Investing Thread (Stocks, Crypto, Real Estate, Whatever)

[Martin Hash]

I can detect that - almost always bad to see high yield...I mean your vanilla quality dividend stock that’s been paying consistently for 20 years.

*I see know you mean zoombie companies - yeah, lots of them out there....but generally, what happens to a dividend from a well run company in a high inflation environment?

A dividend is only net wealth if the company had profit: no profit, dividend is a mirage.

I get that - but that doesn’t answer the question.

Dividends are paid out as a percentage so they're inherently inflation-adjusted.

[DBTrek]

I always check the (dividend) payout ration companies to see if they're value traps. There are a lot of companies that pay out more than they can afford to attract investors into (what seems to me to be) a pyramid scheme. If a company has a payout ratio over 50%, I'm out. Not touching it.

You may find stocks that pay high dividends, and have huge payout raitos - but I bet if you look at them they've been losing money forever. That's the scheme. See a $35 stock paying out $1.50 per share in dividends and a payout ratio of 85%? Next year it's a $32 stock. The next year a $28 stock. But investors will keep flocking to it because they see that fat dividend payment ... never realizing that they're consistently losing money on the stock price because they're only focused on those quarterly dividend gains.

You want to see something wild?
Go check the payout ration on AT&T (Ticker 'T')

[Zlaxer]

Let me put this another way - for [reasons], I am starting a new portfolio in a taxed account - assuming good dividend picks - will we get ass raped if inflation hits? How do good dividends behave in high inflation environments? Do dividends increase with inflation since corporate profits become more inflated? (as Hash stated). Or is it more likely dividends won’t keep pace with inflation?

[Martin Hash]

If you predict inflation, stay out of an IRA; go Roth.

[Zlaxer]

If you predict inflation, stay out of an IRA; go Roth.

You’re capped at a low annual contribution - and wife and I already max roths.

[DBTrek]

Let me put this another way - for [reasons], I am starting a new portfolio in a taxed account - assuming good dividend picks - will we get ass raped if inflation hits? How do good dividends behave in high inflation environments? Do dividends increase with inflation since corporate profits become more inflated? (as Hash stated). Or is it more likely dividends won’t keep pace with inflation?

I think the question you're asking is more complex than it initially appears. Maybe I'm misreading. Here, this quick checklist may help answer what you want to know.

1) Who sets dividends? The company sets dividends. So inflation has no direct effect on the amount of a dividend a company offers, unless the company decides it does.

2) Can dividend rates outstrip inflation rates? They *can*, but beware of high dividend value traps. Still, if inflation hits at 2-3% this year and your dividend is 4% or higher than the value of the shares you purchased, then congrats. You're still making positive cash flow. If the dividend rate is less than the inflation rate then you're not making positive cash flow, but at least you're losing value less quickly than someone with no dividend income.

3) Does inflation increase stock prices - Generally, yes. It increases all asset prices. Everything costs more when the money supply increases and the goods/services supply does not. So on that point, you get a double win. Your stock will probably go up (unless it sucks), AND you'll get quarterly dividends. Both of these factors will keep you well ahead of anyone who just banks their money and lets inflation steal its value.

Does that help answer what you're asking?

[Zlaxer]

Let me put this another way - for [reasons], I am starting a new portfolio in a taxed account - assuming good dividend picks - will we get ass raped if inflation hits? How do good dividends behave in high inflation environments? Do dividends increase with inflation since corporate profits become more inflated? (as Hash stated). Or is it more likely dividends won’t keep pace with inflation?

I think the question you're asking is more complex than it initially appears. Maybe I'm misreading. Here, this quick checklist may help answer what you want to know.

1) Who sets dividends? The company sets dividends. So inflation has no direct effect on the amount of a dividend a company offers, unless the company decides it does.

2) Can dividend rates outstrip inflation rates? They *can*, but beware of high dividend value traps. Still, if inflation hits at 2-3% this year and your dividend is 4% or higher than the value of the shares you purchased, then congrats. You're still making positive cash flow. If the dividend rate is less than the inflation rate then you're not making positive cash flow, but at least you're losing value less quickly than someone with no dividend income.

3) Does inflation increase stock prices - Generally, yes. It increases all asset prices. Everything costs more when the money supply increases and the goods/services supply does not. So on that point, you get a double win. Your stock will probably go up (unless it sucks), AND you'll get quarterly dividends. Both of these factors will keep you well ahead of anyone who just banks their money and lets inflation steal its value.

Does that help answer what you're asking?

For the most part - trying to find data for how dividends did in the 70’s - basically, as long as a dividend increases to match inflation, then I think it’s OK to hold them going into the collapse - sure profits may go down while consumer convulse, but I think it would correct itself shortly thereafter - of course that means staying out of consumer (non-critical) goods, like Apple, which I see shitting a brick when people have to choose between an iPhone upgrade or putting food on the table.

No one except for fools is keeping money beyond an emergency fund in a bank these days....

I’m trying to decide how to split gold and silver purchases with dividends... I can deal with dividends sputtering for a little while as long as they eventually get back on track, but am worried they may lag significantly behind inflation for >10 years.

[DBTrek]

[C-Mag]

See, Communism really is about Equity

[SuburbanFarmer]

This alone is worth all the madness.

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