# Irish Dividends v UK Dividends



## Daddy Ireland (26 Jan 2018)

I have to say over recent years the yields on all bar a handful of Irish shares is pathetic.   Even our biggest companies are yielding poor dividends.   When contrasting this with the UK there are numerous top names yielding over 5%.   What is it about Ireland at all that company dividends are in such poor shape and I am excluding the banks here for obvious reasons.   The main banks in UK while not being in great shape have yields of approx or better than 5%.   Even allowing that sterling could weaken further is it not fair to say that buying UK stocks with good dividend cover and a good yield makes sense.  OK sterling could weaken by the dividend amount or more in the first year but sterling will bounce back if it does.  Can people see sterling at 90P or worse for very long.  Not me anyway.


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## joe sod (26 Jan 2018)

maybe its because we dont have any big dominant companies, no big pharma like GSK, no big oil like Shell, no big tech either they all foreign. The banks if they had of been managed properly should have been the dividend payers but instead they are still recovering from 2008. Also the UK does not have dividend taxes which encourages companies to pay out more in dividends as it goes straight to investors ( irish investors still must pay tax on uk dividends though).


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## Gordon Gekko (26 Jan 2018)

It’s a much bigger market with far more companies, simple as that.


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## dub_nerd (26 Jan 2018)

UK investments trusts are still the best tip I've got from askaboutmoney. Bought one the day of the Brexit vote, anticipating a temporary fall in both the share price and Sterling. Wasn't disappointed, even though Sterling fell a good bit further (from about €1.24 when I bought), the share is still up  10% in Euro terms since then (20% in Sterling),  and has paid a solid 4% dividend. Only wish I'd bought more, and still might.


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## DeeKie (26 Jan 2018)

dub_nerd said:


> UK investments trusts are still the best tip I've got from askaboutmoney. Bought one the day of the Brexit vote, anticipating a temporary fall in both the share price and Sterling. Wasn't disappointed, even though Sterling fell a good bit further (from about €1.24 when I bought), the share is still up  10% in Euro terms since then (20% in Sterling),  and has paid a solid 4% dividend. Only wish I'd bought more, and still might.


What one did you buy?


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## dub_nerd (27 Jan 2018)

DeeKie said:


> What one did you buy?


Not sure if I'm allowed mention it as AAM doesn't discuss particular shares. However, with the proviso that this is not a recommendation and it was a fairly random choice from the lists below, it was City of London, CTY.L. 

I used these lists from several Telegraph articles:

The funds that have returned more than 12pc per year - for THIRTY years
The investment trusts with the safest dividends to pay you an income
[broken link removed]


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## galway_blow_in (27 Jan 2018)

a prominent poster on this site believes dividend yield is irrelevant in terms of building wealth ( and they seem to be well read on the matter )

all about total return , how has the iseq performed compared to the FTSE this past number of years ?, when you convert sterling to euro , the iseq has outperformed the FTSE by a distance


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## joe sod (27 Jan 2018)

galway_blow_in said:


> a prominent poster on this site believes dividend yield is irrelevant in terms of building wealth ( and they seem to be well read on the matter )
> 
> all about total return , how has the iseq performed compared to the FTSE this past number of years ?, when you convert sterling to euro , the iseq has outperformed the FTSE by a distance



Yes but remember the iseq  still has not recovered from 2008,  I think it's one of the few European indices that has not got back to 2008 levels yet. If something drastic happened the food companies post brexit then iseq would be badly affected again. It's unlikely but the iseq is really too small and undiversified for a buy and forget investor, my own opinion albeit


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## galway_blow_in (27 Jan 2018)

joe sod said:


> Yes but remember the iseq  still has not recovered from 2008,  I think it's one of the few European indices that has not got back to 2008 levels yet. If something drastic happened the food companies post brexit then iseq would be badly affected again. It's unlikely but the iseq is really too small and undiversified for a buy and forget investor, my own opinion albeit



i know it hasnt regained its all time highs , i was comparing performance ( in euro terms ) in the past five years ( excluding dividends ) , according to google finance the euro denominated etf which tracks the ftse is up only 17% since february 1st 2013 , contrast that with the performance of the iseq this past five years


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## Brendan Burgess (27 Jan 2018)

galway_blow_in said:


> a prominent poster on this site believes dividend yield is irrelevant in terms of building wealth



I would agree with the prominent poster. 

