View on dividend growth stocks and REITs
View on dividend growth stocks and REITs
I am reading Burton Malkiel’s book and he mentioned dividend growth stocks in bonds and bonds substitutes as part of the AA. With bond yields being low, this comes to my mind.
What is general bogleheads’ view on dividend growth stocks? If something worth to be part of the AA, what are some good dividend growth stock ETFs ? A lot has been discussed on US stocks but for foreigner investors like me I am taxed 30% on dividends, which makes it not that worth.
Same is said that REITs should be part of the portfolio. But I am only familiar with REITS in home country. Is there something international or it just does not exist and one needs to decide which country’s REITs to own if he/she wants to have that as part of AA?
What is general bogleheads’ view on dividend growth stocks? If something worth to be part of the AA, what are some good dividend growth stock ETFs ? A lot has been discussed on US stocks but for foreigner investors like me I am taxed 30% on dividends, which makes it not that worth.
Same is said that REITs should be part of the portfolio. But I am only familiar with REITS in home country. Is there something international or it just does not exist and one needs to decide which country’s REITs to own if he/she wants to have that as part of AA?
-
- Posts: 6394
- Joined: Fri May 13, 2011 6:27 pm
Re: View on dividend growth stocks and REITs
Stocks are not substitutes for bonds because stocks have different characteristics and are more riskyseoulmac wrote: ↑Thu Apr 01, 2021 9:11 am I am reading Burton Malkiel’s book and he mentioned dividend growth stocks in bonds and bonds substitutes as part of the AA. With bond yields being low, this comes to my mind.
What is general bogleheads’ view on dividend growth stocks? If something worth to be part of the AA, what are some good dividend growth stock ETFs ? A lot has been discussed on US stocks but for foreigner investors like me I am taxed 30% on dividends, which makes it not that worth.
Same is said that REITs should be part of the portfolio. But I am only familiar with REITS in home country. Is there something international or it just does not exist and one needs to decide which country’s REITs to own if he/she wants to have that as part of AA?
Dividend growth stocks are a narrow part of market and I would use a total market index
REITs in my opinion should be held at market weight unless you have a reason or specific knowledge to overweight them from market weight
Re: View on dividend growth stocks and REITs
By saying market weight then it should be part of the all world stock market index already?Johm221122 wrote: ↑Thu Apr 01, 2021 9:16 am REITs in my opinion should be held at market weight unless you have a reason or specific knowledge to overweight them from market weight
-
- Posts: 1911
- Joined: Wed Jan 29, 2020 9:29 am
Re: View on dividend growth stocks and REITs
I include neither, and I don't know what Malkiel is thinking by recommending dividend-growth stocks. Dividend growth has absolutely nothing to do with the quality or safety of a company, and dividend payouts have nothing to do with a reliable income stream. Capital gains also provide reliable income streams. Amazon did excellently in the covid crash, acting effectively as a defensive stock. It will not be included in a dividend-growth etf because it doesn't pay dividends. Meanwhile, VIG (vanguard dividend growth etf) performed almost identically to the broader market. Dividend growth stocks are no safer than the equity market as a whole, they do not provide higher dividend yields than the equity market as a whole, and they certainly aren't as stable as bonds.seoulmac wrote: ↑Thu Apr 01, 2021 9:11 am I am reading Burton Malkiel’s book and he mentioned dividend growth stocks in bonds and bonds substitutes as part of the AA. With bond yields being low, this comes to my mind.
What is general bogleheads’ view on dividend growth stocks? If something worth to be part of the AA, what are some good dividend growth stock ETFs ? A lot has been discussed on US stocks but for foreigner investors like me I am taxed 30% on dividends, which makes it not that worth.
Same is said that REITs should be part of the portfolio. But I am only familiar with REITS in home country. Is there something international or it just does not exist and one needs to decide which country’s REITs to own if he/she wants to have that as part of AA?
As for REITs, I also don't see any derisking or diversification benefit to them.
Just stick to the broader market, and just stick to good old bonds. Malkiel hasn't backed up his recommendations with anything persuasive other than low bond yields. Could it be that low bond yields are correct because inflation in the globalized world of today remains very unlikely as a long-term prospect? I certainly think so.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
Re: View on dividend growth stocks and REITs
I agree with Johm221122. Non-US investing is different vs US investing. We prefer capital gains vs dividend income.
