Money For the Rest of Us
Does Dividend Investing Still Work?
Feb 14, 2024
This podcast explores the performance of dividend-paying stocks compared to non-dividend-paying stocks over various time periods. It discusses the reasons behind the recent outperformance of non-dividend-paying stocks, the impact of dividend smoothing, and the role of payout ratio and return on equity in dividend strategies. The podcast also highlights the benefits of including dividend strategies in a portfolio, such as stability and diversification, and mentions specific investments and tools like LinkedIn Jobs and Betterment.
28:05
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Quick takeaways
- Dividend growers and initiators have historically outperformed dividend cutters or eliminators.
- Non-dividend paying stocks have outperformed all other categories in the past 20 years, attributed to growth companies' ability to generate higher profits and the rise of indexing.
Deep dives
Dividend Investing and its Impact on Stock Prices
When companies like Meta initiate or raise dividends, it signals their confidence in long-term prospects. Dividend smoothing is a common practice, where companies aim for stable payouts and increase dividends only when they can sustain them. Research shows that dividend growers and initiators outperform dividend cutters or eliminators. However, over the past 20 years, non-dividend paying stocks have outperformed all other categories, including dividend growers and initiators. This may be attributed to growth companies' ability to generate higher profits and the rise of indexing, which has shifted investor preferences.
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