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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Debt Free who wrote (3178)	12/31/2009 7:18:19 PM
From: Kip S	2 Recommendations Read Replies (1) \| Respond to of 34328

For instance if the yield is currently 5% and your effective yield is 10% (because of your purchase price) the yield you receive is only 5% of your current value. Therefore if you look at it from the perspective that it is yielding 10% then you are potentially overstating what you are receiving. Agree with your post, DebtFree. There is a tendency to think in terms of return on our investments based on their original, historical cost. This can lead to poor decisions, though, I believe. For example, say I bought something a very long time ago, such that it is now yielding, say, 8% on my original investment. However, its current yield is 2%. If I am pursuing a dividend strategy, I would likely be better off selling it, taking the capital gain, and buying something with a higher yield.

To: Debt Free who wrote (3178)	12/31/2009 9:06:56 PM
From: Steve Felix	Read Replies (1) \| Respond to of 34328

I can see the point but I think the perspective comes with the objective. The objective being a never ending, increasing, compounding by reinvesting, dividend stream. Growth of dividend stream being more important that growth of portfolio, something that goes against the grain of most investors. Since I have no idea what dabum has reinvested the money in, return can't really be figured, but his yield and current value would be higher.

To: Debt Free who wrote (3178)	1/1/2010 8:25:12 AM
From: chowder	2 Recommendations Read Replies (1) \| Respond to of 34328

>>> ... if the yield is currently 5% and your effective yield is 10% (because of your purchase price) the yield you receive is only 5% of your current value. Therefore if you look at it from the perspective that it is yielding 10% then you are potentially overstating what you are receiving. <<< A very good point, but I think it depends on what your objectives are. My objective is to build a steady stream of income to be used later in life. I'm not interested in capital gains, although I will take them. My focus is the monthly dividend income. It must continue to grow. PG and KO for example, pulled back last year with the rest of the market. It wasn't pretty looking at portfolio value decrease. However, the dividends were increased during this time. Now, if I were drawing those dividends to live on, there was no need to panic. I would have received a pay raise while the rest of the market plummeted. The share price dropped, the dividends increased. As long as dividends are increasing, share price will eventually catch up. And ... you get paid while you wait. Lower the dividend, and I sell the stock. Dividend growth is the focus. This is what separates the blue chips from everyone else. I'm not saying other strategies won't work. In fact, if you are very good at research and know what you are doing, buying small caps will outperform most other strategies. The risks are greater though. I'm managing risk. I'm willing to take less capital growth to increase income. I don't want to sell a security to live off of. So, although you are correct in that I may be overstating my return, my focus is on those dividends increasing every year and letting compounding do its work. It's a different way of looking at the market, I know. But almost everyone is looking to create portfolio value. And then what? You have to sell. You have to liquidate positions or you will eventually end up doing what some of us are already doing. Buying dividend stocks to insure an income. A lot of baby boomers will be doing that soon. I could be wrong, but in my opinion, dividend growth is what a lot of people are going to be looking for going forward.