Why I abandoned dividends (and what I do now)

Last updated: February 2026

My website is called dividendes.ch. For 17 years, I invested in dividend aristocrats. I built my financial independence with that strategy.

And today, I no longer use it.

Even more striking: in my book "Les Déterminants de la Richesse" (The Determinants of Wealth), I explain why dividends are not the best approach to achieving FIRE.

Why bring this up now, when I changed strategy back in 2017? Because I still regularly receive questions about "my dividend strategy". Because my domain name creates confusion. And above all, because it is time to publicly own this evolution.

How did I get here? Let me walk you through my journey — and why it might change the way you invest.

Phase 1: Why I went all-in on dividends (2000–2017)

Trial by fire

I started investing in 2000. The worst possible timing in modern history: right in the middle of the dot-com bubble.

I watched my portfolio collapse from 2000 to 2003. Then again in 2008–2009. Two major crashes before I even had ten years of experience. I made every mistake in the book: JDSU and other wildly overvalued tech stocks.

I learned a brutal lesson: my biggest enemy was myself. My emotions. My impatience. My greed.

The reassuring solution: dividends

Faced with those traumas, I looked for safety. And I found it in dividend aristocrats:

• Companies that have paid growing dividends for 25 years or more
• Regular income, no matter what
• A defensive strategy that stopped me from panic-selling

It worked. Between 2010 and 2017, this strategy helped me navigate market turbulence without stress and make steady progress toward financial independence.

I even became a dividend evangelist, launching dividendes.ch in 2010 to share this approach with others.

The warning signs (2015–2017)

The market shifted

Around 2015–2017, I started noticing anomalies.

1. Dividend aristocrats were getting very expensive

P/E ratios were exploding. Johnson & Johnson, Coca-Cola, McDonald's — all these defensive stalwarts were trading at historically high multiples.

Why? Because everyone wanted dividends. Interest rates were at zero. Retirees were chasing yield. The strategy had gone mainstream.

I was paying 25 to 30 times earnings for slow-growing companies.

2. Some "boring" companies were outperforming

Digging through the data, I discovered something unsettling: some companies I had never even considered — because they didn't pay enough dividends — were delivering better returns.

"Boring" businesses with low valuations (P/E below 15), solid balance sheets, modest growth, but little or no dividend. Not all of them, of course. But enough to make me think.

3. The fiscal, emotional and financial cost

In Switzerland, dividends are taxed as income. I was losing a meaningful share of my dividends to taxes.

And psychologically? I spent my days monitoring whether any company was cutting its dividend, and manually reinvesting dividends while paying transaction costs each time.

I had become a slave to my dividends.

The revelation: what the science says

The "oh damn" moment

In 2018–2019, I started digging into the academic literature on dividends. Not amateur investor blogs, but peer-reviewed scientific studies published in academic journals.

What I found shook me: dividends do not create additional value.

This is the Modigliani-Miller theorem (Nobel Prize): in a world without tax frictions, the choice between dividends and share buybacks is neutral for company value.

But we live in a world with frictions:

• Dividends are taxed immediately
• In Switzerland, capital gains are not taxed (for individuals)
• Share buybacks are therefore far more tax-efficient

By focusing on dividends, I was imposing an unnecessary tax penalty on myself.

What the research actually shows

I spent months compiling studies. The findings are in my book "Les Déterminants de la Richesse".

The factors that genuinely predict performance:

1. Value: buying cheap (low P/E, P/B)
2. Quality: profitable and financially sound companies
3. Momentum: price trends over 6 to 12 months
4. Size: small-cap stocks
5. Low volatility: less volatile stocks

Notice what's missing? Dividends.

Dividends are not a robust outperformance factor. They are a byproduct of other characteristics — primarily value and quality. By focusing on dividends, I was using an imperfect proxy rather than the real underlying factors.

My transition: from dividends to quant (2017–2020)

Transition phase (2017–2019)

I didn't change overnight. I had 17 years of deeply held convictions to question.

