| | | The goal of Dividend Growth Investing is to invest in "safe" stocks -- ones that have been around a long time with a long track record of increasing dividends faster than inflation... companies that will still be chugging along in 20-30 years and continuing to hike divvies at least once a year faster than inflation.
The intent is to replace income in retirement.
The companies that are good DGI candidates also happen to be ones that typically do not plunge as much in corrections or crashes and recover faster/before other stocks like pure growth stocks that do not pay dividends.
Our portfolios are constructed such that we may never have to sell a single share of stock to generate income in retirement -- I can almost guarantee that the folks who save up some "magic number" the brokers and Suzy Ormans talk about and will help you calculate what that magic number is.... and then in retirement you SELL x% of your holdings every year for income until you have zero left and/or die... in many ways good DGI stocks are also good defensive plays during crisis and/or corrections -- every single stock I owned kept paying and raising their divvy during the financial crisis of a lifetime in 2009 time frame and the best part is during that time, which was still in our accumulation phase, Dripping all stocks meant I actually came out the other side in significantly better shape that prior to the crisis because eace dripped dollar bought more "future income" in the form of increased dividend income from more shares dripped at 40% off prices and the resulting bull really really really compounded future earnings.
DGI yields more than 4% income per year (my wife's is 4.5%, and mine is more tuned to current income, yielding on average almost 6% per year, some of which is DRIPPED), so there are no future RMD issues either.
So far, the only problem we've had is we make too much money now -- 15%-20% more gross income (in retirement accts like IRAs and ROTHs) and if we withdraw all of 2018's divvy/distribution income, we end up with bigger marginal tax rates -- I contend that is a great problem to have as we can choose how much to "earn" and the taxes, while not pleasant, perhaps are at least a great reminder of how much more money we make in retirement compared to when we both were working full time.
If you get a chance, just skim some of the books in the intro to this board, in particular, Lowell Miller's book and you might understand why we all talk dividends so much, etc. |
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