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Strategies & Market Trends : Dividend investing for retirement

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To: Cogito Ergo Sum who wrote (6051)	10/11/2010 7:23:04 PM
From: Tom C	Read Replies (1) of 34328

Maybe I have a different interpretation of yield on cost then you. I just started converting to a yield oriented portfolio this year. I had been out of the market in terms of buying individual stocks until I started a new IRA in 07 and started adding to an existing taxable account this year. My primary investments for the past 10 years were Mutual Funds in an IRA and my current 401K. I purchased 33 shares of Oracle in 1993 (or maybe 92 but I’m not going to look it up) for about $1000.00. They split a few times and in Mar. 2000 I sold about 300 shares. There was one more split right after that and those shares sat in my account for ten years. At the beginning of this year I had 1000 shares. A few years ago ORCL started a dividend. The dividend is 20 cents a share or in my case $200 per year. Using a dollar as my cost per share that means my yield on cost is 20%. Pretty good huh, but the reality is that my yield on cost is exactly the same as it was when the stock was priced at $15 and exactly the same as it was a few years ago. It could go up to $30 tomorrow and my yield on cost would still be 20%. Capital appreciation is a good problem to have but it has little to do with cost on yield. A great cost on yield like 20% is also a good problem to have except that this stock’s current yield is only .07%. And most importantly it’s not growing, even if ORCL did up the dividend it’s not reliable in that area. So I’ve been selling 100 shares here and there because I figure to use the money to increase my overall portfolio yield, taking the big cap gains hit this year instead of in the future. I’m also doing this to adjust my allocations for any one stock to between 1-5%. In a way, I’m not so sure that an individual stock’s cost on yield in as important as the overall portfolio cost on yield. Is the cost on yield increasing for this stock? By selling some ORCL I’m increasing my portfolio’s cost on yield by using those cap gains for higher yielding stocks, I expect to provide increasing dividends. Edit: Since I've been selling somthing I've had for many, many years that probably means everyone else should buy. I'm resigned to that and won't look back.

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