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Strategies & Market Trends : Dividend investing for retirement

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From: chowder	11/18/2010 1:27:24 PM
	1 Recommendation Read Replies (4) of 34328

I think I'm going to stir up some trouble! ... :o) When I initially made the decision to focus on high yield, dividend growth stocks back in late 2008, my plan initially called for taking the dividends from existing positions and buy other dividend paying stocks. I liked the way that strategy played out as it allowed me to fill out my portfolio more quickly than I could have done by just adding cash every month. From what I have read, most dividend income investors like to take the dividends in cash and purchase something else that is undervalued or buying more of one of their undervalued holdings which I take as a code phrase as a stock that is underperforming. I've given this subject a lot of thought. I've even got to the point where I'm obsessive about it. <lol> I think that strategy makes logical sense and it sounds good on paper. That strategy is the consensus view! I've gone the other way! Every holding I have is signed up for 100% reinvestment. PG reinvests in PG. KO reinvests in KO. O reinvests in O. Etc. etc. etc. As Yul Brenner said in The King and I. The argument against this is that KO is reinvesting at 52 week highs. ... I say "SO WHAT!" ... :o) ... I'm not looking to sell and take capital gains, I'm looking to increase the income flow on a steady, reliable and predictable basis. As someone who spent most of his entire working experience in sales management, we always worked with our strengths. ... If I have quite a few holdings that are performing the way I expected them to perform, why not invest more into them? I know there are many logical reasons not to. I know people will say you can do better doing something else. Maybe so. But it's my objective to increase the income stream and to do it through diversity. If JNJ and KO increase dividends at 10% per year, and they do, why would I want to take those dividends and buy an undervalued position that only increases dividends at a 5% annual growth rate? I may have an ADP or a PAYX that could use additional funds while their share prices are lagging, but that's where my monthly cash contributions come into play. They can add to the underperformers. Meanwhile, I want my winners to keep growing and adding to that winning position and I'm doing that through dividend reinvestment.

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