Baloney. I have been retired 17 years looking only at total return and withdrawing money from my portfolio to spend all that time. The two sets of data of interest are the total portfolio value as a function of time and the sequence of withdrawals over time. The two are related incorporating return by the simple arithmetic that over a period of time the end value is the beginning value plus what is gained by return less what is lost by withdrawals. Breaking that down to which is and which isn't dividends is irrelevant.This is a more interesting conversation than I anticipated back when I posted my first comments and called the anti-dividend crowd zealots.
The dividend as a forced sale is a fact on ex-dividend day, but price recovery seems to happen quite rapidly. In normal markets, it generally doesn't take 3 months of dividend accrual in the NAV for the price to recover (in SCHD, for example). I'm not sure what that means.
I also think total return is what we all get regardless of how we invest. I think being able to look only at that indicates a person who probably doesn't need their portfolio to provide for anything. Those of us not in that position can't ignore the income part of total return. It's always going to be an important factor in if we meet our goals or not.
In terms of mechanics, sure I have the dividends in my taxable account deposited directly to my checking account. It is convenient and makes sense in terms of taxes. I also might sell some shares and send the money to the checking account. One year we sent money from the checking account and bought shares. I have also taken withdrawals by gifting shares directly in kind to someone. That is still a withdrawal. We pull RMDs from the 401k. That involves selling the shares in the 401k but it is all the same in that case or a person can transfer in kind. We usually spend much of the RMD before what is left is even delivered to the checking account in cash. That happens by withholding enough in state and Federal tax withholding to pay the income tax due for the year. Paying taxes is spending in a cash management budget.
Don't mix up mechanics of cash management with financial planning and asset management.
Statistics: Posted by dbr — Fri Jul 26, 2024 2:05 pm — Replies 94 — Views 4522