I first broadened my investment universe: value companies whether or not they paid dividends, with a focus on P/E, P/B and return on equity, and less attention to dividend yield.

This transition set me up for the next phase, even if the results weren't immediately spectacular.

Quantitative phase (2020–present)

From 2020 onwards, I systematised my approach.

1. Systematic factor investing

I built portfolios based on rigorous backtests: multi-factor selection (value + quality + momentum), disciplined rebalancing, elimination of emotional bias.

2. Portfolio resilience

The real benefit showed up during the turbulence of the early 2020s. My quantitative value portfolio held up better during drawdowns than the broader market. Factorial diversification and selection discipline paid off when it mattered most.

That was the validation I had been waiting for: this approach wasn't just theoretical — it worked in the real world.

Dividends are no longer my target. They are a consequence of good value investing.

The results: a more robust approach

I cannot directly compare my dividend performance (2010–2017) against my quantitative performance (2020+). The market environments are too different — the 2010s were an exceptional decade for equities.

What I can say:

Resilience

My quantitative approach has demonstrated its robustness through recent market turbulence. Factorial diversification and systematic discipline limited losses during market corrections.

Diversification

My portfolio now holds over 50 quality value stocks, rather than 20 to 30 potentially overvalued dividend aristocrats.

Flexibility

I am no longer constrained by the "must pay growing dividends" criterion. My investment universe is far wider.

Why I have no regrets

Dividends helped me rebuild

I wasn't in dividends during the crashes of 2000–2003 and 2008–2009. I took the full force of those downturns with far riskier strategies.

But after those traumas, I needed stability. Dividends gave me that psychological crutch: seeing income land in my account every quarter, feeling that my portfolio was "working" for me even in difficult times.

Dividends were the right strategy for recovering from those hard lessons.

But I evolved

Today I have 25 years of experience. I have survived two major crashes, started becoming financially independent as early as 2012, and learned to understand my own emotional biases. I no longer need that psychological crutch.

Dividends are like training wheels on a child's bike. Essential for learning. Limiting once you know how to ride.

Dividends for FIRE: the problem

Many in the FIRE community swear by dividends. "I live off my dividends!" This is suboptimal — and here's why.

Problem #1: Capital inefficiency

This is the biggest issue, and it's rarely discussed: to live solely off dividends, you need to accumulate an enormous amount of capital.

A simple illustration: if you need 100'000 CHF per year and the average dividend yield is 3%, the capital required is 3'333'000 CHF. With a 4% withdrawal rate (drawing down capital), that same annual need requires only 2'500'000 CHF.

Note: a fixed 4% withdrawal rate is a useful approximation but remains imperfect, as I explain in "Les Déterminants de la Richesse". An adaptive approach like the VPW method — Variable Percentage Withdrawal — is more personalised: it adjusts the withdrawal rate based on your age, portfolio allocation and actual returns.

The difference: 833'000 CHF — several additional years of work to reach FIRE.

Even worse: if you never touch your capital and live only off dividends, your capital keeps growing throughout retirement. The result? You leave a comfortable inheritance... but you never got to enjoy your own money.

FIRE is about leaving early to enjoy life. Not working five extra years to leave millions to your heirs.

Problem #2: Tax inefficiency

In Switzerland, dividends are subject to a 35% withholding tax, then taxed as income at the cantonal and federal level. Capital gains, on the other hand, are not taxed for individuals — 0% tax.

This is a significant tax advantage that Switzerland offers, and one that dividend investors voluntarily ignore.

Problem #3: Sector concentration

Strong dividend payers cluster in a handful of sectors: financials, utilities, consumer staples. You end up overweight in those sectors and poorly diversified relative to the broader market.

Problem #4: The "passive income" illusion

Psychologically, receiving 30'000 CHF in dividends "feels" different from selling 30'000 CHF worth of shares. But economically, they are identical. Both reduce your net worth by 30'000 CHF. The only difference? The tax you pay on dividends — which you avoid entirely when selling shares in Switzerland.

So what should you do?

