Rangle, I know I have a different view from most people, but I hope you don't mind me sharing it at this time.
Most people prefer to collect the dividends in cash and then deploy them where they think the most undervalued situation exists. It's a philosophy that makes perfect sense!
However, it's a philosophy I do not employ!
I own 50 plus companies. I can't sit here and tell you which one will outperform going forward. In fact, outperform is a term that I believe is used by those who are still trading, speculating and still not confident of the dividend income strategy.
When the market sold off last week, and probably in future weeks, how do we know where to deploy dividends, how do we know which company is the best one to reinvest in?
Most people will tell you one that is undervalued, as it pertains to earnings multiples and share prices.
Again, it sounds logical! However, if I employed that strategy, I would be so overweighted on ABT and JNJ, for example, that I would have missed my MLP's which have shown great returns for me.
Every company that I own shares in, I reinvest in.
I believe that the strong often get stronger (MLP's for example). Ask anyone here who has owned EPB for about 3 years and they will tell you, it was one of their best performing companies with regard to total return.
If I were to wait for them to be undervalued, I'd still be waiting! So, I kept reinvesting and those shares have provided handsome profits as well.
Since I can't predict who will be my next EPB, and I've had similar results with KO, MCD, etc. ... I decided to reinvest in all of my companies.
All I care about is that the 3rd quarter income from dividends this year, are higher than the third quarter dividends last year. Based on declared dividends, this will occur even in the face of the market volatility we are experiencing.
The 4th quarter of this year will show more income than the 4th quarter last year and I attribute that to staying fully invested and reinvesting the dividends.
Share price? ........ YAWN!
I'm not selling! My companies are like rental units and the dividends are my rents. I could care less about the property value as long as rents keep coming in ... and most of my rental units have built in rent increases.
Does it get any better than that? ... :o)
PS - I'm not trying to make a sale here. I'm simply sharing my objectives just in case it may appeal to someone else. I'm not saying one way is better than another. My way is just better for me! |
