There is no reason why you would want to convert stock to cash in a way related to how (or how much) dividends get paid, so it’s purely an inconvenience. And the FIRE safe withdrawal rate is similarly in general unrelated to the dividend rate. Dividends are not relevant to anything.
No, because stock prices are more dependent than dividends on state variables that you don’t care about as a diversified long-term investor. See how smooth dividends are compared to stock prices: the dividends are approximately a straight line on log scale while the price is very volatile. Price declines often come with better expected returns going forward, so they’re not a valid reason to reduce your spending if the dividends you’re receiving aren’t changing.
If you’re just going to hold stocks to eat the dividends (and other cash payments) without ever selling them, how much do you care what happens to the price? The main risk you care about is economic risk causing real dividends to fall. Like if you buy bonds and eat the coupons: you don’t care what happens to the price, if it doesn’t indicate increased risk of default. Sure, interest rates go up and your bond prices go down. You don’t care. The coupons are the same—you receive the same money. Make it inflation-indexed and you receive the same purchasing power. The prices are volatile—it seems like these bonds are risky, right? But you receive the same fixed purchasing power no matter what happens—so, no, they aren’t risky, not in the way you care about.
There are many reasons you probably don’t want to just eat the dividends. By using appropriate rules of thumb and retirement planning you can create streams of cash payments that are better suited to your goals since choosing how much to withdraw gives you so much more flexibility and you have more information (your life expectancy, for example) than the companies deciding how to smooth their streams of dividends. But there also are good reasons why many people took dividends from large companies in the past and today use funds designed for high dividend yield, retirement income, and so on.
No, because stock prices are more dependent than dividends on state variables that you don’t care about as a diversified long-term investor. See how smooth dividends are compared to stock prices: the dividends are approximately a straight line on log scale while the price is very volatile. Price declines often come with better expected returns going forward, so they’re not a valid reason to reduce your spending if the dividends you’re receiving aren’t changing.
If you’re just going to hold stocks to eat the dividends (and other cash payments) without ever selling them, how much do you care what happens to the price? The main risk you care about is economic risk causing real dividends to fall. Like if you buy bonds and eat the coupons: you don’t care what happens to the price, if it doesn’t indicate increased risk of default. Sure, interest rates go up and your bond prices go down. You don’t care. The coupons are the same—you receive the same money. Make it inflation-indexed and you receive the same purchasing power. The prices are volatile—it seems like these bonds are risky, right? But you receive the same fixed purchasing power no matter what happens—so, no, they aren’t risky, not in the way you care about.
There are many reasons you probably don’t want to just eat the dividends. By using appropriate rules of thumb and retirement planning you can create streams of cash payments that are better suited to your goals since choosing how much to withdraw gives you so much more flexibility and you have more information (your life expectancy, for example) than the companies deciding how to smooth their streams of dividends. But there also are good reasons why many people took dividends from large companies in the past and today use funds designed for high dividend yield, retirement income, and so on.