feel if you're not going big on stocks you might as well just put more into something like VOO
Investing in dividend paying stocks with no growth is a safe strategy for income seeking investors. Retirees might like to invest in low volatility stocks, high yield stocks. Young folks with a loving term horizon should be more aggressive. All depends on your goals like they say
Jake Broe I think it’s because the thought of making an easy 5-6% a year for doing nothing but buying boring dividend paying companies with a safe and long history of paying those dividends, appeals to people’s desire for guaranteed “easy” money. Kind of like a get rich easy scheme. It has a broad appeal factor.
I bought a Vanguard growth ETF with accident settlement that put me on permanent disability just before crash sold some bought mostly Utilities which are growing and pay dividends
Andrei Jikh i call him a little energy guy,he is electrifying the audience with Hope,its like this is keeping the volume,he puts all my critics into the waist not to be visible
You are awesome in how you describe (breakdown) the contents of your video; Its simple and elegant. I also watch Andrei Jikh vids as well for the same reasons. I agree with you on your assessment of the dividends; I invest in VTI for capital gains. But am also thinking of mixing VTI and ITOT in my brokerage account. Why? because I found ITOT to have a lower price per share entry vs. VTI and it performs just as good as VTI. They both have same ER, so what's not to like.
Ira and 401k (tsp, 403, etc) at a minimum, then buy stocks if you can. I only plan to buy big shares of companies that can possibly make high returns... otherwise keep putting into 401k or just buy VOO
Hey Johnny! I will max out my IRA and 401K this year, so any money I put in stocks will be just for fun in my brokerage account. I'll stop buying at the end of the year and let it ride all of 2021. If I can't outperform the market, then I will sell it all and just stick to index funds!
Thanks for the insight, I'm spanking brand new to this and yes dividend stocks look soo attractive to buy into but I'm new to the investing world and I want to make the most of my money and be smart with it. So clicking on this video is helpful.
Neos S&P 500(R) *High Income ETF (SPYI)* has >10 % yield. That is NOT FIXED but about 0.50 on 50 dollar invested paid monthly. SPYI I do not hold any shares yet in March 2024.
Dividend stocks are more for retirees as a stable source of retirement income. It's not for people still working who can take higher risk investing in stocks for appreciation. You'll probably be in dividend stocks and bonds when you get old as well.
@@JakeBroe your risk tolerance will be significantly lower when you don't have any other source of income at retirement. That's not to say you can't invest in those more "speculative" stock, but it will probably be less of your portfolio. A lot of other factors also come into play as to how aggressive your retirement portfolio is such as retirement age, cost of living, social security, personal savings.
You pay taxes on dividends, in a taxable Brokerage account, no matter whether you reinvest the dividend or cash the dividend out. Qualified dividends are taxed at long term capital gains rates.
VFIAX is a mutual fund you buy in to with Vanguard. It is their S&P 500 index fund. You give a dollar amount and receives shares from Vanguard. An ETF is like a mutual fund, except all the shares are bought and sold peer to peer on the New York Stock exchange. They perform the same but operate slightly different. Check out my video on ETFs - th-cam.com/video/e-xnR2JeQGU/w-d-xo.html
Respectfully, money can be created. When production goes up value and money are created. GDP goes up every year. Human work is being transformed into money.
Yes, in our fractional reserve economy, money can be created. The faster money changes hands, the more the money supply in our economy expands, but on a company's balance sheet, it cannot be created. Sales and services is how companies acquires money.
Jake... whoa... 8:33. Company One appreciates 20% and pays a 10% dividend means, $120,000 in stock and $10,000 pay out in dividends. This beats Company Two. I think this was just a mistake in editing on your part.
That was a very rough math example. I could have explained it better. But whether a company pays out a dividend or appreciates itself in valuation is net equal. That's what I wanted to communicate.
Correct. Appreciation is same. Company 1 wins in this scenario. But still it’s good to own the haystack. Jake I think you’re missing out on the next 4500 stocks.
