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Sorry, Dividend Investors Are Not Stupid

Published Mon, 20 May 2019 04:52:03 -0400 on Seeking Alpha

I recently read this post on The Retirement Café. It's a fine blog for sure penned by Dick Cotton. Here's The Mystery of The Dividend Preference and the 'Spend Only' Strategy.
First, let's set the stage, from that article.
A good many retirees seem to be enamored with the "Spend Interest and Dividends Only" strategy for spending down their retirement savings. The foundation of this strategy is a preference for the value of a dollar generated from dividends over the value of a dollar generated from the sale of stock, or capital gains.
Let's move on to the statement that for my money, is largely false and based on unproven or 'unprovable' assumptions.
Hartzmark thinks dividends fall under the category of mental accounting. He describes a "free dividend fallacy", in which investors view dividends as a source of return that is independent of the price of the stock when in reality the price of the stock is immediately reduced by the value of the dividend when it is paid. This fosters the mistaken belief that dividends are the same as bond interest.
I've been around investors for many decades. I've been writing on Seeking Alpha for quite some time. I was an advisor at Tangerine Investments for over 5 years. In all of those years I never came across an investor who described their dividends as 'free money.' I was never given the impression that an investor did not know where 'the money came from' to create that dividend. Read my many, many dividend-focused articles that... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
BLACKROCK 454.95   17.1 26.55 13.20 3.00
VANGUARD DIVIDEND APPRECIATION ETF 114.85   0.0 0.00 0.00 1.65
APPLE 197.87   16.6 11.89 3.08 1.59
BERKSHIRE HATHAWAY B 214.20   0.0 0.00 0.00 0.00


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