For beginners

If you are just starting out and market crashes terrify you: dividends can be your ally. They will help you stay the course psychologically and avoid panic-selling. Just know that you are paying an insurance premium in the form of taxes and reduced performance.

For intermediate investors

If you have a few years of experience: broaden your approach. Keep a few aristocrats if they reassure you, but add quality value companies even if they pay no dividend.

For advanced investors

If you are aiming for maximum optimisation: go quantitative. Factor investing (value + quality + momentum), rigorous backtests, elimination of bias, tax optimisation. This is what I do in my PFD & PP 2.x portfolios.

The real message

Don't be dogmatic

The biggest danger in investing? Dogma. "Dividends are the only way." "A global passive ETF is the only way." "Bitcoin is the only way." None of these claims hold up to scrutiny.

The best strategy depends on your level of experience, your psychology, your time horizon, your tax situation and the market environment. I have changed strategy three times over 25 years. And I may change again.

Evolve with the data

What saved me? Being willing to question my own convictions. When the data showed I was wrong, I didn't deny it. I changed.

It was hard. I had years of dividend investments behind me, an entire blog built around it, readers expecting my dividend analyses. But my ego matters less than my results.

Conclusion: why I left dividends behind

Dividends are not "bad". They are simply suboptimal for someone who has experience, understands their emotions, optimises for after-tax performance and applies a scientific approach to investing.

I am grateful for dividends. They helped me recover from two crashes. They helped me achieve financial independence.

But today I have moved on. With quantitative value investing, I have an approach that is more robust, better diversified, and more aligned with what investment science actually tells us.

My website is still called dividendes.ch. But now you know why I no longer focus exclusively on dividends.

And you? Are you ready to question your own convictions?

Further reading

• My current quantitative portfolios
• My backtests and analyses
• My biggest investing mistakes
• My book: Les Déterminants de la Richesse

Frequently asked questions

Why abandon dividends if the strategy worked so well?

Because a strategy suited to one phase of your life is not necessarily right forever. Dividends helped me rebuild psychologically after the crashes of 2000–2003 and 2008–2009. But with experience, emotional control and a deeper understanding of financial science, staying with dividends meant paying an unnecessary premium — in taxes and in foregone performance — with no real benefit in return.

Are dividends really bad for FIRE?

Not bad, but suboptimal. Living solely off dividends requires accumulating 30 to 40% more capital than a capital drawdown approach like the VPW method. That translates to several additional years of work — the opposite of what FIRE is about. Add to this the tax inefficiency in Switzerland, where dividends are taxed as income while capital gains are entirely exempt.

Do you need a very high savings rate to reach FIRE?

No. The idea that you need to save 50% or more of your income to reach financial independence is a misleading oversimplification. A savings rate of around 20%, combined with a sound investment strategy and the elimination of professional expenses after FIRE, is enough to achieve financial independence in under 20 years.

What is quantitative value investing in practice?

It is a systematic approach that selects stocks based on objective, measurable criteria — value (low P/E, P/B), quality (profitability, balance sheet strength) and momentum (price trends over 6 to 12 months) — using rigorous backtests. The goal is to eliminate emotional bias and capture the risk premia documented by academic research.

Can you still invest in dividends as a beginner?

Yes, and it can actually be a solid starting point. Dividend aristocrats provide valuable psychological stability when you have not yet lived through a major crash. The key is to treat dividends as a stepping stone, not a destination, and to evolve toward more efficient approaches as experience and confidence grow.

Sources and data

• Modigliani, F. & Miller, M. H. (1961). "Dividend Policy, Growth, and the Valuation of Shares". Journal of Business. — jstor.org
• Fama, E. F. & French, K. R. (1993). "Common risk factors in the returns on stocks and bonds". Journal of Financial Economics. — sciencedirect.com
• Jérôme, dividendes.ch. "Les Déterminants de la Richesse". — amazon.fr
• Swiss Federal Tax Administration (SFTA). Withholding tax on dividends (35%). — estv.admin.ch
• S&P Global. S&P 500 Dividend Aristocrats methodology. — spglobal.com