Hi Jake, I'm just getting interested in investing (currently in grad school), and I have a question about this topic. I understand your points about how the yield should be the same, but does % ownership matter? For example (please excuse my lack of vocab on this), if Company A has 1M total shares and they are $100/share and have no dividend, I buy 100 shares and now how 100/1M (0.01%) ownership of the $100M Company A, right? If the price/share increases 10% to $110, I now have 0.01% ownership of the $110M Company A, right? Now, if Company B is a mirror of Company A, but instead produces dividends, and I buy the same amount, I start with 0.01% ownership of the $100M Company B. After the 10% dividend of $10/share, I make $1,000 (forgetting taxes for this example) and buy another 10 shares. Now I have 110/1M (0.011%) ownership of the still $100M Company B. The final financial status is exactly the same in these two situations, but for Company A I have 0.01% ownership and in Company B I have 0.011% ownership. Is there any value in this additional ownership? What about at much higher percentages, like the difference between 10% vs 11%?
Hey Austin! I am not sure what you are getting at. Owning more stock (by %) does increase or compound the value of your holding over time. But these companies are a zero sum game. Either they reinvest in themselves and increase their equity (thus your stock value), or they pay out a dividend and you can buy more stock thus increasing your equity by an equal amount. Owning a larger percentage of the stock only matters for people who hold the most because they can then obtain voting rights on the company board.
If opportunity cost is all that matters you should never invest in stocks at all. Real estate makes enormously better returns. Trust me I don’t have any stocks that have performed better than my real estate over time. It’s not even close.
You are correct. Real estate does outperform the stock market in most real estate markets. I do plan to buy a house soon, but some passive income is more passive than others.
If you had to personally invest in 5 of the following companies which ones would they be? Apple $287 Microsoft $172 Disney $106 McDonald’s $184 Costco $314 Amazon $2,183 Walmart $129 Alphabet/Google $1,265 Visa $175 Tesla $710 Chase $96 Netflix $414
Hey Brett, I currently am invested in Apple, Microsoft, McDonald's, Visa, and Chase. And I am not and would not invest in the others. Either they are overpriced in my opinion (Amazon) or they are not seeing enough capital gain (netflix, disney) or they have not proven their long term viability (Tesla).
hi Jake, let me put it this way connecting with what you said on previous videos.. an example, if you have already reached your retirement number goal, where you said that whatever you earn later would be invested to other stuff like new cameras, etc.. instead of doing that, some folks buy dividend stocks where they earn extra money every quarter (when dividend stocks usually payout dividends).. i am not saying you have to buy 1 over the other.. however, when the market is down for everyone, you should not disregard dividend stocks just to focus on growth stocks.. example of exxon (again) since they are averaging before at 80$ per share and they are down now, when you buy them and market rebounds, you double earn with the price going back to 80$ per share rebound, plus the dividend... i have not analyzed it fully yet, but since you are a schwab client, you can take a look at their high yield dividend etf where i think it has the US 100 dividend stocks..
Hey Nael! Thanks for the comment. I agree there is a healthy debate about this. I guess I have convinced myself of one way, but it is up to each individual how they want to invest!
Made me smile when you said both are "the same." I absolutely agree. People should be looking at the total return. A 10 percent price growth is equivalent to a 10 percent dividend. However, one factor that may lead one to opt for a dividend stock is it makes it easy to figure how much you can take out if you want to preserve your capital. Nonetheless, you can still do this on growth stocks with a little bit of calculation.
Here's a simple example showing why paying dividends is not the same: say you're retired and living off a portfolio. If you depend on dividends alone you don't need to sell any stock at a discount in the market just because people are panicked at the moment.
This could be true, if you are collecting dividends from the right companies. Companies in a downturn reduce or stop their dividend payouts all the time. GE and Ford being famous examples.
Hey Sam, I am still only buying index mutual funds in my IRA and my 401K. I am buying individual stocks in my private brokerage with just fun money. If i can not outperform the market average the next couple years, then I will sell them all and go back to low cost index mutual funds.
@@sam9242 I'm not sure, I think if you do your research, you don't have to start strictly with index funds, ESPECIALLY if you already have a retirement account based on index funds. Investing is a learning curve and you might as well jump in if you know the risks!
Thanks for watching everyone! If you found this video helpful, then support my channel by giving this video a LIKE and checking out my entire playlist of videos on investing with Fidelity! th-cam.com/play/PLscTZuOqKWIxSG8kRA7uxvJZQkz0q9Hko.html
Big difference between non-dividend paying stocks and dividend paying stocks: I don't have to sell one of these in order to get paid.
This is true!
