Hoard cash vs pay down mortgage

[marcus335]

@druid

Companies can stop paying dividends. In fact, as business deteriorates, companies will slash dividends first. The bond may take a small hit in price as business deteriorates but more often than not bond interest will continue to be paid. This is because a bond default is more shameful than a dividend cut. In the worst case (bankruptcy) bond holders have higher repayment priority. But I am sure you know all this. All I am saying is that you need to have a mix and not just dividend stocks.

There are companies that paid the dividend for 30+ or 50+ straight years. The risk of them not paying it is very small. They paid through the great recession.

[john]

@druid

This is because a bond default is more shameful than a dividend cut. In the worst case (bankruptcy) bond holders have higher repayment priority.

That’s great point. In fact, I don’t know any company ever defaulted on bonds without filing for bankruptcy. Defaulting on bond will be much more difficult than cutting dividend. Also, for dividend stock, the principal is at risk when stock price falls. This is much more frequent than bankruptcies.

[hanera]

@druid

But I am sure you know all this.

Obviously Ask is not to test how much you know, just in case you have a reason that I’m not aware of.
As marcus said, invest in dividend aristocrats and champions, they not only paid dividends through recession but also increase dividends through time (what investors called dividend growth, is an important metric for dividend investing). In addition, with DRIPs your dividends grow even more. For those a little more aggressive (dividend investors are usually conservative), can sell covered calls to juice up the return. What I dislike about bonds is in most situation you need to hold till maturity to get max gain and then relook for another bond upon expiry, also its price decline when interest rate goes up (which is the environment now), selling then mean capital loss.

[Jil]

@marcus335

@druid

Companies can stop paying dividends. In fact, as business deteriorates, companies will slash dividends first. The bond may take a small hit in price as business deteriorates but more often than not bond interest will continue to be paid. This is because a bond default is more shameful than a dividend cut. In the worst case (bankruptcy) bond holders have higher repayment priority. But I am sure you know all this. All I am saying is that you need to have a mix and not just dividend stocks.

There are companies that paid the dividend for 30+ or 50+ straight years. The risk of them not paying it is very small. They paid through the great recession.

To add more in this line.

In my view, Well established dividend aristocrat companies drop less than other companies during recession (still need to do research to substantiate with evidence).

Second, I consider real estate holdings like bond, gives rent (yield) and appreciation, with low volatility like Bond. Keeping such in mind, I moved my money into dividend paying stocks.

Third, I look for qualified dividend for less tax treatment, at least 13% tax savings (for me) like LTCG, do not do DRIP, but use those returns either to buy new stocks or use it for regular expenses. Any tax saved is considered direct income to investor.