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Message
Some common myths about the markets that are untrue and/or 99% do not know
Posted on 4/16/24 at 3:23 pm
Posted on 4/16/24 at 3:23 pm
Dividends are a good sign. Nope, not really. While they are tax advantaged (a good thing) any company that pays a dividend is taking money out their operations. If the business was truly booming, they should not pay a dividend but reinvest in their business. Case and point- Buffett’s Berkshire has NEVER paid a dime in dividends. Fed Ex did noy pay one for its first 40 years- grow your business if it is good.
The DJIA and S&P 500 are calculated the same way. Nope the S&P 500 is market weighted where a stocks capitalization moves the market pro rata to its size. The DJIA moves based on each company’s stock price. So, if Goldman Sachs stock is trading at $400 and Honda at $200, GS has twice the impact as HON no matter their market capitalization.
Stock splits are good- Nope study after study shows near zero correlation between stock splits and stock performance. In fact, it costs about $1 million just to split a stock. Using Buffett as an example-he has never split Berkshire, although he did issue another class of stock.
The NYSE and NASDAQ operate the same way. Nope the NYSE uses floor brokers and traders where the NASDAQ is 100% computers. NYSE has a trading flood, NASDAQ does not.
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.
The DJIA and S&P 500 are calculated the same way. Nope the S&P 500 is market weighted where a stocks capitalization moves the market pro rata to its size. The DJIA moves based on each company’s stock price. So, if Goldman Sachs stock is trading at $400 and Honda at $200, GS has twice the impact as HON no matter their market capitalization.
Stock splits are good- Nope study after study shows near zero correlation between stock splits and stock performance. In fact, it costs about $1 million just to split a stock. Using Buffett as an example-he has never split Berkshire, although he did issue another class of stock.
The NYSE and NASDAQ operate the same way. Nope the NYSE uses floor brokers and traders where the NASDAQ is 100% computers. NYSE has a trading flood, NASDAQ does not.
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.
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Posted on 4/16/24 at 3:34 pm to secfballfan
Berkshire Hathaway's Top Holdings PAY DIVIDENDS.
Including by far his largest holding AAPL.
Berkshire Collects 2.1 Billion a year in dividends from AAPL,KHC,BAC alone.
The S&P 500, Dow Jones, & Nasdaq all pay Dividends (SPY,DOW,QQQ)..
Did you not buy NVDA a year ago because it pays a dividend and "that's a bad sign" ?
AAPL and MSFT have paid dividends for years, they are two of the best performers over the last decade.
You might just want to delete this thread since I'm the only one that's read it.
Including by far his largest holding AAPL.
Berkshire Collects 2.1 Billion a year in dividends from AAPL,KHC,BAC alone.
The S&P 500, Dow Jones, & Nasdaq all pay Dividends (SPY,DOW,QQQ)..
Did you not buy NVDA a year ago because it pays a dividend and "that's a bad sign" ?
AAPL and MSFT have paid dividends for years, they are two of the best performers over the last decade.
You might just want to delete this thread since I'm the only one that's read it.
This post was edited on 4/16/24 at 4:20 pm
Posted on 4/16/24 at 3:40 pm to Ghandi
Don't quit your day job
If you only knew....
In the S&P 500 25% of companies pay no dividends. For the NASDAQ- only about 50% pay a dividend, the other 50% pay zero.
oh and Google, Facebook, Amazon and Netflix are a few who pay no dividends, why? Do you really want to take money from their booming/growing business or put it back in the business? You are making my point for me.
If you only knew....
In the S&P 500 25% of companies pay no dividends. For the NASDAQ- only about 50% pay a dividend, the other 50% pay zero.
oh and Google, Facebook, Amazon and Netflix are a few who pay no dividends, why? Do you really want to take money from their booming/growing business or put it back in the business? You are making my point for me.
This post was edited on 4/16/24 at 3:45 pm
Posted on 4/16/24 at 3:44 pm to secfballfan
quote:
If you only knew....
In the S&P 500 25% of companies pay no dividends. For the NASDAQ- only about 50% pay a dividend, the other 50% pay zero.
No sheet Sherlock.
Not all Companies in those indexes pay a dividend.
But you said that it's not a good sign when a stock pays a dividend.
Every S&P 500 ETF pays a dividend.
Every Nasdaq ETF pays a dividend.
Every Dow Jones ETF pays a dividend.
So even according to you, 75 percent of S&P 500 stocks pay a dividend.
And even half of Nasdaq stocks pay a dividend.