Love the content Jake! I like QQQ and VOO
@@mike-uw6wt I think his point is when you sell those shares you never get them back, so to make up for that you pray the share price goes up enough for it to at least equal the amount sold. Nobody know if the shares will keep going up and if they don't and you keep selling shares you will have a quickly disappearing asset
Unless I'm of age and want the income (and tax burden), I'm likely going to just reinvest it. Besides, selling nondividend stocks are pretty easy these days.
@@BigBoyOtero you still pay tax on the reinvested dividend.
Well said man. Me personally, dividends are a bonus. Most of my investments are targeted more for capital gains. For those who heavily rely on dividends and ignore capital gains, might be in a world hurt. Great vid man!
They aren't losing money per say... I keep getting comments that older people like dividend stocks and they live off the income. It's just a different kind of investment strategy. But it still doesn't out perform a low cost index fund.
Slow and steady wins the race. I agree with you if you’re in it for the long run stick with the market ETFs.
Solid advice! Thanks Splash Track!
Jake I can always count on you to give unbiased investment advice. You’re extremely educated and I appreciate how you always include opportunity cost to provide an in-depth comparison. It has really helped me make the best financial decisions thus far. Keep up the good work, you deserve a larger audience!
Thanks for the high praise Nathan! This is just a part time hobby and I have yet to take the time to increase my production value. I'm humbled by the audience I already have, but I definitely would not turn down more views!
Thanks for calling this out Jake. This is the major flaw in the complete dividend investors' argument. Ok, great, you're getting dividends but are you showing growth? Even worse, are you are losing value? Maybe. Maybe not. But no investing strategy is perfect and that's why I diversify as much as I can. I have growth stocks, dividend stocks, bonds, cash, etc (getting back into real estate when this nonsense is all over). Bottom line is, there's no perfect strategy and if there were this whole system wouldn't work... at all. There are always winners and losers. We all just hope to win more than we lose.
100% In the end, it is people's money and they should do what they think is best. What works for some doesn't work for others.
How about this comment? You were born for teaching! I’m a new subscriber and have learned much from you. I like the way you discuss your topic but at the same time give an explanation. 😀
Thanks so much Karen! Welcome to the channel and I appreciate the support! More videos coming soon!
Man Jake thank you for clearing the air there is so much noise out there.
You certainly have pointed out the fact that anybody anybody can have a TH-cam channel and say anything they want to say to just try to win a popularity contest and have subscribers what a complete waste of time.
I on the other hand appreciate your channel and your professionalism and your knowledge and I'm learning from you so thank you again.
Great video Jake. That is a good rule of thumb that a company had to have doubled over the last 5 or 6 years to have kept up with the s&p500. Using this rule, you can quickly determine whether a company has underperformed or outperformed.
Thanks Raymond! It's a simple rule! Cheers!
I’ve always liked dividends because a consistent dividend keeps them theoretically more honest.
A couple people have mentioned this. That does make sense and I do believe that once a company starts paying out dividends, their behavior changes.
Wow. New to investing. Have done a lot of online and book research and watched a lot of youtube videos including many of yours. I've subscribed to your 'channel' on youtube because your videos are informative and you share what you've learned without any catch. For example, the 5 year comparison and tool /formula you shared in this video is new to me and one that I am adding to my tools to assess stocks before buying! Thank you for sharing.
Thanks for subscribing Suzie! Great to have you with us!
Good video Jake. I like a company to have both capital appreciate (most important because I'm young) and a dividend (with a low payout ratio). In your example with the 2 companies your kind of right...but kind of wrong. If both companies appreciate 20% and one pays a 10% dividend, the company that pays a dividend is definitely better. The divdend doesn't get paid from the capital appreciate or the gross profit for that matter. It gets paid from the free cash flow. It's important to look at many different things when deciding.....capital appreciate, free cash flow, return on equity, return on investments, etc. But your right, picking a stock specifically for dividend income is not wise.....unless you're in retirement, but thats whole other topic. Lol
Thanks for the comment T&I. That company 1 and company 2 example was a bit rough. I already want to redo this video and clean that up. But I feel like people overall will get the message I was trying to get across. Cheers!
*Good points. I started out in growth stocks but now predominantly in dividends with some growth.* 😉
That "some growth" is REALLY important if you are picking individual stocks, lol.
