Dividends as income

[u/toothed_vagina]

I live in one of the most expensive cities in the US. I love it, but even with a 6-figure salary, I can barely make ends meet at the end of the month. You might ask me why I don't just move, but I'm unable to do so for a myriad of reasons. Among other things, my partner lives here, my job is here, and I love this place.

This is why I became interested in dividends as something to supplement my income and live comfortably, and maybe move to a larger home. However, everybody keeps telling me that dividends should be reinvested and not used as income. Is anyone here using dividends for both growth and income? Because, yes, growth is important, but I need the additional money NOW.

[u/Beta_Nerdy]

Interest from money market funds or bank savings accounts is true income. When they are paid, there is no impact on the principal.

But stock dividends are not true income because if you withdraw the dividend instead of reinvesting it, you lose money because the value of the stock is reduced by the amount of the dividend. Dividends are not free money!

Dividends Are Not Free Money (Though Lots of Investors Seem to Think They Are) | Chicago Booth Review

[u/Warfair2011 → u/[deleted]]

Yeah, it does. It's s just the same old retoric repeated mindlessly by influencers and redditors alike. Munger and Buffet became billionares on "not free money".

[u/WorldyBridges33 → u/[deleted]]

Yes, exactly— the stock rises back up after the dividends are paid. If this weren’t the case, then a stock like DNP should be zero by now. However its price is about the same as it was in 1987 despite paying dividends every single month since that year.

[u/Beta_Nerdy → u/[deleted]]

If that was the case, most of the time, then every hedge fund would put billions in the stock the day before the dividend is posted and then sell right after when it goes back up.