So over half of the stocks in the two Gold Standard Indexes pay a dividend
So using your logic people shouldn't invest in the Index Funds because they pay dividends.
This post was edited on 4/16/24 at 4:22 pm
Posted on 4/16/24 at 3:50 pm to Ghandi
I love index funds- but it has nothing to do with dividends. No one can pick individual stocks and win over time. Even Buffet underperformed the S&P 500 for nearly 15 years after 2008. The average investor should stick to index funds for sure.
REITs (who to be a REIT MUST pay our 95%) and utilities (very slow growth heavily regulated) pay the highest % dividends year in and year out. Any growing company needs to keep their money to invest in their business. Put another way, would your rather have Elon Musk invest your money or have him give it back to you?
REITs (who to be a REIT MUST pay our 95%) and utilities (very slow growth heavily regulated) pay the highest % dividends year in and year out. Any growing company needs to keep their money to invest in their business. Put another way, would your rather have Elon Musk invest your money or have him give it back to you?
Posted on 4/16/24 at 4:04 pm to secfballfan
quote:False - META recently started paying a $0.50 quarterly dividend.
Facebook pays no dividends, why?
This post was edited on 4/16/24 at 4:25 pm
Posted on 4/16/24 at 4:07 pm to secfballfan
quote:
Do you really want to take money from their booming/growing business or put it back in the business? You are making my point for me.
Uh, not every company is in ramp up/rapid growth mode. It is appropriate and desirable for a company in Exxon’s position to pay a dividend.
Posted on 4/16/24 at 4:09 pm to secfballfan
quote:Your framing is poor. There's a place for everything. Why does it have to be DIVIDENDS GOOD or DIVIDENDS BAD instead of "your portfolio should contain a mix of income-producing and growth companies"?
Dividends are a good sign. Nope, not really. While they are tax advantaged (a good thing) any company that pays a dividend is taking money out their operations. If the business was truly booming, they should not pay a dividend but reinvest in their business.
quote:And yet owns a portfolio of equities worth scores of billions of dollars where about half of those holdings pay substantial dividends.
Case and point- Buffett’s Berkshire has NEVER paid a dime in dividends
Again, your framing is sweeping and poor - completely lacking in nuance or actual understanding.
quote:Everyone knows this. However, they have been increasingly similar in the age of mega companies.
The DJIA and S&P 500 are calculated the same way. Nope the S&P 500 is market weighted where a stocks capitalization moves the market pro rata to its size. The DJIA moves based on each company’s stock price. So, if Goldman Sachs stock is trading at $400 and Honda at $200, GS has twice the impact as HON no matter their market capitalization.
quote:What % of total NYSE volume is through floor brokers? High enough that your point still stands? I'd be surprised.
Nope the NYSE uses floor brokers
Posted on 4/16/24 at 4:10 pm to sjmabry
Thank you SJ, I stand corrected.
Maybe I should clarify, all I am saying is that if a business is truly growing profitably they should want to reinvest their money in that growth. Rewarding shareholders with tax advantaged ways to monetize their investment (which is basically what a dividend does) is not "bad" but id does take away from the ability of the company to grow.
Maybe I should clarify, all I am saying is that if a business is truly growing profitably they should want to reinvest their money in that growth. Rewarding shareholders with tax advantaged ways to monetize their investment (which is basically what a dividend does) is not "bad" but id does take away from the ability of the company to grow.
Posted on 4/16/24 at 4:22 pm to secfballfan
I remember my first commercial banking / investing class.
Posted on 4/16/24 at 4:24 pm to secfballfan
I am struggling to see the point of this thread.
Posted on 4/16/24 at 4:46 pm to TDTOM
quote:
I am struggling to see the point of this thread.
To let you know that it's a bad sign if a stock pays dividends because Berkshire Hathaway doesn't pay a dividend, even though Warren Buffett's largest holdings pay dividends.
Posted on 4/16/24 at 4:51 pm to TDTOM
I am struggling to see the point of this thread.
fair point- my thoughts is this, when it comes to my car, I know next to nothing, someone could sell me a part that does not even exist and I would not know. However, I ma fascinated when I learn things about cars from those that know. Let's just say I no very little about most things and claim not intellectual high ground above anyone else on this board, but I do know money and markets- as well as the best mechanic knows cars, it is all I do. I will try a less condescending tone-because I do not mean to be.