Stocks are just fun for me, a chance to earn (or lose) money after my other investments. First, my wife and I both max out our 401Ks, both max IRAs, and then an additional mutual fund account. I look at stocks as quick money, but if I stick with them for the long run I do review the aristocrat list.
That's awesome Rob! You and your wife are for sure going to be retiring millionaires at that rate! The money I have in my Schwab brokerage account is the same. I am maxing out my IRA and 401K and taking care of business first. The rest is for fun and to learn.
Jake, one of the best videos you made. I 100% agree w/ your thesis. I'm amazed when I hear influencers go on and on about AT&T, 3M, etc. Keep making these type of videos.
You bet Foggy Shores! Thanks for letting me this was a good one!
There is a interesting analogy, when I was younger I drove a truck, then also went to Truckdriving school. I had driven the way I knew for along time, but was not going to do trailer hauling. I had a heck of a time using what I already knew to then also back up huge trailers. Housewives and you ladies that had never driven anything at all, Learned and we doing better then me and my 8 years of driving. Why? Because they learned this way and it worked. Key if it works then stay the course. Personally dividends, unless you plan on living off of them serve me personally no purpose . i am new to stock. But not at businesses, nor accounting. Having owned my own businesses and done well. I do find your information very credible.
Thanks so much P C! That is high praise! I seriously am not an expert. I'm just a guy who likes to learn and I'm going to explain and teach stuff how I understand it. Hopefully other people learn something useful as well. Cheers!
Good video, I agree capital appreciation should not be completely ignored. However, I do have a few things I disagree with. First, what about dividend growth? Sure, if you are looking at a purely 3 or 4 % dividend from year 1 and the dividend doesn’t grow, nobody relying on this dividend only will have beaten the market. But if the company is consistently growing its dividend and you are reinvesting that dividend, in several years, you can reach a point where you are netting 10 or even 20% yield on cost from your out of pocket investment. In that case you are most certainly beating the market, even if the stock value doesn’t move. In fact, if the value of the stock goes down that helps you reach a higher yield on cost faster. Another thing, you don’t necessarily need to sell your stocks as you suggest, at least not with dividend stocks. You can pass them on as an inheritance, so that future generations live off the dividend income, which is why i think people put so much emphasis on dividend aristocrats. And in that case, capital appreciation truly becomes less important. Finally, although you’re right in saying that capital appreciation is also passive, for a growth stock, once you sell, thats it, you have locked in that value and you wont be earning any more money. Which is fine if thats what you want. But with dividend stocks you will keep earning income, and as long as the dividend grows you will keep making more and more income, and once again, there really isn’t any need to sell. So in that sense, I do think dividend stocks are more passive. Overall though, I agree with you though, I also prefer stocks that have shown capital appreciation and dividend growth, and I look at companies with similar profiles to those that you are interested in. There may be more fruitful strategies, I just like this one the best!
Yield on Cost is the key.
Hey Daniel, thanks for the comment and thanks for the reply! First, I'm not that impressed by the dividend pay out per share and dividend "growth" that I see from companies. These companies get cute with the numbers and will increase their raw number payout by a single penny more than the previous year to keep themselves on the list. But dividends re-invested go almost nowhere without capital appreciation. Let's pretend a stock has a 5% dividend yield on a $1000 in stock.
year 1 - $1050
year 2 - $1102.50
year 3 - $1157.63.
The number of shares is irrelevant. This can never catch up to a simple index fund earning you the market average of 9.8%. As for selling stock, it isn't a big deal unless you only own a couple shares and selling a couple shares wipes you out entirely.
Let's say you own $10,000 in a stock that grows at 10% a year and every year you want to live on 10% of that stock being sold. The valuation of that stock would then never go up collectively. Yes, the number of shares decreases as the stock price goes up, but it doesn't matter. The valuation is the same and it earns you more than a dividend stock that never grows and only earns you 5%.
Your argument is good except for one thing you didn’t mention. You are working on the assumption that non dividend paying stocks always go up. unfortunately they do go down, and when they do that money is gone. if dividend paying stocks go down you can collect the dividend until they rebound. Also the dividend yield actually increases when the stock price goes down.
This is true, but i meant to focus on dividend stocks versus S&P index funds. If an S&P 500 index fund has lost all its value, then the US economy has collapsed and all our money is worthless anyways.
Another aspect which has been totally ignored is that if you reinvest your dividend (which most do) every month/quarter then your number of shares and dividend amount will keep compounding.
