“𝐓𝐡𝐞 𝐨𝐧𝐥𝐲 𝐭𝐡𝐢𝐧𝐠 𝐭𝐡𝐚𝐭 𝐠𝐢𝐯𝐞𝐬 𝐦𝐞 𝐩𝐥𝐞𝐚𝐬𝐮𝐫𝐞 𝐢𝐬 𝐭𝐨 𝐬𝐞𝐞 𝐦𝐲 𝐝𝐢𝐯𝐢𝐝𝐞𝐧𝐝𝐬 𝐜𝐨𝐦𝐢𝐧𝐠 𝐢𝐧.” — 𝐉𝐨𝐡𝐧 𝐃. 𝐑𝐨𝐜𝐤𝐞𝐟𝐞𝐥𝐥𝐞𝐫 💰

🙏It is a mesmerizing feeling when you see money hitting your account, out of thin air. You did not work for it; your capital did. Whole libraries have been written on how great dividends are, and many people build their strategy on dividends as a means of getting regular cash flow.

I'd like to make a case for why you should NOT focus on dividends alone.

𝙇𝙚𝙩'𝙨 𝙨𝙩𝙖𝙧𝙩 𝙬𝙞𝙩𝙝 𝙩𝙝𝙚 𝙗𝙚𝙣𝙚𝙛𝙞𝙩𝙨 𝙤𝙛 𝙙𝙞𝙫𝙞𝙙𝙚𝙣𝙙𝙨

👉Regular Cash Flow. Companies, especially mature companies, have a fixed schedule of (mostly) quarterly dividends. Predictable income.

👉Financially Healthy companies can afford to pay average dividends, however, I'll get back to this at the disadvantages. The average dividend yield of the $SPX500 (SPX500 Index (Non Expiry)) companies is 1.27%. Some don't pay at all, and others pay usually somewhere between 2%-6% $CVX (Chevron) pays 5% in a year, and it is among the higher ones.

👉Psychological benefits, reinforcing a sense of ownership, and seeing the fruits of your investments.

𝙒𝙝𝙮 𝙄 𝙖𝙢 𝙨𝙩𝙖𝙮𝙞𝙣𝙜 𝙖𝙬𝙖𝙮 𝙛𝙧𝙤𝙢 𝙙𝙞𝙫𝙞𝙙𝙚𝙣𝙙-𝙞𝙣𝙫𝙚𝙨𝙩𝙞𝙣𝙜 𝙘𝙤𝙢𝙥𝙖𝙣𝙞𝙚𝙨?

⛔Companies paying (high) dividends may lack opportunities to reinvest profits for higher growth, potentially limiting future returns.

⛔Companies paying extremely high dividends, usually above 7%-8% often cannot afford it. They are usually in some sort of financial trouble, and they need to compensate investors for high risk, so expect the stock price to decline. $IIPR (Innovative Industrial Properties Inc. A) over 13% dividend. I let you do the reading, but the company has been declining steadily in the past 5 years. Not a coincidence.

⛔Dividends are not guaranteed and can be reduced or eliminated, especially during economic downturns or company-specific crises. Yes, there are dividend Aristocrat companies that would never touch the dividend, unless they really have to. A recent example is $T (AT&T Inc) when they cut their dividends in 2022 after raising them every year for 25 years.

⛔Tax inefficiencies: Dividends are typically taxed in the year they are received, which can be less favorable than capital gains taxes that are deferred until sale. Also, in many countries, capital gains are taxed more favorably than regular dividend income, either by rewarding long holding periods or a lower tax category.

𝙒𝙝𝙖𝙩 𝙙𝙤 𝙄 𝙥𝙧𝙚𝙛𝙚𝙧 𝙞𝙣𝙨𝙩𝙚𝙖𝙙 𝙤𝙛 𝘿𝙞𝙫𝙞𝙙𝙚𝙣𝙙𝙨?

✅Capital Gains. I get to choose when I realize my gains, optimizing my taxes. 🤩

✅Stocks not paying a dividend usually reinvest everything to the business. They see it as a better return, and I should trust the management team. Top companies, such as $NVDA (NVIDIA Corporation) 🤩

✅Stock Buybacks: Companies repurchase their own shares, reducing the number of outstanding shares and increasing the value of remaining shares. Buybacks can be more tax-efficient than dividends for shareholders and signal management’s belief in the company’s undervaluation. If a company can buy back its own shares, that means they have cash reserves, it is a solid company. 🤩

💖For many modern investors, capital gains and stock buybacks may be preferable due to their tax advantages and potential for higher returns. However, every investor's situation is different, and in certain cases, Dividends are the answer! For me, not yet. I keep on focusing on undervalued companies and growth potential. I am not investing to get a single-digit dividend, I want to see real growth.💹🚀🚀🚀

Check out what you can learn from my investment journey:

📉𝙄 𝙡𝙤𝙨𝙩 𝙣𝙚𝙖𝙧𝙡𝙮 𝟵𝟬% 𝙤𝙛 𝙢𝙮 𝙨𝙖𝙫𝙞𝙣𝙜𝙨😭, 𝙝𝙚𝙧𝙚 𝙞𝙨 𝙝𝙤𝙬 𝙄 𝙩𝙪𝙧𝙣𝙚𝙙 𝙩𝙝𝙖𝙩 𝙛𝙖𝙞𝙡𝙪𝙧𝙚 𝙞𝙣𝙩𝙤 𝙛𝙞𝙣𝙖𝙣𝙘𝙞𝙖𝙡 𝙛𝙧𝙚𝙚𝙙𝙤𝙢

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💚 Invest smarter, not harder—copy my trades and watch your portfolio grow! 🚀

✅2023 - 54.58%

✅2024 - 54.1%

Gabor Fogarasi @fogi70

eToro Popular Investor 🏦

CISI Level3 Investment Certification

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