Non-US investors w/o US tax treaties pay L1/L2 dividend withholding taxes of ~13% on VWRD and VHYD. The interest income from bond UCITS ETFs comes thru tax free. Capital gains are not taxed either.
Compare VWRD (FTSE all world) vs VHYD (FTSE all world dividend)
VWRD. #stocks = 3480. ER = 0.22%. Gross 12 mo yield = 1.34%. Net 12 mo yield = 1.17%. Tax ratio = 0.17%. TER = 0.22% + 0.17% = 0.39%.
VHYD. # stocks = 1507. ER = 0.29%. Gross 12 mo yield = 2.65%. Net 12 mo yield = 2.31%. Tax ratio = 0.34%. TER = 0.29% + 0.34% = 0.63%.
Non-US investors w/o US tax treaties pay L1/L2 dividend withholding taxes of ~13% on VWRD and VHYD. The interest income from bond UCITS ETFs comes thru tax free. Capital gains are not taxed either.
Compare VWRD (FTSE all world) vs VHYD (FTSE all world dividend)
VWRD. #stocks = 3480. ER = 0.22%. Gross 12 mo yield = 1.34%. Net 12 mo yield = 1.17%. Tax ratio = 0.17%. TER = 0.22% + 0.17% = 0.39%.
VHYD. # stocks = 1507. ER = 0.29%. Gross 12 mo yield = 2.65%. Net 12 mo yield = 2.31%. Tax ratio = 0.34%. TER = 0.29% + 0.34% = 0.63%.
KISS & STC.
Re: View on dividend growth stocks and REITs
There is a debate on the degree to which private ownership distorts the influence of real estate in the public equity markets. So there is no consensus on your question.seoulmac wrote: ↑Thu Apr 01, 2021 9:25 amBy saying market weight then it should be part of the all world stock market index already?Johm221122 wrote: ↑Thu Apr 01, 2021 9:16 am REITs in my opinion should be held at market weight unless you have a reason or specific knowledge to overweight them from market weight
Re: View on dividend growth stocks and REITs
For non-USA investors I BELIEVE that the income generated by REITS would have L1/L2 withholding taxes.
IMHO the best way to own REITS is to use the Ireland Ishares small cap UCITS ETF WSML which has 9.3% global in REITS.
IMHO the best way to own REITS is to use the Ireland Ishares small cap UCITS ETF WSML which has 9.3% global in REITS.
KISS & STC.
Re: View on dividend growth stocks and REITs
REITs did terrible in 2008, but did offer some diversification benefits in dot com era if I remember correctly.
If you believe what is coming will be something between 2000 and the hyperinflation period, holding REITs probably is not a bad idea.
I don’t have REIT and think the evictions and foreclosures will come eventually, but there is a case to be made.
There are global real estate index tracking REITs like SPY2 and EPRA. However, the REITs structure in EU is not the same as in the US so it is not a uniform product. Although there are accumulating ones. TER tends to be high also.
So not an easy decision to be made. Maybe around 10% of the equity allocation is fine, but higher allocations may be hard to justify.
If you believe what is coming will be something between 2000 and the hyperinflation period, holding REITs probably is not a bad idea.
I don’t have REIT and think the evictions and foreclosures will come eventually, but there is a case to be made.
There are global real estate index tracking REITs like SPY2 and EPRA. However, the REITs structure in EU is not the same as in the US so it is not a uniform product. Although there are accumulating ones. TER tends to be high also.
So not an easy decision to be made. Maybe around 10% of the equity allocation is fine, but higher allocations may be hard to justify.
-
- Posts: 6394
- Joined: Fri May 13, 2011 6:27 pm
Re: View on dividend growth stocks and REITs
Yesseoulmac wrote: ↑Thu Apr 01, 2021 9:25 amBy saying market weight then it should be part of the all world stock market index already?Johm221122 wrote: ↑Thu Apr 01, 2021 9:16 am REITs in my opinion should be held at market weight unless you have a reason or specific knowledge to overweight them from market weight
-
- Posts: 25625
- Joined: Thu Apr 05, 2007 8:20 pm
- Location: New York
Re: View on dividend growth stocks and REITs
Dividend growth is another way of saying invest in quality companies with wide moats, strong earnings ability and a desire to return cash to shareholders on a consistent basis. If you are looking for an ETF or mutual fund, then for ETF - you want one that tracks the Dividend Aristocrats (25 year track record of raising dividends) DGRO, SCHD, VIG, SPHD, SDY or Vanguard Dividend Growth Fund (concentrated with only 40 companies).seoulmac wrote: ↑Thu Apr 01, 2021 9:11 am I am reading Burton Malkiel’s book and he mentioned dividend growth stocks in bonds and bonds substitutes as part of the AA. With bond yields being low, this comes to my mind.
