One way to look at dividend stocks are: The higher % dividend payouts, the more risk the market associates with the stock. For oil companies (for example), forecasted dividends might be 15-20% yoy/relative to stock price, but if market sentiment shows faith in company - lowering risk (for example oil price rising or staying steady, or fundamentals indicating a rise in oil price) you might see the stock increasing to where dividends are 10% of stock price, making you money on both dividends and growth. This ofc. is granted that you know what to look out for. I always advise people to invest in index funds unless they’re willing to spend 10.000+ hours studying the markets, but if you know what you’re doing - making 20-50+%/y is not impossible granted you have the properties needed to become a good stock trader.
I have a mix of dividend and growth focused stocks and ETFs. Im shifting toward more dividend focus to weather any potential downturns while still maintaining my growth trajectory. Mine has really accelerated to outpace my income over the last 5 years on average even with ending 2022 flat. I'm not ready to live off it yet but in another 10 years I'm hopeful I can.
Focusing on growth or dividends solely based on those factors are unoptimal for investment. Personally I look at dividend stocks as a bonus in the case where price takes time to play out, or as a safety net if market conditions turn unfavourable, but I buy stocks mainly based off of 1year targets made by professional analysts and technicals. Holding stocks for growth is really only a good idea if you buy safe stocks (coca cola, microsoft etc.), or if you have proper education in fundamental analysis and idea generation. Most new retail trades buy popular stocks because those are the ones they hear about, pennystocks making 30% moves in a week making headlines in financial newspapers, when in reality you should never limit yourself in trading (only trading certain timeframes or types of stock (dividend/growth)) as markets always evolve and if you want to be successful you have to evolve with the market, as we both know your $3.000 isn’t controlling the market.
There are still several factors that can come into play, but I understand where you're going with this. I'm more of a scenario 4 investor, but the reasoning for scenario 1 or 2 for younger investors is still sound. Great comparisons JP.
Agreed there are a lot of variables that come into it and time horizon/risk tolerance is a big part of that. As long as people invest consistently into high quality positions thats all that matters. Thanks for the input!
In general, people with a longer investing horizon should concentrate on growth to help build the core of what will later become the snowball. The timing of migrating into a more yield-focused portfolio is different for everyone, of course. That said, I don't really see a problem with younger investors making some dividend-focused investments as part of their overall plan -- especially in well-managed funds that have a solid record of total returns that includes a healthy yield.
Agreed 100% couldn’t have said it better myself. I think it motivates younger people to have some dividend income coming in as long as they aren’t falling for yield traps and have high quality stocks or etf’s with a solid dividend CAGR and healthy yield but mainly a good total return overall. Thanks for the input!
@@JP_DividendsI’d really encourage anyone to look at stable BDCs as a „core“ when starting to invest (eg Ares or MAIN). Sure, the growth might not be as high as from let’s say Nvidia, but it’s so motivating to see the dividends come in and it secures you a cash flow, which makes you more confident into your investments/or cover basic bills. Personally that really helped me when starting a few decades ago.
now imagine that those dividends are on automatic reinvestment that snowball effect of dividends will skyrocket to the moon. that is if you know which ETFs or stocks that you are willing to put into that can yield you a higher dividends per month and auto reinvest and let the cycle run through
....but if I have no intention of ever selling my holdings, what do I care about the total return? At that point, I'm accruing value just to ogle at it like its a trophy in a window, rather than put that money to use.
I mean you can do whatever works best for you I don’t care haha. But you should care about total return because long term you can convert that to more dividend income. If you take that extra $230K at the end and invest it into dividend paying stocks at a 5% yield then you would have more dividend income a year than purely focusing on higher yield. Like I said though whatever works best for you.
One way to look at dividend stocks are:
The higher % dividend payouts, the more risk the market associates with the stock. For oil companies (for example), forecasted dividends might be 15-20% yoy/relative to stock price, but if market sentiment shows faith in company - lowering risk (for example oil price rising or staying steady, or fundamentals indicating a rise in oil price) you might see the stock increasing to where dividends are 10% of stock price, making you money on both dividends and growth. This ofc. is granted that you know what to look out for. I always advise people to invest in index funds unless they’re willing to spend 10.000+ hours studying the markets, but if you know what you’re doing - making 20-50+%/y is not impossible granted you have the properties needed to become a good stock trader.
I have a mix of dividend and growth focused stocks and ETFs. Im shifting toward more dividend focus to weather any potential downturns while still maintaining my growth trajectory. Mine has really accelerated to outpace my income over the last 5 years on average even with ending 2022 flat. I'm not ready to live off it yet but in another 10 years I'm hopeful I can.
Focusing on growth or dividends solely based on those factors are unoptimal for investment. Personally I look at dividend stocks as a bonus in the case where price takes time to play out, or as a safety net if market conditions turn unfavourable, but I buy stocks mainly based off of 1year targets made by professional analysts and technicals. Holding stocks for growth is really only a good idea if you buy safe stocks (coca cola, microsoft etc.), or if you have proper education in fundamental analysis and idea generation. Most new retail trades buy popular stocks because those are the ones they hear about, pennystocks making 30% moves in a week making headlines in financial newspapers, when in reality you should never limit yourself in trading (only trading certain timeframes or types of stock (dividend/growth)) as markets always evolve and if you want to be successful you have to evolve with the market, as we both know your $3.000 isn’t controlling the market.
Great input I agree! Especially when it comes to retail investors buying overhyped stocks. Thanks for the comment!
There are still several factors that can come into play, but I understand where you're going with this. I'm more of a scenario 4 investor, but the reasoning for scenario 1 or 2 for younger investors is still sound. Great comparisons JP.
Agreed there are a lot of variables that come into it and time horizon/risk tolerance is a big part of that. As long as people invest consistently into high quality positions thats all that matters. Thanks for the input!
In general, people with a longer investing horizon should concentrate on growth to help build the core of what will later become the snowball. The timing of migrating into a more yield-focused portfolio is different for everyone, of course. That said, I don't really see a problem with younger investors making some dividend-focused investments as part of their overall plan -- especially in well-managed funds that have a solid record of total returns that includes a healthy yield.
Agreed 100% couldn’t have said it better myself. I think it motivates younger people to have some dividend income coming in as long as they aren’t falling for yield traps and have high quality stocks or etf’s with a solid dividend CAGR and healthy yield but mainly a good total return overall. Thanks for the input!
@@JP_Dividends Right on! Keep up the good work -- I enjoy your channel.
@@JG-DivMan Thanks will do and I appreciate the support!😎👍
@@JP_DividendsI’d really encourage anyone to look at stable BDCs as a „core“ when starting to invest (eg Ares or MAIN). Sure, the growth might not be as high as from let’s say Nvidia, but it’s so motivating to see the dividends come in and it secures you a cash flow, which makes you more confident into your investments/or cover basic bills.
Personally that really helped me when starting a few decades ago.
now imagine that those dividends are on automatic reinvestment that snowball effect of dividends will skyrocket to the moon. that is if you know which ETFs or stocks that you are willing to put into that can yield you a higher dividends per month and auto reinvest and let the cycle run through
Exactly! The snowball effect goes crazy.
....but if I have no intention of ever selling my holdings, what do I care about the total return? At that point, I'm accruing value just to ogle at it like its a trophy in a window, rather than put that money to use.
I mean you can do whatever works best for you I don’t care haha. But you should care about total return because long term you can convert that to more dividend income. If you take that extra $230K at the end and invest it into dividend paying stocks at a 5% yield then you would have more dividend income a year than purely focusing on higher yield. Like I said though whatever works best for you.