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Originally Posted by lewdog
Honest questions here and I'll start you off with this.
How will you know that these stocks are not going to go lower as you stated above?
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I don't. But the things that initially knocked them down aren't getting any worse, and are indeed subsiding. They just haven't gone up because new things have arisen. But I don't know that they'll do better or worse than other stocks going forward.
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Originally Posted by lewdog
Cash dividends reduce the size of a company's balance sheet and paying these out has the company lose part of its liquid assets. What if a beaten down company can't get it's cash flow back? What happens to dividends for companies who never return to glory?
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Yeah, but there's a market that likes dividend stocks for income reasons. I can't find any research at the moment that says that the net influx of those investors will push the price up, but I do know that cutting a dividend will drive a price down as those folks leave. (I have sad experience with that on GE and T.)
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Originally Posted by lewdog
"Investing in the company's future and growth increases the value of the stock as well as expands your returns. That's exactly why high yields should not be chased as they do not reflect well on a company's plan for growth in future returns. This is why you shouldn't only buy dividend stocks."
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I'm not only buying dividend stocks. However, at my stage of life I'm not trying to hit home runs. I'm just trying to get on base. Dividends may offer lower growth, but they also generally offer lower risk due to the types of companies that pay them. I'm willing to accept lower growth prospects in exchange for lower risk going forward.
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Originally Posted by lewdog
You do know that dividends come right off the stock price? A dividend is NOT a bonus. When dividends are paid out, the stock price decline in the same amount of the dividend.
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Yeah But I don't have to sell the stock to get the income. I like that.
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Originally Posted by lewdog
Dividends can be a part of a winning plan but IMO you must focus on blue-chip companies that are proven. Given your timeline, I wouldn't risk it on ANY other than great companies that pay a dividend.
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I think most companies that have offered dividends have been stable. We just got rocked by an anomalous event in 2020. This is why I have the theory that those companies will at some point decide that they need to start offering them again. The hotel chains are the ones that I think will get back to normalcy soonest, companies like MAR and H and HLT. Those are big companies that I think are past the crisis and their stock prices are above where they were in February of 2020. I think they're past due to start paying dividends again.
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Originally Posted by lewdog
You must also not get into the habit thinking that high dividend paying companies will out pace growth stocks over the long term. Many growth stocks that have amazing growth and stock returns, pay no dividends. Granted your timeline is different but this is a statement for the general masses reading this thread.
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Agreed. I doubt that they will outpace growth stocks. My plan is to keep growth stocks in my IRAs, which I hopefully won't tap into (other than RMDs) until I'm 80. They're often more volatile, but will grow more. In my investment accounts that will provide my income during my first 15 years of retirement, I like dividend stocks that generally have lower risk and spin off cash for me so I can sell them off slower.
Of course, the painful thing is that some of those dividend companies completely tanked in 2020 and aren't back. But I think they'll get back to some semblance of normalcy at some point. The cruise ships are running again, demand for hotels is high, people are back in the malls, and the airlines can't keep up with demand.