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After summarising my total dividends recieved since 2007, I can now see the "direct" effect of good dividend paying shares. Since 2007, dividends on my DST shares and BTI shares are 95% and 75%, respectively, of the total cost of the purchases. In a few years, the dividends will have "paid" off my shares on BTI (assuming people still continue smoking). Dividends have so far paid for 50% of my SPP, SUR and VOD shares. What is really positive to see, is the compound effect of the good dividend yield on a share price that generally goes up. The effect is "very noticeable" now, after holding various shares for some years. And, yes, while this can be modelled and ploted in spreadsheets and graphs, the tangible return (in my account) is nice to see. I look forward to the day where the dividend for a share, is more than the price I paid. That, I expect, is still some years to come. Anyway, hoooray for dividends.
maybe this is a ramble - but if the share price was not reflecting growth over the time held - which is a function of its business efficieny and income growth then you would not have continued to hold the shares?
But that said - even thought growth is a combination of resulting factors - I prefer personally prefer - given the reason I hold shares generally - to calculate the applicable after tax return on my dividends based on what I paid for the shares plus inflation yoy - and then I look on double digit income returns after inflation and tax with some pleasure....
Yip - a comparison might be holding Preftrax, which doesnt (shouldnt ???) have any large capital growth over time, yet gives you a good DY. When I started buying shares, I had no real idea how to value a company (not sure I do now), but not being in the financial field, I had to use some margin of common sense, so tried to buy well branded companies, with a reasonable earningns growth history but also a reasonable dividend yield. Example I had was SPAR. The DY I'm getting currently is about 60% of the cost of the first tranche I bought. Maybe if SPAR had not grown, I would have sold out and moved into another share - since the DY wasnt attractive enough to hold on its own. That was my basic thinking.
I completely agree - I do factor in my after tax costs. But at the moment, since really all I do in my "investment account" is hold shares, the only tax I pay is Dividends tax. I generally dont look to factor in inflation. I am not good enough to chop and change shares based upon inflation. I acccept inflation, and will deduct that off my growth.
"I had no real idea how to value a company (not sure I do now)" this is true of us all. Anybody suggestign they KNOW how to value is in for a surprise.
But yes divs are great but takes time and what I really like is that I can then deploy the capital as I want. For eg dividends have helped build me a position in ADH as I took divs from others and bought ADH.