What is general bogleheads’ view on dividend growth stocks? If something worth to be part of the AA, what are some good dividend growth stock ETFs ? A lot has been discussed on US stocks but for foreigner investors like me I am taxed 30% on dividends, which makes it not that worth.
Same is said that REITs should be part of the portfolio. But I am only familiar with REITS in home country. Is there something international or it just does not exist and one needs to decide which country’s REITs to own if he/she wants to have that as part of AA?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
- nisiprius
- Advisory Board
- Posts: 52216
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: View on dividend growth stocks and REITs
Here is how the Vanguard Dividend Growth Fund (blue) performed, compared to the Vanguard Total Bond Market Index Fund (orange). Do dividend growth stocks look like a "bond substitute" to you?
Source
around 2000,
around 2008,
and just last year.
Source
around 2000,
around 2008,
and just last year.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: View on dividend growth stocks and REITs
Thanks all. I realized there were other threads talking about this:
viewtopic.php?t=330046
viewtopic.php?t=322118
viewtopic.php?t=318325
The majority disputes the ideas but it was also mentioned that his suggestion may have been for those at the withdrawing phase that needs stable income although his definition as bond-substitute is criticized (I am still accumulating so not yet learning much about the de-accumulating phase). People point out during the low yield era they either 1) accept the fact 2) increase AA with risk 3) tilt to utility / dividend stocks.
Are there some good readings about how to deal with the low-yield bond time?
viewtopic.php?t=330046
viewtopic.php?t=322118
viewtopic.php?t=318325
The majority disputes the ideas but it was also mentioned that his suggestion may have been for those at the withdrawing phase that needs stable income although his definition as bond-substitute is criticized (I am still accumulating so not yet learning much about the de-accumulating phase). People point out during the low yield era they either 1) accept the fact 2) increase AA with risk 3) tilt to utility / dividend stocks.
Are there some good readings about how to deal with the low-yield bond time?
-
- Posts: 1911
- Joined: Wed Jan 29, 2020 9:29 am
Re: View on dividend growth stocks and REITs
Nobody knows how to deal with low-bond yields.. A lot of players are saying 75/25 is the new 60/40. They don't actually know. People are saying bond yields have to go up, which is what they said 10 years ago. They don't know. Choose an allocation you can stick to. Don't think that some equities are going to protect you better in a crash than other equities will. Bonds are for safety, not yield. Hyperinflation is not likely. Don't try to time the market.seoulmac wrote: ↑Sat Apr 03, 2021 5:04 am Thanks all. I realized there were other threads talking about this:
viewtopic.php?t=330046
viewtopic.php?t=322118
viewtopic.php?t=318325
The majority disputes the ideas but it was also mentioned that his suggestion may have been for those at the withdrawing phase that needs stable income although his definition as bond-substitute is criticized (I am still accumulating so not yet learning much about the de-accumulating phase). People point out during the low yield era they either 1) accept the fact 2) increase AA with risk 3) tilt to utility / dividend stocks.
Are there some good readings about how to deal with the low-yield bond time?
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
Re: View on dividend growth stocks and REITs
"People point out during the low yield era they either 1) accept the fact 2) increase AA with risk 3) tilt to utility / dividend stocks."
We do 1 and 2. We'd like to hold 30% world stocks. With these low yields we hold 50%.
We do 1 and 2. We'd like to hold 30% world stocks. With these low yields we hold 50%.
KISS & STC.
Re: View on dividend growth stocks and REITs
Do you mean the total equity AA goes from 30% to 50%? When I first read I thought you mean world stocks excluding us stocks but guess I misread since we are not US investors.
Re: View on dividend growth stocks and REITs
VWRD (world stocks) = 55% USA + 45% non-USA.
We would LIKE to hold 30% VWRD. Low yields on investment grade world bonds (AGGG) has "forced" us to hold 50% VWRD.
We would LIKE to hold 30% VWRD. Low yields on investment grade world bonds (AGGG) has "forced" us to hold 50% VWRD.
KISS & STC.