New to the channel man, love your videos. You give a different perspective compared to these other youtubers. Keep doing your thing!
Will do, Emcee! Welcome to the channel!
I'm 50/50. Capital appreciation is very important which is why I hold Growth ETFs. But I also love the power of compounding. The dividends provide a stream of income that I can then reinvest into shares that will pay out more dividends and so on. Plus it's nice to get income without having to reduce your shares in the company.
For sure depends on how many shares you have to begin with. Cheers Orange Monk!
You make great points dude, really impressive as long as there is a little bit of growth I’m happy enough but I do have dividend growers in my portfolio too
I just want to perform better than a simple low cost index fund, haha.
Jake Broe,.....I kind of agree with you respect to the other mentioned TH-cam creators(who I watch from time to time).I have serious money in mutual funds and Roth Ira's spread out over multiple growth and dividend stock mutual funds , but mostly S&P 500 index and, at the end of the day their''holdings'' are all very similar. I am not going to waste too much time worrying about a little difference here or there in returns. Just continuing to fund the 401k, HSA,....and Roth and sleeping like a baby every night. It works for me.
Awesome, Tony! I am doing the exact same thing as you with my 401K and IRA. I'm basically just buying individual stocks in my brokerage account with my fun money. Feels like gambling honestly.
@@JakeBroe whats hsa?
@@HKX_ORANGECHICKEN , it is a Health Savings Account. You can set aside money in to a tax free investment account and then anytime in the future pull it out to pay for medical expenses. It is tax deductible going in, tax free year to year, and tax exempt coming out. You just have to spend it on medical costs.
@@JakeBroe I think you have to spend it yearly though..... but with stocks I feel if you're not going big on stocks you might as well just put more into something like VOO
Wow very informative, thank you keep these vids coming
You are very welcome Kameron. Cheers!
Investing in dividend paying stocks with no growth is a safe strategy for income seeking investors. Retirees might like to invest in low volatility stocks, high yield stocks. Young folks with a loving term horizon should be more aggressive. All depends on your goals like they say
Very true! I understand this argument. But I'm still confused why so many TH-camrs in their 20s are pushing these stocks so hard in videos, lol.
Jake Broe I think it’s because the thought of making an easy 5-6% a year for doing nothing but buying boring dividend paying companies with a safe and long history of paying those dividends, appeals to people’s desire for guaranteed “easy” money. Kind of like a get rich easy scheme. It has a broad appeal factor.
I bought a Vanguard growth ETF with accident settlement that put me on permanent disability just before crash sold some bought mostly Utilities which are growing and pay dividends
Hope you are doing well too! Great video very informative! You raised some pretty interesting points!
Thanks Frank! Cheers!
Andrei Jikh i call him a little energy guy,he is electrifying the audience with Hope,its like this is keeping the volume,he puts all my critics into the waist not to be visible
Downturn by Exxon, Walgreens- would it make sense to “swing” into them now?
Hey Ron! I looked at both and both those are pretty far above their 20 day moving averages. I would look elsewhere for swing opportunities!
You are awesome in how you describe (breakdown) the contents of your video; Its simple and elegant. I also watch Andrei Jikh vids as well for the same reasons. I agree with you on your assessment of the dividends; I invest in VTI for capital gains. But am also thinking of mixing VTI and ITOT in my brokerage account. Why? because I found ITOT to have a lower price per share entry vs. VTI and it performs just as good as VTI. They both have same ER, so what's not to like.
Thanks for the compliment Chibuike! I checked out ITOT and it looks like it is managed by BlackRock. Also a good fund and very similar to VTI!
dividend income is the best paycheck, can't wait to make it my average job paycheck 💪
That would be the dream. ^_^
That's going to take allooottttt of time. But you can do it!
That sounds like the "wine vineyard strategy". As the saying goes, To make a small fortune in wine, you start with a big one!
Ira and 401k (tsp, 403, etc) at a minimum, then buy stocks if you can. I only plan to buy big shares of companies that can possibly make high returns... otherwise keep putting into 401k or just buy VOO
Hey Johnny! I will max out my IRA and 401K this year, so any money I put in stocks will be just for fun in my brokerage account. I'll stop buying at the end of the year and let it ride all of 2021. If I can't outperform the market, then I will sell it all and just stick to index funds!