Ryanair generally does not pay dividends. 
Berkshire Hathaway does not pay dividends. 

If I sell my shares in Ryanair, I pay 33% CGT on the gains. 

If I get dividends I pay over 50% in taxes. 

I would be quite happy if all the companies I have shares in stopped paying dividends.

Brendan


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## Brendan Burgess (27 Jan 2018)

dub_nerd said:


> Not sure if I'm allowed mention it as AAM doesn't discuss particular shares.



Just to clarify:
*11 We don't discuss individual shares*
You won't find any messages suggesting investing in _CRH_ or asking if _AIB_ is a good investment. It is not the purpose of _Askaboutmoney_. We don't facilitate stock tipping or speculation about the future performance of individual shares.

While an investment trust is technically a share, I wouldn't regard this posting guideline as applying to them.  

The purpose of the guideline is to stop people pumping shares in particular companies and to stop people who have no idea what they are talking about giving their analysis of shares. 

Brendan


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## Gordon Gekko (27 Jan 2018)

Which would you prefer?

a) to receive a dividend which is likely to be taxed at 52%?

b) for the management of a great company to reinvest the spare cash in profitable ventures with a view to growing the value of your shareholding and enabling you to take gains whenever you like and only pay 33% tax?


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## Sarenco (27 Jan 2018)

galway_blow_in said:


> a prominent poster on this site believes dividend yield is irrelevant in terms of building wealth ( and they seem to be well read on the matter )


Well, I don't agree that dividends are irrelevant - far from it.  However, I do believe that it is irrational to look at dividends in isolation.

A couple of points to bear in mind when looking at the total return of the shares in any investment trust (IT):-

The total return of any share in an IT assumes that dividends are immediately reinvested in the IT shares at the time that the share goes ex-dividend.  It ignores the fact that an investor will have to pay income tax on those dividends and stamp duty and broker commissions to buy the additional shares; and
Most ITs (including CTY) use leverage to magnify their income and capital gains.  Obviously, leverage can also magnify capital losses.


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## Daddy Ireland (27 Jan 2018)

I disagree that dividends are irrelevant.  A lot of people are yearning for a return on their money and to some extent depend on a return as part of their income.  Receiving a 5% dividend and paying 50% tax still leaves one with 2.5% approx net which is a hell of a lot more than a bank would give you.  As for your point regarding companies that don't pay dividends well that's ok too but there are a huge amount of income funds that exist to produce a yield that highly depend on dividends.  Also, there are plenty if companies that pay dividends whose share price is higher today than a few years ago.


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## Brendan Burgess (27 Jan 2018)

Daddy Ireland said:


> A lot of people are yearning for a return on their money and to some extent depend on a return as part of their income.



Well they shouldn't. 

When I require "income" I sell some shares. 

Brendan


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## Gordon Gekko (27 Jan 2018)

Daddy Ireland said:


> I disagree that dividends are irrelevant.  A lot of people are yearning for a return on their money and to some extent depend on a return as part of their income.  Receiving a 5% dividend and paying 50% tax still leaves one with 2.5% approx net which is a hell of a lot more than a bank would give you.  As for your point regarding companies that don't pay dividends well that's ok too but there are a huge amount of income funds that exist to produce a yield that highly depend on dividends.  Also, there are plenty if companies that pay dividends whose share price is higher today than a few years ago.



Nobody is suggesting that receiving no return is better than receiving a dividend.

The point is that investors should look at total return rather than obsess about dividend income.


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## Daddy Ireland (27 Jan 2018)

I'm sure the amount of great companies about other than the two you mentioned Ryanair and Berkshire Hathaway that one could invest in are few and far between.  Also, there are many, many great companies that pay dividends too.


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## Sarenco (27 Jan 2018)

There are plenty of publicly traded companies that rarely if ever pay dividends.  Amazon, Alphabet (Google) and Facebook are three biggies that spring to mind.


