Dividend irrelevance

Dividend irrelevance — the Miller-Modigliani (1961) result that, before taxes and frictions, a ₱1 dividend drops the share price by ₱1, making it identical to selling ₱1 of shares. Dividends are a real component of total return but say nothing about which stocks will return more; dividend growers’ historical outperformance is explained by factor exposure (value, profitability), not the payout. In PH terms the identity cuts harder: a dividend costs 10% final tax, a self-made dividend via selling listed shares costs only the 0.6% stock transaction tax.

First used in: 2.1 · Dividends without the traps