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harrison_wintergreen t1_iyf8yuo wrote

I'm not aware of any data on dividend stocks and inflation.

however,

(a) there's strong data showing that dividend stocks have advantages in bear markets (when the market declines over 20%). professor Jeremy Siegel has called dividend stocks 'bear market protectors' for this reason. you can see this phenomenon happening this year. the overall US market is down about 16% so far this year, but dividend oriented ETFs are doing better: HDV is up about 7%, SCHD is down only 4% DJD is about flat, SPYD is down only 1.5%

for this reason, Siegel recommended a mix of growth stocks and dividend stocks for a portfolio. growth stocks usually perform better in 'bull' markets (when the market is going up) and dividend stocks are superior in bear markets. you can see his advice in the book Stocks for the Long Run.

(b) there's also data showing dividend stocks tend to offer superior long-term performance. year to year? not always. but dividend stocks have offered superior performance over the majority of 20 year periods in the US market since 1928 and with lower volatility. https://www.heartlandadvisors.com/media/Insights/White-Papers/Dividends-A-Review-of-Historical-Returns.pdf

the higher-dividend stocks in theS&P 500 have also beaten the overall S&P 500 index over time, by over 1% year on average. https://www.wisdomtree.com/en-gb/-/media/us-media-files/documents/resource-library/whitepaper/the-dividends-of-a-dividend-approach.pdf

this sub will tell you to just buy a total market index, but they usually can't explain why or offer much in the way to data or justification. they also tend to hate dividend stocks, but again can't really articulate a sensible objection. the best they can come up with is 'dividends are a taxable event', which is fair to point out for a taxable brokerage. otherwise they just repeat the same gripes over and over again without any evidence.

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pancak3d t1_iyfd8vr wrote

These studies are retrospective. It doesnt really help to look backwards and say "the stocks that paid high dividends beat the SP500" -- you need to be able to predict and invest in the right stocks before the dividend is paid. I mean, it's akin to saying "the fastest growing companies last yesr beat the SP500" -- ok, great, but how can you know ahead of time exactly which companies those will be?

Now if you know of a high dividend ETF or some backtested strategy that has consistently beaten the total market, I'd be all ears!

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Grevious47 t1_iyfa8p4 wrote

I know you aren't talking specifically to me but just as part of the community I will say I don't dislike dividend stocks in a retirement account. I do dislike them in a taxable account just because they provide an unneeded tax drag on the investment as well as an increase to your AGI.

Also I think the asset class you are refering to is more typically called Value than Dividend. Yes a lot of companies that are in the Value class offer dividends but that isn't really what defines them right. Really you are talking just about large companies that have been around a while have a big market cap and don't reinvest all of their returns into themselves as growth because they just dont have that much to gain from growth anymore. Those companies do tend to be more stable yeah so overall they are going to dip less (and subsequently rise less).

The idea that avoiding volitility in a retirement account where you are regularly contributing and are still young though not sure if that is 100% the best strategy. Lets say you are in largely growth stocks and they dip 25% in value while the Value stocks only drop 5%. That is great for the Value stock holder if they are about to cash out...but if they are 30 years from retirement well, that 25% drop in share price represents additional shares that they can purchase before the inevitable rebound over that 30 years. Its not like that lower drop in the Value share price means that the Value shares will be 20% ahead from there on out, that isn't how it works.

I'm pro value funds in holdings and pro say even a 60-40 mix, but when you are in your 50s and a substantial market downturn could actually negatively affect your retirement. Then yeah it makes sense. But for a 20 year old putting their first $1k into a Roth IRA? Nah.

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