Free Dividend FallacyWhy Dividends Don't Increase Your Wealth

High dividend stocks are all the rage. With bond yields at historic lows, many tout the alleged benefits of stock dividends. What many fail to understand, however, is that dividends are not free. Dividends simply give back to investors what they already owned. In fact, the price of a stock, etf, or mutual fund is mechanically lowered by the exact amount of the dividend. A $1 dividend on a $100 stock will see the stock price lowered by the exchange to $99.

Low bond yields and interest rates cause some investors to move to high dividend paying stocks. This is particularly true for those in retirement. It scares us to sell shares to generate retirement income, particularly when the market is down. In this article we will cover the following concepts, all related to what is known as the Free Dividend Fallacy:

1. How stock dividends are fundamentally different than interest from bonds;
2. How dividends affect the price of a stock, ETF or mutual fund; and
3. Why Spending dividends in retirement does NOT protect us from sequence of returns risk

Resources mentioned in this video:

The Dividend Disconnect: https://poseidon01.ssrn.com/delivery....

An analysis of dividendoriented equity strategies: https://www.vanguardcanada.ca/documen...

Tools & Resources

My Book (of course): https://amzn.to/2MsRJ9B
Personal Capital: https://go.robberger.com/personalcap...
M1 Finance $30 Bonus: https://go.robberger.com/m1financebo...
Best Investment Tracking Apps: https://bit.ly/3wSbKZa

Portfolios

1⃣ 3Fund Portfolio: https://bit.ly/3yT6hmO
2⃣ Merriman Ultimate Buy & Hold Portfolio: https://bit.ly/3g9qtse
3⃣ Ray Dalio All Weather Portfolio: https://bit.ly/3cbzdwF
4⃣ Warren Buffett Portfolio: https://bit.ly/3pdI8mm

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

I'm also the author of Retire Before Mom and DadThe Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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