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Message
re: Some common myths about the markets that are untrue and/or 99% do not know
Posted on 4/17/24 at 8:47 am to secfballfan
Posted on 4/17/24 at 8:47 am to secfballfan
You are trying too hard to sound smart. Readers should not infer that dividends nor stock splits are a bad sign.
0
Posted on 4/17/24 at 8:55 am to secfballfan
quote:
but I do know money and markets- as well as the best mechanic knows cars, it is all I do
Posted on 4/17/24 at 9:32 am to secfballfan
quote:
Dividends are a good sign. Nope, not really.
Advisor Perspectives: “Why Dividends Matter"
quote:
For an average holding period of 1 year, dividends accounted for 27% of total returns for the S&P500 since 1940. If we increase the holding period to 3 years, dividends account for 38%, 5 years it increases to 42%, over a 10 year period it rises to 48%, and with a 20 year holding period dividends account for some 60% of total returns. It is important to note, too, that here we are just looking at the S&P500 as a whole and not focusing purely on companies that actually pay a dividend. If we did, we think these results would likely be even more striking.”
As noted in the above article, time frame or holding period matters. So that we can make more of an apples to apples comparison, can you provide data which shows that companies within the S&P 500 that did not pay dividends outperformed those that did?
Since longer term investors aren’t typically “traders”, choose some reasonable holding period, say 3-5 years. Opinions on either side of the issue are just opinions… if no data is provided. I’m not here to be argumentative, just asking if you have actual data to legitimize your opinion?
Posted on 4/17/24 at 9:45 am to Jag_Warrior
Ok, lets look at the famous FANG stocks that accounted for about 70% of the S&P 500 moves over the past 3 years- Facebook/Meta pays a tiny dividend 0.4% yield, same with AAPL 0.56%, Netflix, Amazon, Google zero. Oh and new star NVIDIA- yields a whopping 0.02%. Look I am not saying dividend are bad- but when companies are booming and at their best, you do not want them giving you money back- you want them putting it back in the company.
One ore way to look at it- do you want other people telling you when to buy or sell stocks? When a company pays a dividend (especially a large one) they have decided for you that you should reduce your investment in them.
My OP came off as arrogant, I apologize for that. I respect most of your points, but again feel you are missing the logic here. And look no one knows the "real" person behind the usernames, is it maybe possible I am not an expert in this, sure, but maybe I am. Maybe I once reported to Warren Buffett at one of his subsidiary companies and am a CFA who overseas multi billion $ portfolios with an MBA from a top 20 school. Two truths and a lie?
One ore way to look at it- do you want other people telling you when to buy or sell stocks? When a company pays a dividend (especially a large one) they have decided for you that you should reduce your investment in them.
My OP came off as arrogant, I apologize for that. I respect most of your points, but again feel you are missing the logic here. And look no one knows the "real" person behind the usernames, is it maybe possible I am not an expert in this, sure, but maybe I am. Maybe I once reported to Warren Buffett at one of his subsidiary companies and am a CFA who overseas multi billion $ portfolios with an MBA from a top 20 school. Two truths and a lie?
Posted on 4/17/24 at 10:00 am to secfballfan
quote:
Robinhood is the “wild west” way to trade. Nope, all stock exchanges are heavily regulated and play by the same rules. When they halt Meme stocks it is NOT their choice, they are being forced by regulators to do so.
Now it’s going to seem like I’m picking on you, and I’m really not. But Robinhood is not an “exchange” - it’s a brokerage company. And yes, there are SEC and other base rules in place which all brokerages must follow. But brokerages are allowed to set their own minimums and other rules above and beyond that regulatory base.
So to your example, yes, if exchange trading is halted on a meme stock or some other equity, at least on the regulated exchanges, no brokerage could execute a trade. But Robinhood and others did institute their own restrictions on both equities and options during that “meme period” - and not all investors, traders or account types were treated equally. While I wasn’t able to execute an options trade on the TOS platform on one of those crazy IV equities during the meme frenzy (when Robinhood, TDA, Fidelity, etc. had put on severe trading restrictions), by placing a call to my TDA account rep and having him review my account type and size and the complexity of my past options trades, he approved it and my trade was executed.
