Weekend Reading: Challenging The High-Dividend-Yield Stock Narrative

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

Many investors favor dividend-paying stocks, believing they offer superior returns and reliable income. However, the academic community disagrees.


Classical finance theory says dividends shouldn't matter. Recent research confirms this, showing that dividend-paying stocks outperform largely because they happen to also be "value" stocks with traits like stability and profitability.

Instead of focusing on dividends, you can gain more efficiency by targeting factors like value and quality directly. This allows you to invest in a broader range of stocks, increasing diversification and potentially improving outcomes. Remember, dividends have negative tax implications compared to pure capital gains, further eroding their true value to investors.