Share distribution or dividend distribution? The painful choice for investors.

As a long-term investor, I always grapple with one question: when a company distributes dividends, is it better to choose stock dividends or cash dividends? This choice is more complicated than you might think, as it directly affects my investment returns and cash flow situation.

The Basic Differences Between Stock Distribution and Dividend Distribution

A stock distribution is when a company gives you shares, while a cash dividend is when they directly give you cash. It sounds simple, right? But in reality, there are many considerations behind this.

I have observed that most novice investors are actually more suited to choosing stocks with more stock distributions. Why? Because stock distributions allow you to continuously accumulate the number of shares while also lowering your average holding price. My friend Xiao Chen continuously accumulated a large number of TSMC stocks through stock distributions last year, and it now looks like it has become a significant asset.

On the other hand, many seasoned investors prefer dividends because they tend to value stable cash inflows more. After all, when you get older, you may not want to tie all your money up in the stock market, but rather hope to have cash available for actual use.

Looking at Stock Distribution and Dividend Distribution from the Company's Perspective

Why would a company choose to issue shares instead of dividends? I think this has a lot to do with the company's cash flow. If a company frequently issues shares instead of paying dividends, it may indicate that it wants to retain cash for business expansion, or... to put it bluntly, its cash flow is simply not sufficient.

Large companies like Foxconn can distribute shares and dividends at the same time because they really make a lot of money. However, I have seen many small and medium-sized enterprises that clearly do not earn much, yet insist on distributing dividends every year, which ultimately restricts the company's development and leads to a long-term average performance of their stock prices.

My Personal Experience

Last year I received stock dividends from a certain financial stock, and at that moment I only felt that the number of shares had increased, without any special feeling. But a month later, I saw that the stock price had risen by 15%, and that kind of compound effect really moved me — the more shares I held, the greater the absolute return brought by the price increase.

On the other hand, I also have some income-generating assets, and every time I receive cash dividends, I feel a special sense of accomplishment, as this is at least money that has "really" gone into my pocket. Especially during market downturns, having a steady cash flow feels even more reassuring.

Stock Allocation and Dividend Distribution, You Must Consider Your Own Needs

In fact, whether stock distribution or dividend distribution is better has no absolute answer. The key lies in your investment goals and life stage.

If you are in the investment accumulation phase, stock allocation may be more suitable for you; if you already need stable income, dividend allocation may be a better choice.

My current strategy is to choose dividend-type core assets for stable cash flow, and to select growth-type assets for the opportunity to grow alongside the company.

However, to be honest, every time I encounter ex-rights and ex-dividends, seeing the stock price artificially drop makes me feel a bit uncomfortable. But this is the market, this is investing.

Your investment portfolio and your life stage ultimately determine whether you should choose dividends or stock distributions; no one can make this decision for you.