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## Daddy Ireland (27 Jan 2018)

Brendan Burgess said:


> Well they shouldn't.
> 
> When I require "income" I sell some shares.
> 
> Brendan


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## Daddy Ireland (27 Jan 2018)

Brendan, I think it is very blase of you to say people shouldnt depend on dividend income as part of their income and should in your opinion just sell some shares if they want income. Your opinion to sell some shares if one wants an income is purely a tax driven one.  Many people want to park their money in great companies that pay good dividends and in the hope over time that their principal can grow too.


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## galway_blow_in (27 Jan 2018)

Gordon Gekko said:


> Which would you prefer?
> 
> a) to receive a dividend which is likely to be taxed at 52%?
> 
> b) for the management of a great company to reinvest the spare cash in profitable ventures with a view to growing the value of your shareholding and enabling you to take gains whenever you like and only pay 33% tax?



sounds great but how do you time ( in a favourable way )  when to draw down a portion of your holding in a company which pays no dividend ? , even great companies go through extended ( at least a year )  periods when there stock is in the ditch , a certain airline went through it recently and is still  nearly 20% off its all time high

with the dividend payer , you receive a percentage each quarter regardless of the underlying stock price , i can see the appeal for regular people who dont have to worry about the high tax bracket to begin with


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## Sarenco (27 Jan 2018)

galway_blow_in said:


> with the dividend payer , you receive a percentage each quarter regardless of the underlying stock price , i can see the appeal for regular people who dont have to worry about the high tax bracket to begin with


And every time you receive a dividend payment the value of your stock reduces by precisely the same amount.  

Dividends are not free money.


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## Gordon Gekko (27 Jan 2018)

galway_blow_in said:


> sounds great but how do you time ( in a favourable way )  when to draw down a portion of your holding in a company which pays no dividend ? , even great companies go through extended ( at least a year )  periods when there stock is in the ditch , a certain airline went through it recently and is still  nearly 20% off its all time high
> 
> with the dividend payer , you receive a percentage each quarter regardless of the underlying stock price , i can see the appeal for regular people who dont have to worry about the high tax bracket to begin with



I hardly think it’s fair to classify people whose income exceeds €34k a year as “non-regular”!


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## RedOnion (27 Jan 2018)

Daddy Ireland said:


> Your opinion to sell some shares if one wants an income is purely a tax driven one.


Absolutely. And the dividend policy of most cash generating companies is tax driven, based on their country and largest shareholders circumstances. In the UK 2/3 private individuals who receive dividend income pay absolutely no tax on it. It other countries companies return shareholder funds in other ways, usually through share buybacks.


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## galway_blow_in (27 Jan 2018)

Sarenco said:


> And every time you receive a dividend payment the value of your stock reduces by precisely the same amount.
> 
> Dividends are not free money.






Sarenco said:


> And every time you receive a dividend payment the value of your stock reduces by precisely the same amount.
> 
> Dividends are not free money.



Ok , that makes no sense to me so il leave it as I've been here before


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## Brendan Burgess (27 Jan 2018)

Daddy Ireland said:


> I think it is very blase of you to say people shouldnt depend on dividend income as part of their income and should in your opinion just sell some shares if they want income.





galway_blow_in said:


> that makes no sense to me



I am surprised that so many people have difficulties understanding this.

If a company is worth €100,000 and declares a dividend of €5,000, it's stock market value should fall by €5,000 to €95,000.

If you have €100,000 of shares in a company and it doesn't pay any dividend, you can achieve the same effect by selling €5,000 worth of shares. 



Daddy Ireland said:


> Many people want to park their money in great companies that pay good dividends and in the hope over time that their principal can grow too.



I want to park my money in great companies and get good capital growth. If the company does not pay dividends, it means that I can choose when to realise some of that growth.

It did not suit me a few years ago when Ryanair did pay a substantial dividend.  I didn't need the cash at the time. It came in towards the end of the year after I had paid my preliminary tax, which means that I had estimated my preliminary tax wrong and had to correct it.

It suited me much better when they bought back shares.