@@JakeBroe I'm just looking for next amazon or Netflix with stocks... otherwise its just VOO type etfs and likewise 401k and iras
Thanks for the insight, I'm spanking brand new to this and yes dividend stocks look soo attractive to buy into but I'm new to the investing world and I want to make the most of my money and be smart with it. So clicking on this video is helpful.
Thanks for the comment Tivo! Glad people are getting something from it!
Neos S&P 500(R) *High Income ETF (SPYI)* has >10 % yield. That is NOT FIXED but about 0.50 on 50 dollar invested paid monthly.
SPYI
I do not hold any shares yet in March 2024.
Dividend stocks are more for retirees as a stable source of retirement income. It's not for people still working who can take higher risk investing in stocks for appreciation. You'll probably be in dividend stocks and bonds when you get old as well.
Maybe, maybe not. I still don't see the math that convinces me to hold stocks that are not trying to grow in value.
@@JakeBroe your risk tolerance will be significantly lower when you don't have any other source of income at retirement. That's not to say you can't invest in those more "speculative" stock, but it will probably be less of your portfolio. A lot of other factors also come into play as to how aggressive your retirement portfolio is such as retirement age, cost of living, social security, personal savings.
jack you r 100% right
sorry jake
Thanks amit! Cheers!
Depending on how much you have to invest and age
You pay taxes on dividends, in a taxable Brokerage account, no matter whether you reinvest the dividend or cash the dividend out.
Qualified dividends are taxed at long term capital gains rates.
This is correct! I misspoke in the video and I really need to re-make this video. Thanks Manny!
@@JakeBroe I enjoyed it nonetheless.
Can you please clarify - Is it the same if I buy S&P 500 index fund Mutual Funds Vs ETF?
VFIAX is a mutual fund you buy in to with Vanguard. It is their S&P 500 index fund. You give a dollar amount and receives shares from Vanguard. An ETF is like a mutual fund, except all the shares are bought and sold peer to peer on the New York Stock exchange. They perform the same but operate slightly different. Check out my video on ETFs - th-cam.com/video/e-xnR2JeQGU/w-d-xo.html
you should speak with a licensed financial adviser before purchasing anything.
Can someone help me with the formula he uses for appreciation?
Dividends don’t make sense for people in states with income tax. Tax drag over time
is going to show that growth > dividend
Truth! Unless you move to Wyoming...
Wish you would do more investment videos!
Respectfully, money can be created. When production goes up value and money are created. GDP goes up every year. Human work is being transformed into money.
Yes, in our fractional reserve economy, money can be created. The faster money changes hands, the more the money supply in our economy expands, but on a company's balance sheet, it cannot be created. Sales and services is how companies acquires money.
Jake... whoa... 8:33. Company One appreciates 20% and pays a 10% dividend means, $120,000 in stock and $10,000 pay out in dividends. This beats Company Two. I think this was just a mistake in editing on your part.
That was a very rough math example. I could have explained it better. But whether a company pays out a dividend or appreciates itself in valuation is net equal. That's what I wanted to communicate.
Correct. Appreciation is same. Company 1 wins in this scenario. But still it’s good to own the haystack. Jake I think you’re missing out on the next 4500 stocks.
Hi Jake, I'm just getting interested in investing (currently in grad school), and I have a question about this topic. I understand your points about how the yield should be the same, but does % ownership matter? For example (please excuse my lack of vocab on this), if Company A has 1M total shares and they are $100/share and have no dividend, I buy 100 shares and now how 100/1M (0.01%) ownership of the $100M Company A, right? If the price/share increases 10% to $110, I now have 0.01% ownership of the $110M Company A, right? Now, if Company B is a mirror of Company A, but instead produces dividends, and I buy the same amount, I start with 0.01% ownership of the $100M Company B. After the 10% dividend of $10/share, I make $1,000 (forgetting taxes for this example) and buy another 10 shares. Now I have 110/1M (0.011%) ownership of the still $100M Company B. The final financial status is exactly the same in these two situations, but for Company A I have 0.01% ownership and in Company B I have 0.011% ownership. Is there any value in this additional ownership? What about at much higher percentages, like the difference between 10% vs 11%?
