The Mystery of Dividend Preference

The risk you have is that the value could drop in the future, so a bird in the hand is worth 2 in the bush possibly.

 

I’ve powered thorough like 6 bottles of wine this arvo, along with cigars. I could explain this to you but not in writing.

Question is, when is @Nodrog going to host the PC shareholders jamboree? I’d be happy
To spend money to shout the old boys @SatayKing @truong @Nodrog

 

Will this offer still stand when you’re sober? Besides I’ve got expensive taste in wine, not sure you could afford ALDI medal winners.

I haven’t drank much alcohol for a few days, got an operation on Tuesday.

 

@truong, would your meditation shack be a suitable venue for this?

 

Absolutely. I’ll bring the wine. If we can lock in 4-6 enthusiasts I’m there. I’d love it.

Best “seminar” money ever spent

 

Are you referring to “wine” enthusiasts?

 

If so, my hand is up .

 

Visitors are sparse so you’re most welcome. This one could seat a few, including my local friend (pictured here) who wouldn’t want to miss this event.

 

Count me in. I will start drinking wines from today to practise

 

I have about 40 years more practice than you .

I hope that counts .

 

Trust all goes well and you quickly recover.

 

Another week, another story about how delusional dividend investing is...

An Analysis of the Thornhill Method — Part 1: The Dividend Delusion – Ordinary Dollar

I left a comment at the bottom as it seems a little misunderstood.

 

Nicely done.

 

Preparation for how tax policy is likely to impact dividend policy was the point I wanted to make when starting this thread, But I didn't follow through because I lost interest with all the emotional response supporting pre-conceived ideas. The same emotional arguments and response seem to plague this topic wherever it is discussed on the internet.

I guess I should make another attempt at the real point. (the point I want to make so people can prepare if tax policy and hence dividend policy changes in this country occur.)

Mathematically you should be indifferent to capital v’s income unless there is a tax or transaction cost favouring one over the other.

Change the tax arrangements and you will change financing (including payout ratio) arrangements for companies.

Lets consider AFIC on clientele thinking basis. Their clientele are mainly shareholders who probably currently enjoy a zero or 15% tax rate on income - Income distribution makes sense under current tax policy. If that clientele is in the future to face a flat 30% on income but a zero or 10% on capital tax rate. They may well decide very logically and in shareholders interest to cease dividends and retain all funds or distribute via buy backs.

If you have got your head around income/capital indifference than the above change of dividend policy should not worry you one bit – in fact you should be appreciative of them acting in their clienteles best interest and just commence creating your own dividend by selling – ala the Buffet example posted earlier in the thread.

Dividends are just one part of the source and use of funds in the financing equation of listed equities. In the big picture a change to the mix that halves dividends is not a big change. (I.e. halve the dividend and increase buybacks and/or reduce financing cash flows and hence increase internal growth.)



Tax policy is most likely changing – Dividend policies are likely to follow – get yourself in front of the ball by understanding return type indifference - OR DON’T – your choice.

 

Probably my doing. Apologies for that. I think it’s an age related hormonal thing so please make allowances for me at times.

As much as I love dividends I’m not wedded to any strategy if it means we might be penalised taxation wise or whatever. I think even Thornhill may have said if Australian dividends were taxed like in the US then one would take a different approach?

So please hit us with all your thoughts. Minimising tax is one of my favourite interests.

Putting behavioural issues aside you’re correct of course in what you say. For example younger FIRE types who planned to live off franked dividends will be hard hit given their likely lower income under Labor’s policy. However if they were to top up dividends by periodically realising some growth capital the excess franking credits that would otherwise be lost would then cancel out any resultant capital gains tax. Tax loss harvesting would also be worth considering to avoid having to pay tax on future capital gains needed to fund lifestyle.

Plenty of ways to still live the life of FIRE tax free including not wasting franking credits should Labor succeed in implementing their proposals.

 

Its not about minimising tax.

Its simply about understanding that if tax policy moves dividend payouts lower in Australia its no big deal.

You won’t have to save double your capital to live if dividend yield moves from 4% to 2% – your sequence of return risk will be just the same if you spend your 2% dividend plus spend 2% of the capital.

Chasing high yield (REITS, High dividend stocks, junk bonds etc) because you believe you have to only spend income to protect your nest egg would be a mistake – it just decreases your diversification.

Things are evolving - best we evolve with them, me thinks.

I know you get it I see you adapting and evolving, and I get your behavioural aspect points. But if we don't chew the fat it would be pretty boring around here, all they seem to to talk about is bloody property, I wish they would get there own forum.

 

I know, but it’s a bit of extra fun for me. I want it all.

Greed is good ...
Nodrog Gekko

 

Ain't for want of trying.

 

Cracked me up.