There was a very odd thing a few years ago in the UK, when the banks were paying generous dividends and having rights issues at the same time. I remember reading a report that over a period of 5 years or so, they had raised the same in rights issues as they paid out in dividends. So ordinary shareholders were subscribing capital to have it paid back to them as taxable income. It made no sense at all.

A company should be able to say to its shareholders: "We are doing very well. We see some great opportunities and need more capital. So we are not going to pay any dividends for a few years, as that is a lot cheaper and more tax-efficient than paying dividends and having expensive rights issues." Unfortunately, if a company cuts or passes its dividend, the stock market takes it as a sign that the company is in difficulty.

Brendan


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## galway_blow_in (27 Jan 2018)

i understand the deduction exercise ( on ex dividend day )  , i just dont see how it matters ? ,( not like if you bought a hundred shares , on ex dividend day you loose six of them ) i can think of a british dutch oil major which last july had a dividend yield of nearly 8% , the stock  price  is up 25% since then yet the dividend was also paid

win win ?


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## Brendan Burgess (27 Jan 2018)

Hi Galway

You are confusing different things.  If Shell pays a dividend of €1 per share, its share price should fall by €1, _all other things being equal. 
_
But there are other issues affecting the price of Shell. So Shell could pay a dividend of €1 and see its price fall by €6 or rise by €8. 

The dividend payment is only one of the many issues which affect the share price. 

There is no "win win".  A company can't create magic money by paying high dividends. 

The higher the dividend, the greater the price adjustment downwards, although this is not easy to see against the background of the other issues which affect the share price. 

Brendan


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## galway_blow_in (27 Jan 2018)

Brendan Burgess said:


> Hi Galway
> 
> You are confusing different things.  If Shell pays a dividend of €1 per share, its share price should fall by €1, _all other things being equal.
> _
> ...



but why does it matter if the share price adjusts in order to facilitate the dividend payment ?, the stock price often has regained what is lost within a relatively short period of time and you still have your dividend , in a bear market , everything  goes down so you would not want to be offloading shares in amazon if its price is down 50% for a few years , with the boring dividend payer , your just collecting the quarterly cash payout while hoping the market eventually turns a corner and with it your low PE dividend payer

why else would people buy the likes of telecoms if dividends are misleading ? , dont pension funds own these boring utilities which are viewed as income creators , people who manage pension funds would tend to be well informed


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## Daddy Ireland (27 Jan 2018)

Excellent analogy Galway.  Could not actually have put it better myself.


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## RedOnion (27 Jan 2018)

Has every Economic Nobel prize winner ever got it wrong?...



galway_blow_in said:


> the stock price often has regained what is lost within a relatively short period of time and you still have your dividend


In this case, all other things being equal, the share price would have risen even more if there hadn't been a dividend.



galway_blow_in said:


> why else would people buy the likes of telecoms if dividends are misleading ?


Telecoms have pretty predictable cash generation patterns. Without differing tax treatment, an investor shouldn't care whether excess cashflow is returned to shareholders via dividend or share buybacks (at&t for example does both).



galway_blow_in said:


> dont pension funds own these boring utilities which are viewed as income creators ,


Pension funds don't care about the tax treatment, they invest for total return, and are investing for the positive cashflow generated by the company, not the dividend.

Rather than reading older economic theory by Nobel prize winners, there was a recent paper 'The Dividend Disconnect' which examines the topic and the behaviours of investors. Some interesting interviews of the authors on YouTube to save reading a 60 page paper!


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## Brendan Burgess (27 Jan 2018)

galway_blow_in said:


> but why does it matter if the share price adjusts in order to facilitate the dividend payment ?,





Daddy Ireland said:


> Excellent analogy Galway. Could not actually have put it better myself.



As I have said...


Brendan Burgess said:


> I am surprised that so many people have difficulties understanding this.



You should stay away from investment if you can't grasp this very, very, simple concept. 

Brendan


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## dub_nerd (27 Jan 2018)

Not everyone's in the same boat. I gave up work partly because I was sick of 50%+ tax (though mostly because I wanted to do something else). Now my dividends get taxed at 0-20%, much less than capital gains.


