>>> How do you manage the total return of your dividend investing? <<<
That's a good question! And my answer is sure to make some people think I've gone loco!
Total return is not a priority with me! It is not something I focus on. If it comes, it comes.
My focus is on a steady, reliable and increasing stream of dividends (income).
I'm buying blue chip companies and companies that are strong financially. I want a reliable dividend. Something you can count on.
This is the philosophy of my investing: if a company can provide a steady, reliable and increasing dividend, then share price will rebound in time because that company has value.
In 2008 - 2009 for example, PG dropped 40% in share price from its high. If I were concerned about total return, I would have had a stop loss at some point and I would have sold.
However, PG not only continued their dividend, they raised it both years!
I got a pay raise to sit still and do nothing. And what did the share price do? It came back! The stock had value because in face of the worst financial crisis since the Great Depression, PG continued to pay its dividend and increase it. Just as many other blue chip stocks did.
I'm not worried about share price. I don't plan on selling. I just want to collect the dividends at some point.
Those who focus on capital gains will eventually have to find a place to earn income or start liquidating. What if there's another financial crash when it comes time for them to draw money? They will have to take on more risk than they really need. They may not get any decent returns either. Treasuries are paying what? Maybe 2.5%? Pfffft, I've got equities paying me double digit yields on cost. I'm not worried about total return. As long as my companies continue to provide a steady, reliable and increasing stream of income, total return will work it's own way out in time.
PG has had many significant pull backs in the past 10 years. It always comes back because of the steady, reliable and increasing stream of income. In the past 10 years (from today), including dividends, PG is up 105%. BRK/A is up 84% and the S&P 500 is down 26%.
If you look at total return short to intermediate term, you'll be chased out of your positions. So again, it's not a focus for me.
Total return is something that works out over time when dealing with blue chip or Aristocrat stocks. |