So again, not here to pick on you. But your description was just a bit incomplete.
Posted on 4/17/24 at 10:01 am to Jag_Warrior
Jag- all great points and very good clarifications.
Posted on 4/17/24 at 10:06 am to secfballfan
quote:
they have decided for you that you should reduce your investment in them
Ehh... You’re missing the point that people buy equity for different reasons.
Some prefer a mature company that has solidified itself in its industry. One that creates shareholder value through cash flow. Ideally, said company pays a dividend and increases the dividend to defend against inflationary effect, something bonds, generally speaking, cannot do.
The dividend investor should know the position isn’t a massive growth opportunity. But not everyone needs to reach for growth, some need income now.
You’re seeing tech companies begin to pay a dividend because some of them are maturing themselves. The rates are low because the valuation on some of these tech giants are extremely high, unlike some traditional dividend payers where valuations are more in line with historical norms.
Posted on 4/17/24 at 10:21 am to secfballfan
quote:Yes, let's rely on recency bias to inform our sweeping declarations!
Ok, lets look at the famous FANG stocks that accounted for about 70% of the S&P 500 moves over the past 3 years- Facebook/Meta pays a tiny dividend 0.4% yield, same with AAPL 0.56%, Netflix, Amazon, Google zero. Oh and new star NVIDIA- yields a whopping 0.02%. Look I am not saying dividend are bad- but when companies are booming and at their best, you do not want them giving you money back- you want them putting it back in the company.
Posted on 4/17/24 at 10:23 am to Big Scrub TX
Ehh... You’re missing the point that people buy equity for different reasons.
agree 100%
agree 100%
Posted on 4/17/24 at 10:30 am to secfballfan
quote:
Look I am not saying dividend are bad- but when companies are booming and at their best, you do not want them giving you money back- you want them putting it back in the company.
If capex is being stifled because a dividend is being paid, then I would certainly agree with you. But if the cash is just sitting in a low yielding pile on the floor, then returning it to shareholders is a better option. That seems to be something that Mr. Buffett and I agree on.
quote:
One more way to look at it- do you want other people telling you when to buy or sell stocks? When a company pays a dividend (especially a large one) they have decided for you that you should reduce your investment in them.
No, that’s a reach too far. The investor should still make a buy or sell decision based on underlying fundamentals, or whatever measure they care to use. Now, if it’s a case of a far above average dividend or one which suggests that the company is self-liquidating, that’s a buffalo of a different color.
quote:
My OP came off as arrogant, I apologize for that. I respect most of your points, but again feel you are missing the logic here.
Thanks, but no apology is necessary. I didn’t take your OP as arrogant. And I don’t typically get involved in the schoolyard back & forth that sometimes takes place on this board. I just felt that some of your points weren’t complete, or I happened not to agree with all of it. I don’t mind disagreements and am fine agreeing to disagree.
quote:
And look no one knows the "real" person behind the usernames, is it maybe possible I am not an expert in this, sure, but maybe I am. Maybe I once reported to Warren Buffett at one of his subsidiary companies and am a CFA who overseas multi billion $ portfolios with an MBA from a top 20 school. Two truths and a lie?
Very true. Over time, we can only get to know “who” we are, or what we’re about, by assessing each other’s subject knowledge. And at the same time, we must accept that people may have differing opinions and beliefs. IMO, that’s what supports healthy debate or discussion.
I don’t really speak about my education, successes (or failures
) in real estate and banking in the 80s and 90s or even how well it’s going for me now as a professional index options trader. I’m more likely to go off topic talking about cars or racing. The other would just come off as me puffing or bragging, and I see no need for that. I have enjoyed this discussion though, even if we do not fully agree on this topic.