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## Daddy Ireland (27 Jan 2018)

Brendan,

Ok I will take your advice and stay away from investment..  ONn the other hand I was lucky I didn't take your advice from your RTE slot of 16th Sep 2008.


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## Gordon Gekko (27 Jan 2018)

dub_nerd said:


> Not everyone's in the same boat. I gave up work partly because I was sick of 50%+ tax (though mostly because I wanted to do something else). Now my dividends get taxed at 0-20%, much less than capital gains.



Agreed, but with respect I’d say you are a rare exemption.


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## Daddy Ireland (27 Jan 2018)

He's not a rare exception Gordon.   An exception maybe but so will soon be an exception too.  So there are more of us out there than you think.


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## Daddy Ireland (27 Jan 2018)

Sorry should read so will I be an exception too.


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## Brendan Burgess (27 Jan 2018)

Daddy Ireland said:


> ONn the other hand I was lucky I didn't take your advice from your RTE slot of 16th Sep 2008.



Really? 

Where did you invest to get better returns than this? 

https://www.askaboutmoney.com/threa...rty-prices-and-borrowing.133122/#post-1009150


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## joe sod (27 Jan 2018)

RedOnion said:


> Absolutely. And the dividend policy of most cash generating companies is tax driven, based on their country and largest shareholders circumstances. In the UK 2/3 private individuals who receive dividend income pay absolutely no tax on it. It other countries companies return shareholder funds in other ways, usually through share buybacks.



But in UK you can earn upto £5000 dividends tax free (i only learned this recently from another poster) which explains why so many people do not pay tax on dividends. Ireland has diverged substantially from UK in terms of taxation over last 20 years, if more taxes introduced in ireland over next few years (which seems to be the trend) there could be big exodus of high skilled people there despite brexit.


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## RedOnion (27 Jan 2018)

joe sod said:


> But in UK you can earn upto £5000 dividends tax free (i only learned this recently from another poster) which explains why so many people do not pay tax on dividends


That was exactly my point. In the UK small retail investors, in particular pensioners, want dividends, because they can get 5k tax free.
Their CGT is different to here as well.

Edit: sorry I was typing on phone, and I somehow deleted half my original post earlier re the 5k threshold, so I didn't make my point as clearly as I meant!


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## Daddy Ireland (27 Jan 2018)

Brendan Burgess said:


> Really?
> 
> Where did you invest to get better returns than this?
> 
> https://www.askaboutmoney.com/threa...rty-prices-and-borrowing.133122/#post-1009150



Brendan,  I would be particularly referring to bank shares and not the Iseq overall.  But to tell me that if I do not understand a concept then I should stay away from investment is condescending.





joe sod said:


> But in UK you can earn upto £5000 dividends tax free (i only learned this recently from another poster) which explains why so many people do not pay tax on dividends. Ireland has diverged substantially from UK in terms of taxation over last 20 years, if more taxes introduced in ireland over next few years (which seems to be the trend) there could be big exodus of high skilled people there despite brexit.


                                           I think this 5k may be changing to 2k from April.


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## Sarenco (27 Jan 2018)

dub_nerd said:


> Not everyone's in the same boat. I gave up work partly because I was sick of 50%+ tax (though mostly because I wanted to do something else). Now my dividends get taxed at 0-20%, much less than capital gains.



Bear in mind that the full amount of any dividend payment is subject to income tax whereas only that element of the proceeds of a share sale that represents a taxable gain, over and above the annual exemption, is subject to CGT.  

It's not just a question of comparing your marginal rate of income tax v CGT.


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## galway_blow_in (27 Jan 2018)

Daddy Ireland said:


> Excellent analogy Galway.  Could not actually have put it better myself.



i may be completely wrong on this one , i just cannot get my head around the problem with a ( in my eyes temporary price drop ) dividend payout adjustment


RedOnion said:


> Has every Economic Nobel prize winner ever got it wrong?...
> 
> 
> In this case, all other things being equal, the share price would have risen even more if there hadn't been a dividend.
> ...





