> I also don't fully understand the dividend investor mindset
That interesting, because I don't understand the mindset of investors who are just trading stocks like baseball cards. They don't seem to care what the company actually produce, just that the numbers tell them that the stock can sell for a little more next year.
Divided makes a lot of sense, because it keeps yielding money, for the same initial investment. So it's just extra money, but it's money you can actually spend. Sure you pay taxes on the divided, but you still hold the stock and can sell that at a late time.
Honestly I feel that it problems are the companies that never pay divided. The investors then depend on buy-backs or trading to recover their investment. This has created investors that do not care about the companies they invest in. The companies can go broke tomorrow and that's fine, as long as they can sell their stocks before it happens.
Studies have shown (take this with a grain of salt because I heard this from a podcast), that dividend stocks and non-dividend stocks have roughly equal returns in the end, with dividend stocks faring slightly worse.
This is because dividend stocks tend to appreciate less.
So taking $X in dividends every six months ends up being the same as selling $X of your portfolio every six months in the end.
Except that there are often different tax rates between capital gains and dividends. Even if there weren't tax rate differences, reinvesting dividends effectively compounds the tax rate annually, whereas the capital gains tax is a simple rate the year you realize the gain.
Though, in a tax-free retirement account, it's moot.
It is really just a matter of what a company does with its earnings. The options are: 1) invest in the business (including acquisitions, etc), 2) stockpile cash and 3) pay dividends.
That interesting, because I don't understand the mindset of investors who are just trading stocks like baseball cards. They don't seem to care what the company actually produce, just that the numbers tell them that the stock can sell for a little more next year.
Divided makes a lot of sense, because it keeps yielding money, for the same initial investment. So it's just extra money, but it's money you can actually spend. Sure you pay taxes on the divided, but you still hold the stock and can sell that at a late time.
Honestly I feel that it problems are the companies that never pay divided. The investors then depend on buy-backs or trading to recover their investment. This has created investors that do not care about the companies they invest in. The companies can go broke tomorrow and that's fine, as long as they can sell their stocks before it happens.