I was re-reading "The Single Best Investment" by Lowell Miller last night after I posted my previous message.
As luck would have it, on page 37, under the title Time Is On Your Side (he was referring to compounding interest with regard to equities), he stated that many clients have come to him with portfolios they started back in the 60's, holding stocks like XOM and MRK.
Even though they can find higher yielding stocks at this time, he advises them not to. (Dividends were reinvested into the same stocks.) He says you were already right once, don't take the chance of being wrong. He went on to say that those stocks, because of compounding, are now paying yields in excess of 100% of their initial costs. Just the yields! Think about that! And we want to try and improve on that?
Now this is just me! I understand others have different objectives.
But this is why I try to stick with the Aristocrats. I'll take slow and steady and leave the dream chasing to others. The older you get, the more certainty you need in your investments. You don't have time to make up for mistakes. And I sure don't want to be chasing yield 10 years from now when I wish to draw income to live on.
I've read several sources that all say the same thing. It's not the yield that's important! It's the dividend growth! They showed where low yielding stocks with consistent dividend growth, compounded over time, is what makes dividend investing successful.
Now ... if a company stops dividend growth, or drops the dividend altogether, that's different. Then you may have to sell.
But if I have a stock 20 years from now providing 100% yields on initial cost, I'm not selling anything. But, that's just me. Afterall, that's what my objective is! |