Brendan Burgess said:


> As I have said...
> 
> 
> You should stay away from investment if you can't grasp this very, very, simple concept.
> ...



dont give up on me yet brendan , im a slow learner but i am tenacious


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## dub_nerd (27 Jan 2018)

galway_blow_in said:


> i just cannot get my head around the problem with a ( in my eyes temporary price drop ) dividend payout adjustment


Maybe easiest if you imagine a company that has issued just one share to a single 100% shareholder. At the start of the year the share (and the company) is worth €1. It makes €2 profit and pays out a €1 dividend. The shareholder now has a share worth €2 (€1 + €2 - €1) and a €1 dividend. If there had been no dividend the share would have been worth €3. There is no magic extra money regardless of whether a dividend is paid.


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## Brendan Burgess (27 Jan 2018)

Daddy Ireland said:


> I would be particularly referring to bank shares and not the Iseq overall.



Yes, but I referred to bank and other shares.  Read anything I have written about a balanced portfolio of shares, at the time or since. 



Daddy Ireland said:


> But to tell me that if I do not understand a concept then I should stay away from investment is condescending.



Apologies,but it's so frustrating. This is as basic as it gets and it surprises me that you and  Galway don't get it. I can't explain it in any simpler terms.

Brendan


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## Gordon Gekko (27 Jan 2018)

Daddy Ireland said:


> He's not a rare exception Gordon.   An exception maybe but so will soon be an exception too.  So there are more of us out there than you think.



With respect, I would contend that most people who are in receipt of dividend income have total incomes in excess of €34k a year.


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## Fella (27 Jan 2018)

I don't know if people are just trolling but surely if you don't understand the bare minimum that a companies value will fall by the amount of the dividend payout then you probably shouldn't be investing, although I believe in efficient markets and its probably hard to lose money buying or selling anything liquid enough.

If you believe that the share price doesn't drop by the dividend amount then how have you not seen the massive opportunity of loading up your degiro account and buying the highest dividend paying stocks pre dividend payout and selling straight after they payout so you pocket some quick cash for nothing? 

There is no extra money created you can't pay out millions and expect the company to remain the same value this is crazy talk , I mean i'll float my own company tomorrow buy all the shares myself pay myself declare a 100% dividend and double the value of my company overnight , rinse and repeat and I'm bigger than Apple in no time.


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## galway_blow_in (27 Jan 2018)

Fella said:


> I don't know if people are just trolling but surely if you don't understand the bare minimum that a companies value will fall by the amount of the dividend payout then you probably shouldn't be investing, although I believe in efficient markets and its probably hard to lose money buying or selling anything liquid enough.
> 
> If you believe that the share price doesn't drop by the dividend amount then how have you not seen the massive opportunity of loading up your degiro account and buying the highest dividend paying stocks pre dividend payout and selling straight after they payout so you pocket some quick cash for nothing?
> 
> There is no extra money created you can't pay out millions and expect the company to remain the same value this is crazy talk , I mean i'll float my own company tomorrow buy all the shares myself pay myself declare a 100% dividend and double the value of my company overnight , rinse and repeat and I'm bigger than Apple in no time.



fella , i can assure you im not trolling ,  ive never been in doubt about how the quarterly  dividend cash  payout amount will correspond with a  decrease in value of the underlying share on that day , i understand that completely !  , i just always thought as shares move up and down all the time anyway , its merely a case of saying thank you mr cash dividend and my stock holding should within a few weeks get back to where it was pre ex dividend date

if you park the disadvantages surrounding tax on dividends in this particular country , is that such a bad way to build wealth ? , is it that much worst  than growth stocks which pay no dividend ( why not have both ? )

i dont own any dividend paying stocks right now , i dont own any individual stocks at all , just two dollar denominated european and japan based etf,s , i got a cash payout of several hundred dollars  about a month ago and just re bought more of the same etf a few days later when the price pulled back abit


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## Fella (27 Jan 2018)

galway_blow_in said:


> its merely a case of saying thank you mr cash dividend and my stock holding should within a few weeks get back to where it was pre ex dividend date



I don't get this part , looking at it from a value/arbitrage point of view if this was the case you could make money by buying after the stock price decreases waiting a few weeks and selling. 

