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Talking Real Money - Investing Talk

Dividend Strategy Debunked

Talking Real Money - Investing Talk

Don McDonald

Investing, Education, Business, How To

4.5810 Ratings

🗓️ 6 April 2023

⏱️ 18 minutes

🧾️ Download transcript

Summary

Many investors seem to believe owning a portfolio of dividend-paying stocks is a safe and effective way to create retirement income. Are there better ways to create investment income in retirement? We explore the evidence. Then, we hear from two listeners: What should be done with a windfall that will eventually go into an IRA? A trick to avoid the "pro rata rule" for backdoor Roths. Learn more about your ad choices. Visit megaphone.fm/adchoicesQuestions? Comments? Click!

Transcript

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0:00.0

Reality Radio for a really great future.

0:08.0

We're talking real money.

0:10.6

We hear from a lot of people, a lot.

0:14.1

And you hear it, even if you don't listen to this show.

0:16.7

If you watch financial television or read the financial press a lot of a lot of proponents out

0:23.7

there of a dividend investing strategy that is where you buy only stocks that pay dividends or

0:32.1

higher dividends and you you ignore all the ones that don't pay dividends,

0:37.9

and you create an income stream from that.

0:40.8

Now, on the face of it, it makes perfect sense.

0:45.0

Oh, okay, it's just like getting income from my bonds.

0:48.4

I'm just going to collect the dividends from the stock,

0:50.5

no matter what they do, and I'm going to come out all right.

0:53.4

Well, you might,

0:55.7

you might not. It's one of those kind of, it depends on what the future looks like.

1:00.3

But as a strategy, does it make sense based on evidence, based on academic research?

1:09.8

We have turned to a lot of people to answer this question.

1:13.9

And Tom, what's the answer? The answer really is no. The answer is no twice. Number one, in terms of a

1:21.2

strategy to sort of chase down the higher dividend paying stocks and think you're going to make more

1:27.2

than the market

1:27.9

does not that and we'll talk about the papers to support that and then the second part of this

1:34.2

this is what came up in a recent question is you know why not just have a portfolio of these

1:40.6

harvest this as my income in retirement. And again, the numbers don't pan out.

...

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