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Strategies & Market Trends : Dividend investing for retirement

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To: stock bull who wrote (5574)	8/28/2010 2:18:00 PM
From: Paul Senior	Read Replies (2) of 34328

If you are buying for dividends, then perhaps you would want something where either the risk of the dividend being cut is small or/and where the chance for the dividend to increase is reasonably good. If you have a stock and it drops 50%, it may be risky OR it may just be volatile. If you are buying for dividend yield, then maybe it makes no difference right now whether you buy a consistent dividend grower like P&G or a GNMA like VFIX. Both pay about 3.2% now, and there's a lot more volatility with PG. Over the past five years, the fund's been pretty stable, certainly compared to the volatile P&G (which has pretty much wound up going nowhere over the past few years): finance.yahoo.com However as regards dividends or distributions, that "3.2% yield" equality may change. VFIX has cut distributions in past -- maybe they're in a growing state now (I don't follow or know), whereas P&G has been raising their dividend every year for something like 50 years. I use P&G as an example of several stocks discussed here, i.e. well capitalized stocks with a history of earnings and dividends as a result of providing products or services that customers want or need. Possible that one or all such stocks could suddenly fall 50% (as we have seen.) More likely though, a slow 50% decline as the general market falls or certain sectors fall in or out of favor (e.g. big pharma). While that might make "total return negative" and maybe a "risky business", if somebody were "buying stock for its dividends", the dividends likely would be intact. People here who have relatively long-term goals or outlooks should welcome such a decline in these stocks though. Dividends that are automatically reinvested in stock buy more stock when the stock price is down. Or the low stock price gives an opportunity to commit more cash to buy the stock(s) so as to get the now larger yield (same distribution divided by lower stock price.)

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