I think you may have seen these kind of price movements previously and assume that this is always the case but it is not.


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## Sarenco (27 Jan 2018)

Actually there are hedge funds that seek to exploit investors like Galway that do not fully understand dividends - they use a technique known as the dividend capture strategy.

Basically, they buy a stock on the day before it goes ex-div and then sell it ASAP before the stock price fully adjusts to accurately reflect this event. 

Over the long term the markets are highly (but not perfectly) efficient at pricing stocks but behavioural biases remain that create arbitrage opportunities.


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## Daddy Ireland (27 Jan 2018)

Please see this view which gives 3 reasons dividend paying stocks tend to outperform non dividend payers.   Particular reference to Berkshire Hathaway (non paying dividend) v Johnson and Johnson (dividend payer.)


https://www.google.ie/url?sa=t&sour...FjAAegQIDhAB&usg=AOvVaw238kL47DeiAi0n_aP_lUJM


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## Daddy Ireland (27 Jan 2018)

https://seekingalpha.com/article/3997749-dividend-stocks-outperform


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## Daddy Ireland (27 Jan 2018)

https://www.google.ie/url?sa=t&sour...FjAOegQIDxAB&usg=AOvVaw0h5epjKc1wd9JF_5dHlGhg


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## Daddy Ireland (27 Jan 2018)

Above three articles are relevant to how this thread developed.   Personally I am quite happy having read all to invest in dividend paying stocks over non dividend paying stocks.


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## Sarenco (27 Jan 2018)

Daddy Ireland said:


> Particular reference to Berkshire Hathaway (non paying dividend) v Johnson and Johnson (dividend payer.)


Except the article doesn't actually say that Johnson and Johnson has outperformed Berkshire Hathaway over any reasonable time period.  Because that would be patently untrue.

It is certainly true that over very long time periods value stocks have historically outperformed growth stocks and that value stocks, in general, tend to pay higher dividends than growth stocks. 

Whether this anomaly will persist in the future is anybody's guess.  My own view, FWIW, is that the value premium was at least partly explained by the behavioural biases of individual investors who now make up an increasingly small portion of the market.  To put it another way, there are fewer suckers playing the game than was historically the case.


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## Sarenco (27 Jan 2018)

Daddy Ireland said:


> https://www.google.ie/url?sa=t&sour...FjAOegQIDxAB&usg=AOvVaw0h5epjKc1wd9JF_5dHlGhg



We actually discussed that article on this thread -
https://www.askaboutmoney.com/threads/the-free-dividends-fallacy.204136/


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## joe sod (28 Jan 2018)

Sarenco said:


> Except the article doesn't actually say that Johnson and Johnson has outperformed Berkshire Hathaway over any reasonable time period.  Because that would be patently untrue.
> 
> It is certainly true that over very long time periods value stocks have historically outperformed growth stocks and that value stocks, in general, tend to pay higher dividends than growth stocks.
> 
> Whether this anomaly will persist in the future is anybody's guess.  My own view, FWIW, is that the value premium was at least partly explained by the behavioural biases of individual investors who now make up an increasingly small portion of the market.  To put it another way, there are fewer suckers playing the game than was historically the case.



"an increasingly small portion of the market", what does this mean an "increasingly small" , is this not Trump speak


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## DeeKie (28 Jan 2018)

I was looking at dividends as sort of reducing risk in that the payment out shaves off a bit of risk in the shares plummeting to nothing - taking cash out. But I’m thinking again now.


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## DeclanDublin (28 Jan 2018)

Dividend income brings me in around 5 -6K a yr. I look for stock with good dividend yield AND LT value/ prospects. On UK shares, increasingly I'm averse to  them due, in part, to FX volatility, and the likely impact of Brexit.  As an aside, a large company with good dividend yield went bust in the UK recently. Share buying is somewhat risky, and propectors should  spread investments across a wide range of assets.


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## Gordon Gekko (28 Jan 2018)

I am genuinely frightened at the prospect of people investing directly in shares when they haven’t a notion. This thread has been an eye-opener.

