Stocks: How do stocks with dividends grow compared to stocks without?

Kevin S: Stocks: How do stocks with dividends grow compared to stocks without?
I’m looking for a link to such studies here, so hopefully I can save time from doing my own studies. Basically, I’m looking for edges in the market, and even if dividend stocks grow at the same rate as non-dividend stocks, and dividends are a percent, than I will have a percent plus compounding on that percent every year. May not be much, but every edge counts. Please note that only statistics and studies will help me here. Thanks!

Answers and Views:

Answer by jebediabartlett
I have no link to studies, but I can tell you that you are on the right track… for the long run, you are ahead of the game with dividend paying stocks ( or funds).
You can go with the big American companies that pay decent quarterly dividends and re-invest those dividends and you will come out ahead.
I, myself, go with a couple of different things that pay monthly dividends…with two different results.
I have a fund ..FNMIX..( a Fidelity fund invested in international ” financials”)… each month it pays dividends in the form of more shares… which amounts to ” automatically re-investing”…that does two things… those shares have a monetary value.( so I make THAT much every month)…but also it increases the amount I will get next month AND if you are ” into” accounting, it actually lowers my per share cost… ( I have more shares, but it has cost me zero) Important because when it comes to figuring out EXACTLY how much you are ” ahead” at any given point, you have to know where you started…and the increased number of shares ” lowers” your starting point.
My second monthly div play is in Harvest Energy Trust… I do not re-invest those divs automatically ( prefer to wait to buy only at ” dip” prices ( then I load up)…it pays a per share div of 30 cents ..currently that amounts to about 15%…( but my shares were bought much cheaper, so my div is more in the 17+% neighborhood )
So you can see you will come out ahead… the big companies with the quarterly divs will have the same effect as these two monthly plays…just a little slower…
Non- div growth stocks may blow all of these away at certain times…the right stock at the right time may ” double” in six months or less…( NO DIV CAN COMPETE WITH THAT)…but for solid rarely losing, steadily gaining results…go with a nice chunk of div- paying holdings….you’ll do fine.

Answer by Alan
Part of earnings “growth” is earnings from investments made from earnings. Companies have two choices when it comes to earnings, pay it out as dividends, or reinvest it in existing or new businesses to generate additional income going forward. Companies that pay higher dividends are investing less and therefore figure to be growing slower. Companies that pay lower dividends figure to be investing more, and growing faster. No free lunch here.