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I do not care for the way the author presents this article about dividend paying stocks. It is clear that his views are biased in the way he assembles the information. The author misuses scattered and misleading statistical analysis and other's opinions to state his own opinion of all dividend paying stocks, as if the information was completely factual.
There are pros and cons of investing in dividend paying stocks and there are all risk levels of both dividend paying and non-dividend paying stocks. You can achieve full diversification in the market using either type of stock, independently or together. You don't need stocks from 100% of industries to create a diversified portfolio.
One example of the bias in the article - the author handpicked one large corporate name as an example of dividends not being safe - GE suffered through the great recession, due in large part to its financial subsidiary. The author could have picked from a sampling of stable dividend payers (such as those shown as dividend "achievers" or "champions") to study how many of these cut dividends. While I haven't taken the time to investigate the percentage of pre-2008 dividend achievers that cut dividends in 2008-2009, my guess is that it was a fairly low number.
I have a fully diversified portfolio of 30 dividend paying companies that include both growth and value names. 28 of the 30 have increased dividends for at least 10 years, throughout the great recession, several for in excess of 50 years. The portfolio's risk profile (26 of 30 investment grade companies) and volatility (beta of 0.70) is lower than the stock market in general, I don't claim that it has the same risk profile as bonds and don't suggest that it is a substitute. I do, however, have a great deal of confidence in a steady and growing income stream over my retirement from the portfolio.
I would just encourage others to not make decisions about dividend paying stocks based solely on a biased article such as this one.
I want 5 minutes of my life back. Fortunately, I figured out on the third slide that Daniel Solin is, in my opinion, a complete idiot when it comes the topic at hand. While some of his points are valid, they are, as noted, shallow at best.
I about rolled off my chair when he said only 53% of small cap stocks pay a dividend, focus on those and you'll ignore 47% of the stocks out there. No kidding. Wow. Penetrating.
Daniel, you want to do readers a service?? figure out if there's a SECTOR of the market that doesn't have a dividend payer in it. Then if you're only buying div stocks, you are truly "not diversified" because you're ignoring a sector - assuming that one believes that leaving out a single sector qualifies as being 'undiversified.'
About the only point I can completely agree with the author on is that you shouldn't limit your investments just to dividend-paying stocks since you could lose out on some good opportunities. His point that tax rates on dividends could change in the future is certainly not a reason not to take advantage of the preferential tax rates enjoyed on dividends now. At worst, even if tax rates on divdends were raised, they would become no higher than tax rates on interest income. As to investment returns, you can't lump all dividend paying stocks together and draw conclusions based on an "average". You have to be selective in the stocks you choose and not pick just the highest divdend yield as the basis for choosing the investment.
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