Dividend investing: pros and cons
As I understand it (correct me if I'm wrong), the motivation for investing in companies with a long track-record of paying dividends is for the dividend yield to provide a semi-guaranteed return. Therefore, one only has to research the company to ensure that it is a good long-term investment and you'll hopefully reap the benefits of both the dividend and growth in the stock in the long-term.
However, my counter-argument is that so much depends on that "research" step and how good you are at picking companies whose share price will grow, that whether they pay a dividend or not becomes almost meaningless. In an efficient market, isn't the value of the dividend accounted for in the share price anyway? It is presented to the amateur investor as some sort of bonus (I initially viewed it this way), but this is not the case. Also, as my friend pointed out, it creates a taxable event. It won't matter for investors like me who are just starting out, but surely when the account size is larger, you'd rather have more control over your taxable income, no?
I'm not an expert on investing, but I just want to start a rational discussion on the pros and cons of dividend investing and if it's really all that it's cracked up to be?
I would suggest that you might be as good or better off expending all your energy on researching which stocks, ETFs, will provide you with the best growth opportunities, rather than how much of a dividend they pay out. A good dividend paying company will give you 5% more than a non-dividend paying company, but again, this is reflected in the share price and, the variance of your return on the actual stock itself I'm guessing is much, much higher than 5% - so the pick itself is much more important than whether the company pays a dividend.
I'm more than open to hearing why I might be wrong.