Hi Austin. Personally, I used to be very interested in dividend stocks. What eventually made me change my strategy to growth investing was just the math of it. An average non risky yield would be under 5%, and the really great businesses only have a yield between 1-3%. Let’s be generous and say you buy a bunch of businesses with a 3% average yield. Even if you have $500,000 in dividend stocks, that is only $15,000 a year in dividends. That isn’t even enough to pay rent on a one bedroom apartment in many places. You have to have at least a million to get anywhere, unless you own all REITs and BDCs and stocks with K-1 tax forms. Which then never grow at all because they are putting all their money into paying out the dividend. And then (unlike a 1-2% yielder like AAPL or MSFT), you have to worry about a dividend freeze or cut. Once I ran the math it would just take too long. I switched strategy in April 2020, after the COVID crash, and was lucky enough to put a good bit of my $300k dividend portfolio proceeds into TSLA. Witching 16 months or so, my portfolio was over 1 million. That would have taken decades with dividends. I just think it takes too long for most people. What some dividend investors do is practice “geographic arbitrage” by moving to a country like Thailand or Portugal where the cost of living is a third as much, so then their $15,000 a year in dividends allows them a decent living.
Question of the week: What would make you go all In on a dividend growth style portfolio?
Hi Austin, curious to know -- what website are you using to track your portfolio? those screenshots look nice!
Hi Austin. Personally, I used to be very interested in dividend stocks. What eventually made me change my strategy to growth investing was just the math of it. An average non risky yield would be under 5%, and the really great businesses only have a yield between 1-3%. Let’s be generous and say you buy a bunch of businesses with a 3% average yield. Even if you have $500,000 in dividend stocks, that is only $15,000 a year in dividends. That isn’t even enough to pay rent on a one bedroom apartment in many places. You have to have at least a million to get anywhere, unless you own all REITs and BDCs and stocks with K-1 tax forms. Which then never grow at all because they are putting all their money into paying out the dividend. And then (unlike a 1-2% yielder like AAPL or MSFT), you have to worry about a dividend freeze or cut. Once I ran the math it would just take too long. I switched strategy in April 2020, after the COVID crash, and was lucky enough to put a good bit of my $300k dividend portfolio proceeds into TSLA. Witching 16 months or so, my portfolio was over 1 million. That would have taken decades with dividends. I just think it takes too long for most people. What some dividend investors do is practice “geographic arbitrage” by moving to a country like Thailand or Portugal where the cost of living is a third as much, so then their $15,000 a year in dividends allows them a decent living.