So here is another fun fact, Cathie Wood's ARKK innovation fund, that anyone who watches CNBC knows is perhaps the most hyped fund and fund manager for the past two years has underperformed EVERY major index since its 2014 inception, yet it generates over $100M a year in fees alone. Marketing is a powerful thing, but numbers never lie.
fair point- my thoughts is this, when it comes to my car, I know next to nothing, someone could sell me a part that does not even exist and I would not know. However, I ma fascinated when I learn things about cars from those that know. Let's just say I no very little about most things and claim not intellectual high ground above anyone else on this board, but I do know money and markets- as well as the best mechanic knows cars, it is all I do. I will try a less condescending tone-because I do not mean to be.
So here is another fun fact, Cathie Wood's ARKK innovation fund, that anyone who watches CNBC knows is perhaps the most hyped fund and fund manager for the past two years has underperformed EVERY major index since its 2014 inception, yet it generates over $100M a year in fees alone. Marketing is a powerful thing, but numbers never lie.
Posted on 4/16/24 at 4:57 pm to secfballfan
The thing about dividends is that it ends up being so little really unless you have a million in your investing account which no one my age does.
The theory is that dividends are not a net positive. They are taking cash out the balance sheet to pay investors which will lower market cap by whatever they take out. Whether that is actuality based on studies, I dont know.
The theory is that dividends are not a net positive. They are taking cash out the balance sheet to pay investors which will lower market cap by whatever they take out. Whether that is actuality based on studies, I dont know.
This post was edited on 4/16/24 at 4:59 pm
Posted on 4/16/24 at 5:32 pm to secfballfan
quote:
but I do know money and markets- as well as the best mechanic knows cars, it is all I do.
quote:
So here is another fun fact, Cathie Wood's ARKK innovation fund, that anyone who watches CNBC knows is perhaps the most hyped fund and fund manager for the past two years has underperformed EVERY major index since its 2014 inception, yet it generates over $100M a year in fees alone. Marketing is a powerful thing, but numbers never lie.
Thanks. Next big revelation? Water is wet.Posted on 4/16/24 at 5:44 pm to Ghandi
quote:
To let you know that it's a bad sign if a stock pays dividends because Berkshire Hathaway doesn't pay a dividend, even though Warren Buffett's largest holdings pay dividends.
Another thing about Buffett—he is sitting on piles and piles of cash because he says he can’t find many good investments out there.
This post was edited on 4/16/24 at 5:46 pm
Posted on 4/16/24 at 8:27 pm to Saunson69
quote:
The thing about dividends is that it ends up being so little really unless you have a million in your investing account which no one my age does. The theory is that dividends are not a net positive. They are taking cash out the balance sheet to pay investors which will lower market cap by whatever they take out. Whether that is actuality based on studies, I dont know.
Reinvesting dividends generates typically around 50% more growth over time. There are also long stretches where dividend payers and growers substantially outperformed growth stocks. The fact that that hasn’t been the case for a decade may suggest some reversion to the mean eventually.
Posted on 4/16/24 at 8:32 pm to SloaneRanger
quote:
Another thing about Buffett—he is sitting on piles and piles of cash because he says he can’t find many good investments out there.
Alternatively he is not selling his stocks, so indecision can also be spun as a positive signal. He also bough around $9.3B of BRK stock back in 2023, another positive sign for his own portfolio.
You could also argue he’s just reinvesting the interest from their $164B cash position.
Warren seems a bit indifferent on the current market IMO.
Posted on 4/16/24 at 10:43 pm to Ghandi
quote:
Berkshire Hathaway's Top Holdings PAY DIVIDENDS. Including by far his largest holding AAPL. Berkshire Collects 2.1 Billion a year in dividends from AAPL,KHC,BAC alone. The S&P 500, Dow Jones, & Nasdaq all pay Dividends (SPY,DOW,QQQ).. Did you not buy NVDA a year ago because it pays a dividend and "that's a bad sign" ? AAPL and MSFT have paid dividends for years, they are two of the best performers over the last decade. You might just want to delete this thread since I'm the only one that's read it.
I was going to respond to this guy but then I read this post. What a mic drop
I do find it funny that OP thought the money board hasn’t heard of these points befor.
This post was edited on 4/16/24 at 10:45 pm
Posted on 4/17/24 at 7:57 am to secfballfan
quote:
Dividends are a good sign. Nope, not really.
Silly, silly take.
Dividends can certainly be bad. Dividends can also be good. It all depends on that specific company at that specific time.
A large, stable, profitable company should certainly distribute some of that profit to the owners. Yes, the analysis should be, "Can we make more on this dime by reinvesting it?" If a company is paying a dividend because it is stable and profitable, that is good. If a company is paying a dividend to artificially bolster its share price, that is probably a bad sign.
YMMV
This post was edited on 4/17/24 at 7:58 am
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