I would no more buy a stock without a dividend than I would go to work at a job that didn’t pay a salary but said that at the end of my employment period I might collect payment that might or might not provide an adequate recompense for my time and efforts.
I understand that many investors prefer the tax benefit of deferring capital gains. They are persuaded that the enterprise value will always be reflected in the share price and that there will always be another investor waiting to buy the shares at a higher price. (Berkshire Hathaway is an example.) That may be true, but I prefer to be paid along the way because there is always the risk that the share price will be lower than I expect at the time I need the money.
This is especially true for many “growth stocks” which pay no dividends and aren’t yet profitable. They tend to borrow a lot of money to grow in the expectation that the investment will eventually pay off profitably. Many of these are in high-tech areas that can be disrupted by new technology, as we have seen many times over the past 30 years or so.(Anyone remember Wang computers or Lotus 1-2-3?) The NASDAQ bear market is showing that investors are losing confidence in these stocks as interest rates rise.
My grandmother began investing in the 1920s and taught me the value of dividends. In fact, her nickname for me when she introduced me to her friends was “My Little Dividend.”
My conservative approach is often pooh-poohed by the high fliers who are bored by old-fashioned companies that pay a reliable dividend. But maybe the market is finally coming around.
https://www.wsj.com/articles/search-for-yield-pushes-investo…
**Search for Yield Pushes Investors Into Dividend-Paying Stocks**
**Shares offering dividends race past S&P 500, growth stocks in 2022**
**By Akane Otani, The Wall Street Journal, May 5, 2022**
**Investors seeking shelter from volatility are turning to a part of the markets that had largely been overlooked last year: dividend-paying stocks.**
**Shares of companies paying big dividends to investors have trounced practically everything else this year.**
**The iShares Core High Dividend exchange-traded fund, which tracks 75 such stocks, is up 6.4% this year. That puts the fund far ahead of the S&P 500, which is down 9.8% in 2022....**
**Many dividend payers are in industries like utilities, telecommunications, and consumer staples, which consumers tend to rely on year-round, regardless of the economic environment. That has made them especially attractive to investors who are worried the Fed won’t be able to combat inflation without significantly raising unemployment....** [end quote]
Fidelity and Vanguard both have mutual funds and ETFs that focus on dividend paying stocks.
Wendy
