Agreed. It simply comes down to what side of the question your point-of-view rests on.AltaRed wrote:Perhaps, but I'd call it human nature than being irrational. Humans generally prefer certainty and clarity over the alternative and I suspect most retail investors are best served with the former. Less potential for panic attacks and making poor decisions.ockham wrote:The conclusion: Therefore, shareholders who like firm dividends rather than self-dividends are irrational.
I might add that one thing that hasn't been mentioned here, at least directly, is the ease of receiving a dividend payment. No action is required, no decisions to be made. The money shows up in your account on cue regardless of what the market is doing.
Conversely, self dividends require action on the part of the investor. What to sell? How much to sell? When to sell? Therein lies the uncertainty unless you are working with some sort of systematic withdrawal plan. There are lots of those in existence, but they are almost always attached to high fee funds or discretionary accounts. In light of the alternatives, receiving dividends seems like a "rational option" based on simplicity and costs. It may not be more rational than a self-dividend approach, but I doubt that it's any less. When seeking dividends becomes irrational is when you maintain ownership in a security solely for the dividend when there are superior alternatives available -- IOW ignoring opportunity costs.