Hey Austin! I am not sure what you are getting at. Owning more stock (by %) does increase or compound the value of your holding over time. But these companies are a zero sum game. Either they reinvest in themselves and increase their equity (thus your stock value), or they pay out a dividend and you can buy more stock thus increasing your equity by an equal amount. Owning a larger percentage of the stock only matters for people who hold the most because they can then obtain voting rights on the company board.
YES! Omg, all the dividend videos…
If opportunity cost is all that matters you should never invest in stocks at all. Real estate makes enormously better returns. Trust me I don’t have any stocks that have performed better than my real estate over time. It’s not even close.
You are correct. Real estate does outperform the stock market in most real estate markets. I do plan to buy a house soon, but some passive income is more passive than others.
If you had to personally invest in 5 of the following companies which ones would they be? Apple $287
Microsoft $172
Disney $106
McDonald’s $184
Costco $314
Amazon $2,183
Walmart $129
Alphabet/Google $1,265
Visa $175
Tesla $710
Chase $96
Netflix $414
Hey Brett, I currently am invested in Apple, Microsoft, McDonald's, Visa, and Chase. And I am not and would not invest in the others. Either they are overpriced in my opinion (Amazon) or they are not seeing enough capital gain (netflix, disney) or they have not proven their long term viability (Tesla).
Jake Broe thanks that was very insightful. You could even get all 5 for $1,000.
Great video 👍 ty
Thanks for the comment Shack! Cheers!
It’s mean of 9 percent not median
hi Jake, let me put it this way connecting with what you said on previous videos.. an example, if you have already reached your retirement number goal, where you said that whatever you earn later would be invested to other stuff like new cameras, etc.. instead of doing that, some folks buy dividend stocks where they earn extra money every quarter (when dividend stocks usually payout dividends).. i am not saying you have to buy 1 over the other.. however, when the market is down for everyone, you should not disregard dividend stocks just to focus on growth stocks.. example of exxon (again) since they are averaging before at 80$ per share and they are down now, when you buy them and market rebounds, you double earn with the price going back to 80$ per share rebound, plus the dividend... i have not analyzed it fully yet, but since you are a schwab client, you can take a look at their high yield dividend etf where i think it has the US 100 dividend stocks..
Hey Nael! Thanks for the comment. I agree there is a healthy debate about this. I guess I have convinced myself of one way, but it is up to each individual how they want to invest!
McDonald's is expensive not worth buying just for dividends just like most long established companies that pay dividends
Made me smile when you said both are "the same." I absolutely agree. People should be looking at the total return. A 10 percent price growth is equivalent to a 10 percent dividend. However, one factor that may lead one to opt for a dividend stock is it makes it easy to figure how much you can take out if you want to preserve your capital. Nonetheless, you can still do this on growth stocks with a little bit of calculation.
Thanks for the comment Remo!
Here's a simple example showing why paying dividends is not the same: say you're retired and living off a portfolio. If you depend on dividends alone you don't need to sell any stock at a discount in the market just because people are panicked at the moment.
This could be true, if you are collecting dividends from the right companies. Companies in a downturn reduce or stop their dividend payouts all the time. GE and Ford being famous examples.
Great Vid Jake :)
Thanks so much Glenn! I hope your day is finding you well!
Do a video on ROTH IRA .
Hey Princeton! Good idea! I am looking in to it now.
First!!! I ❤️ Jake Broe Video's!!!
Congrats! You got it this time, Emily!
This video is wrong. U assume u can predict share price. U cant. Thats why dividen are goos cause they dont care bout share price
If you are new to this and you are buying individual stocks, you're already in trouble. Good luck.
Hey Sam, I am still only buying index mutual funds in my IRA and my 401K. I am buying individual stocks in my private brokerage with just fun money. If i can not outperform the market average the next couple years, then I will sell them all and go back to low cost index mutual funds.
Bad way to think of it. How are those that are beginners supposed to gain experience? By doing, that's how.
@@TechCryptoNow By doing with index funds first, then individual stocks. You start at the base of the investment pyramid.
@@JakeBroe I'm more inclined to go with ETFs these days. Lower cost, more tradable, and much wider range of choices.
@@sam9242 I'm not sure, I think if you do your research, you don't have to start strictly with index funds, ESPECIALLY if you already have a retirement account based on index funds. Investing is a learning curve and you might as well jump in if you know the risks!
LOAN is 11.21 dividend
Hey Scott. It as at the moment, only because it has lost 50% of its value. Once the next dividend goes out, its average will correct and fall.