Posted on 4/17/24 at 10:40 am to Jag_Warrior
quote:What's dispersion trading like these days? Does anyone care anymore?
professional index options trader
Posted on 4/17/24 at 11:00 am to Big Scrub TX
Well said Jag- I have failed too many times to count- my biggest failure probably FNMA and FRE preferred stocks in 2008- was lucky to have no BSC or Lehman exposure but got spanked hard when FNM FRE cut of their dividends....90% drop overnight, $40 million gone- was at a public company at the time, was small % of AUM, but CFO rightfully lit me up
Posted on 4/17/24 at 11:26 am to secfballfan
quote:
Ok, lets look at the famous FANG stocks that accounted for about 70% of the S&P 500 moves over the past 3 years
If Bill Gates walks into a bar the average patron is a billionaire. How young are you?
Posted on 4/17/24 at 11:45 am to secfballfan
quote:You were long the Fannie preferreds headed into the crisis? That was one of my biggest post crisis trades. FNMFO at $800 (on $100K par value).
Well said Jag- I have failed too many times to count- my biggest failure probably FNMA and FRE preferred stocks in 2008- was lucky to have no BSC or Lehman exposure but got spanked hard when FNM FRE cut of their dividends....90% drop overnight, $40 million gone- was at a public company at the time, was small % of AUM, but CFO rightfully lit me up
All those names are vastly higher now, but I still think it's crazy that the agencies haven't just started paying the divvies again. For like $1B total annually, they could make them all go back to par and get rid of all the lawsuits.
Also, Lehman exposure wasn't that bad - I think almost all counterparties got paid in full.
Posted on 4/17/24 at 11:47 am to secfballfan
Not all companies are in growth mode. Not all companies can find a good use of cash to grow. If a company can't find a good way to invest their cash into future additive growth, then they should keep some cash as a reserve, and pay dividends on the rest.
You mention Berskshire.
1) Warren B has said MANY times over the years how much he loves his dividend players. They provide a ton of cash that can be reinvested in other ways.
2) Berkshire over the years was very much a growth company, but in recent years has struggled to find growth opportunities at scale, so they have an ever-increasing cash pile. Warren has changed his tune a bit to say that having that much cash, while not desirable, does at least provide a LOT of protection.
He's right, but how much protection do you need?
I would not be surprised if after his passing, if Berskshire is still having trouble finding good growth opportuniies, if they do not face presure to start dividends.
Also... Berkshire HAS, at times, done stock repurchases, so it's not like they refuse to ever return any cash to stockholders.
You mention Berskshire.
1) Warren B has said MANY times over the years how much he loves his dividend players. They provide a ton of cash that can be reinvested in other ways.
2) Berkshire over the years was very much a growth company, but in recent years has struggled to find growth opportunities at scale, so they have an ever-increasing cash pile. Warren has changed his tune a bit to say that having that much cash, while not desirable, does at least provide a LOT of protection.
He's right, but how much protection do you need?
I would not be surprised if after his passing, if Berskshire is still having trouble finding good growth opportuniies, if they do not face presure to start dividends.
Also... Berkshire HAS, at times, done stock repurchases, so it's not like they refuse to ever return any cash to stockholders.
Posted on 4/17/24 at 1:40 pm to secfballfan
quote:
company that pays a dividend is taking money out their operations
That is absolutely not true.
Posted on 4/17/24 at 2:16 pm to secfballfan
quote:
And look no one knows the "real" person behind the usernames, is it maybe possible I am not an expert in this, sure, but maybe I am. Maybe I once reported to Warren Buffett at one of his subsidiary companies and am a CFA who overseas multi billion $ portfolios with an MBA from a top 20 school. Two truths and a lie?
“Trust me bro”
Posted on 4/17/24 at 2:23 pm to Weagle25
This is one of the dumbest threads I've seen in a while.
Posted on 4/17/24 at 3:08 pm to Big Scrub TX
quote:
I still think it's crazy that the agencies haven't just started paying the divvies again
You serious, baw?
Posted on 4/17/24 at 4:01 pm to wutangfinancial
quote:I mean, yes? It's been several years since I stopped tracking it, but I just looked now and Fannie booked net income of over $17B in 2023. I think they could fully service the pref dividends for like $500M annually. If they re-instated them like that, the prefs would basically instantly go to par. So for sacrificing like 3% of their earnings they could make this eyesore go away. Who is it good for to have them trading at cents on the dollar and with tons of court cases?
You serious, baw?
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