Dividends feel like "free paychecks." The math says they aren't. If you want to build long-term wealth, total return beats dividend investing every single time. Here is the simple breakdown 🧵 1️⃣ Dividends are not free money. If you own a $50 stock and it pays a $2 dividend, the stock price instantly drops to $48. You didn't make $2. You just moved $2 from your left pocket to your right pocket. Your total net worth is still $50. 2️⃣ The research is settled. Decades of academic studies show that dividend payouts do not generate higher returns. Dividends don't make a stock superior. Healthy, profitable businesses do. Yield is simply how a company hands you cash, not how much value it created. 3️⃣ You miss the biggest winners. High-growth companies reinvest their cash to build better products and expand. When you filter only for high-dividend yields, you load up on slow-moving companies (like utilities and older banks) while cutting out the fastest-growing compounders in the market. 4️⃣ Dividends take away your tax control. Every time a cash dividend hits your non-registered account, you trigger an immediate tax bill. Whether, you needed the money today or not. With share growth, you stay in the driver's seat. You decide when to sell and when to take the tax hit. 5️⃣ Dividends solve an emotional problem, not a math problem. Getting cash in your account feels good, but feeling good doesn't make the math better. Stop worrying about how the pie is sliced. Focus on growing the size of the entire pie. ___ THE TAKEAWAY 👇: Stop chasing yield traps and focus on what actually builds wealth. If you want a simple, data-backed approach: • Buy low-cost, globally diversified broad-market ETFs • Automatically reinvest every dollar • Focus on growing your total portfolio balance • Sell shares only when you actually need cash
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36 Comments
Rabid Money Badger
@riggs · 11d
Just saying Total Returns includes dividends/distributions.
Raj
@double_oh · 11d
Agreed that the focus should be on total return and not dividends. So why do I look at dividends? A company that is able to pay out a dividend, and even increase it annually, all while maintaining a solid balance sheet, highlights the abiility of the management team and the quality of the stock. Psychologically it's great to see that dividend stream come in, and if it helps identify, strong, diciplined management, then that's a path to higher total return.
Randy @makingbacon · 11d
I enjoy living g with small growth and 8% dividends. Tomorrow is not guaranteed. Do it long enough and 5k in dividemds a month is not chump change. It allows some freedom that you can't have if you are only growth focused to take when you are retired. Enjoy life now because you aren't guaranteed anything. Be wise but dont think you know your end date
Jay
@jayjay126 · 7d
You’re right. I've been using this website, and It’s saving me a lot of time because I used to do this work manually to keep on top of these ETFs’ data. It’s set to look for the top performers of the Hi-Yield ETF’s but focuses on the best total returns for each one. It also catches the Yield Trap ETFs. https://hybtretfs.com/
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