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Strategies & Market Trends : Dividend investing for retirement

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From: chowder	10/11/2010 7:44:12 AM
	1 Recommendation Read Replies (1) of 34328

When I decided to start investing in dividend paying stocks, my motivation began with the financial crash of 2008. Up to that point, most financial advisors promoted growth through capital gains. Then the objective in your later years was to draw 4% of your portfolio per year to live off of and then hope the market would continue higher so you wouldn't outlive your portfolio. The crash changed everything! I saw a lot of people who were planning on retiring and couldn't because thier portfolio's were losing value very quickly. They had to extend their work careers, those who were lucky enough to keep their job. I saw people already in retirement who then had to take on more risk than they had planned, by getting back into the market during a bear market, in order to try and build their portfolio's that they were living off of. Scary times! It was at that point that I decided I would try and build an income stream via dividend paying stocks. I also decided at that time that I didn't want to liquidate anything. I wanted to live off the dividends. I decided I would reinvest all dividends until I was ready to start drawing them in cash. Since "MY" objective was not to sell anything for living expenses, I had to determine a goal to work towards. I came across the concept of "yield on cost." Many knowledgeable investors are quick to point out that yield on cost is an irrelevant metric. They argue that current yield is what is meaningful when comparing investments. They are correct in this statement. Yield on cost is entirely specific to the timing of an investment. However, if the objective of an income investor is to invest in securities with increasing income over time, the best metric to measure your success in achieving this objective is yield on cost. It's the dividend growth that will provide you with income later in life. Here is an article supplied by Realty Income (O) on "The Magic Of Yield On Cost." realtyincome.com

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