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My personal opinion is that retail investors love dividend stocks and they are more expensive than non-dividend stocks. Further to this, I have strong preferen

My personal opinion is that retail investors love dividend stocks and they are more expensive than non-dividend stocks. Further to this, I have strong preference for firms which re-invest their cash flow resulting in capital gains which is much more tax efficient than a dividend.

zer0tonin 7y ago
> My personal opinion is that retail investors love dividend stocks and they are more expensive than non-dividend stocks. This is absolutely not true, there's plenty of stocks around here with low P/E ratio and dividends. You just have to look outside of tech to find them.
- twobat 7y ago
  Examples?
  - starlightfury 7y ago
    STWD
    - hrez 7y ago
      it's REIT, with all the tax etc implications
  - tres 7y ago
    kr & wba are two that have what I consider a good P/E and a good dividend.
- Blackstone4 7y ago
  I made a generalization so there will be counter examples and I appreciate that some stocks/sectors will have attractive dividends. I would put REITs in the expensive dividend-focused sector... The main issue I have with a dividend paying stock is that they pay corporation tax and then I pay income tax on the dividend....with a group which re-invest its earnings, I do not pay income tax on that and if I need cash, I can sell stock and pay capital gains tax at a lower rate. The main issue with dividend stocks is that when the dividend gets cut there's forced seller by the dividend ETFs and stared retail investors so the drop in share price gets exacerbated which is unfortunate.
anonu 7y ago
I think retail guys love div stocks because they don't realize that when a div gets paid the stock price drops by the same amount. You wont't believe how many people think its just "free money". You even see strategies where people buy the stock before ex-date and sell after. Bonkers. I would agree with you that div stocks are more expensive on a Price-to-Earnings basis. Check this comparison: https://pages.etflogic.io/?compare=DVY|SPY|XLU https://pages.etflogic.io/?compare=DVY|SPY|XLU High yield (3%+) div ETFs like DVY and XLU are trading near 25 P/Es whereas the S&P is closer to at 22 PE yielding just above 1%. As interest rates tick down people look for income/yield. So high div stocks get bid up because of this
- Sohcahtoa82 7y ago
  Could you make money by buying a div stock a bit of time before the dividends are distributed, but then sell BEFORE dividends, then short it until after dividends and people sell?
  - anonu 7y ago
    Good remark. I always tell people that a trade exists because a trade exists. In this case you're trying to game the "dumb" money. Question is how much alpha is there? If any, is it arbitraged out by people who have made the same observation as you? So something that worked in a backtest may cease to work when you implement it. Stock splits are famously positive alpha events. The mere fact that a stock has now become more "affordable" because of a lower per share price causes people to buy it. But I don't think any professional investor in their right mind would trade such a strategy. The pre ex date div strategy you suggest may be more relevant because there's a higher frequency of events. The effect may be more pronounced in more "retail" investor focused names. I wouldn't trade it in its own. But maybe group it together with a suite of other signals in a stat arb like strategy.
  - hrez 7y ago
    If you short on div.date you are paying the dividend.
mdorazio 7y ago
I don’t disagree, but the question was specifically about passive income. Buying and selling stocks isn’t what I would consider passive income since it’s not recurring. As with most things, there’s a tradeoff for the payout schedule. I’m perfectly willing to take the small total return hit in exchange for regular cash injections I can use for other things. Of course, my portfolio is more than just dividend stocks, but it’s a good passive income source.

zer0tonin 7y ago

> My personal opinion is that retail investors love dividend stocks and they are more expensive than non-dividend stocks. This is absolutely not true, there's plenty of stocks around here with low P/E ratio and dividends. You just have to look outside of tech to find them.

twobat 7y ago
Examples?
- starlightfury 7y ago
  STWD
  - hrez 7y ago
    it's REIT, with all the tax etc implications
- tres 7y ago
  kr & wba are two that have what I consider a good P/E and a good dividend.
Blackstone4 7y ago
I made a generalization so there will be counter examples and I appreciate that some stocks/sectors will have attractive dividends. I would put REITs in the expensive dividend-focused sector... The main issue I have with a dividend paying stock is that they pay corporation tax and then I pay income tax on the dividend....with a group which re-invest its earnings, I do not pay income tax on that and if I need cash, I can sell stock and pay capital gains tax at a lower rate. The main issue with dividend stocks is that when the dividend gets cut there's forced seller by the dividend ETFs and stared retail investors so the drop in share price gets exacerbated which is unfortunate.

anonu 7y ago

I think retail guys love div stocks because they don't realize that when a div gets paid the stock price drops by the same amount. You wont't believe how many people think its just "free money". You even see strategies where people buy the stock before ex-date and sell after. Bonkers. I would agree with you that div stocks are more expensive on a Price-to-Earnings basis. Check this comparison: https://pages.etflogic.io/?compare=DVY|SPY|XLU https://pages.etflogic.io/?compare=DVY|SPY|XLU High yield (3%+) div ETFs like DVY and XLU are trading near 25 P/Es whereas the S&P is closer to at 22 PE yielding just above 1%. As interest rates tick down people look for income/yield. So high div stocks get bid up because of this

Sohcahtoa82 7y ago
Could you make money by buying a div stock a bit of time before the dividends are distributed, but then sell BEFORE dividends, then short it until after dividends and people sell?
- anonu 7y ago
  Good remark. I always tell people that a trade exists because a trade exists. In this case you're trying to game the "dumb" money. Question is how much alpha is there? If any, is it arbitraged out by people who have made the same observation as you? So something that worked in a backtest may cease to work when you implement it. Stock splits are famously positive alpha events. The mere fact that a stock has now become more "affordable" because of a lower per share price causes people to buy it. But I don't think any professional investor in their right mind would trade such a strategy. The pre ex date div strategy you suggest may be more relevant because there's a higher frequency of events. The effect may be more pronounced in more "retail" investor focused names. I wouldn't trade it in its own. But maybe group it together with a suite of other signals in a stat arb like strategy.
- hrez 7y ago
  If you short on div.date you are paying the dividend.

mdorazio 7y ago

I don’t disagree, but the question was specifically about passive income. Buying and selling stocks isn’t what I would consider passive income since it’s not recurring. As with most things, there’s a tradeoff for the payout schedule. I’m perfectly willing to take the small total return hit in exchange for regular cash injections I can use for other things. Of course, my portfolio is more than just dividend stocks, but it’s a good passive income source.