There is very little, if any, Sterling risk if you hold shares in a UK based multinational. Take the example of UK plc which is listed on the London Stock Exchange and quoted in Sterling. Its customers are all over the world. You’re here in Ireland and you hold the stock. Sterling collapses; are you worried? No is the answer. Its revenues are in foreign currencies so they are now worth more to the company, and the share price adjusts accordingly.


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## Brendan Burgess (28 Jan 2018)

Brendan Burgess said:


> You should stay away from investment if you can't grasp this very, very, simple concept.





Gordon Gekko said:


> I am genuinely frightened at the prospect of people investing directly in shares when they haven’t a notion.



Hi Gordon 

You put it so much more diplomatically than I do. 

Brendan


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## Mez! (1 Feb 2018)

Gordon Gekko said:


> There is very little, if any, Sterling risk if you hold shares in a UK based multinational



So say I purchase a UK multinational share for £1.00 on 1st Jan 2018. 33% of their revenue comes from UK business, 33% Eurozone and 33% US. The fx rate to Euro is £1.00 to €0.80.

One year later, I sell my share for £1.00 (no gain, no loss). However the fx rate is now £1.00 to €0.70.

How am I not exposed to currency risk?


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## rob oyle (1 Feb 2018)

Mez! said:


> So say I purchase a UK multinational share for £1.00 on 1st Jan 2018. 33% of their revenue comes from UK business, 33% Eurozone and 33% US. The fx rate to Euro is £1.00 to €0.80.
> 
> One year later, I sell my share for £1.00 (no gain, no loss). However the fx rate is now £1.00 to €0.70.
> 
> How am I not exposed to currency risk?


The logic being that a weaker GBP will mean the share price increasing to reflect the higher returns from their non-GBP operations (when converted to GBP). Due to non-related factors, this does not result in 100& correlation.
Take Shell for example. If you buy their London listing or their Frankfurt/Paris listing, the price of the share will reflect the movement in their primary traded product (oil) which is denominated in USD and then converted at the going exchange rate. So, for example, if the price of oil doesn't change but GBP weakens, the UK share price would increase


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## Gordon Gekko (1 Feb 2018)

Mez! said:


> So say I purchase a UK multinational share for £1.00 on 1st Jan 2018. 33% of their revenue comes from UK business, 33% Eurozone and 33% US. The fx rate to Euro is £1.00 to €0.80.
> 
> One year later, I sell my share for £1.00 (no gain, no loss). However the fx rate is now £1.00 to €0.70.
> 
> How am I not exposed to currency risk?



There are a variety of things that feed into a share price.

But in broad terms, a company that is merely listed in the UK but earns revenues globally should not give rise to Sterling risk.


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## Mez! (1 Feb 2018)

Gordon Gekko said:


> There are a variety of things that feed into a share price.
> 
> But in broad terms, a company that is merely listed in the UK but earns revenues globally should not give rise to Sterling risk.


In the absence of evidence, this is supposition.


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## Sarenco (1 Feb 2018)

Mez! said:


> In the absence of evidence, this is supposition.


We actually have a good recent example of this phenomenon - the impact of the Brexit vote on Sterling and the relative performance of different UK-listed companies depending on where they generate the majority of their revenue.

Here's a good analysis of how things played out -
https://assets.kpmg.com/content/dam/kpmg/uk/pdf/2017/06/kpmguk50-kpmguknon50-June-2017.pdf


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## DeclanDublin (1 Feb 2018)

Not sure that UK multinationals (and their shareprice) will be totally  immune to a 'chilling effect' of Brexit, given the likely impact it may have going forward or companies trading into the Europe. Indeed, it is precisely to protect the UK economy and give stability that the UK agreed an 18 month (?) grace period after they offically leave the EU.  In any event, personally I would excercise caution in UK investments and look at them more thoroughly. I would also be concerned on the impact on STG value given some of the dire forecasts  given to the UK gov.t and leaked this week to the press.  As an aside, personally I've started looking at shares around the Eurozone, (particularly in Germany/Austria/France/Holland) and there are some interesting prospects there, without the FX risks.


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