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

To: Kip S who wrote (3556)	1/31/2010 3:08:27 AM
From: Paul Senior	Read Replies (1) \| Respond to of 34328

I believe you have to consider the objectives of the stockholder before determining whether switching out of a lower yielder to a higher yielder is sensible or a good decision or not. If the person is somebody as described earlier - a young military person with no interest in stocks - then it's not so much that a financial decision to sell is the primary determinant. Because, financial objectives are still being met (wealth accumulated), and yet when to sell, what to buy next, when to sell it again -- all are decisions the person may not wish to deal with and may not need to. Those dividends just keep accumulating and if reinvested and get compounded, the person winds up with something good without having to delve into buy/sell decisions. As I carry this further, my argument would also be not only don't stop reinvesting back into the stock, but also if the stock seems to be working out okay, not only don't switch, don't rebalance (by switching). I've seen people grow tidy nest-eggs in some stock just letting the dividends get reinvested and keeping on keeping on doing that. So that's colored my experience. Of course the argument for switching does have merit for somebody following stocks more closely or with an interest in the stock market. Depending on the historical yields of the particular stocks and the overall yield of stocks (the S&P) I might assume the 2% yield stock is where it is because the stock has become relatively popular (the price bid up, so the yield is low), and the 4% stock less popular or maybe the company is having some business problem (so the stock's down, and thus yield up). A switch like this between good companies (aristocrats say) maybe/might/could be the classic selling high to be buying something that's low. To play this game, I assume the person has to have some tactics to determine when to get in and out. If somebody is doing all that - somebody following the market or a few stocks and sometimes switching into or out of a stock -- well then the person considering retirement maybe should also use some of that energy and interest and knowledge and so go beyond just "dividend stocks for retirement" and spread out and additionally go with growth or other types of stocks where the capital gains possibilities themselves might night add additional and incremental gains vs. stocks just bought for historical dividends. === My personal experience is that for stocks I've held for a decade or more - it's pretty difficult for me to part with them just because of a bad quarter (stock down) or good quarter (stock up) or because the dividend yields have become small even as dividends themselves have increased. Yes, I understand I can always buy back in, but that just does not happen. (My experience). And if I want to sell down the position, once I start, it becomes ever more easy to sell, which I've done and regretted. Again, all just my experience. Others will have different experience and opinions.

To: Kip S who wrote (3556)	1/31/2010 7:47:21 AM
From: chowder	1 Recommendation Respond to of 34328

I was re-reading "The Single Best Investment" by Lowell Miller last night after I posted my previous message. As luck would have it, on page 37, under the title Time Is On Your Side (he was referring to compounding interest with regard to equities), he stated that many clients have come to him with portfolios they started back in the 60's, holding stocks like XOM and MRK. Even though they can find higher yielding stocks at this time, he advises them not to. (Dividends were reinvested into the same stocks.) He says you were already right once, don't take the chance of being wrong. He went on to say that those stocks, because of compounding, are now paying yields in excess of 100% of their initial costs. Just the yields! Think about that! And we want to try and improve on that? Now this is just me! I understand others have different objectives. But this is why I try to stick with the Aristocrats. I'll take slow and steady and leave the dream chasing to others. The older you get, the more certainty you need in your investments. You don't have time to make up for mistakes. And I sure don't want to be chasing yield 10 years from now when I wish to draw income to live on. I've read several sources that all say the same thing. It's not the yield that's important! It's the dividend growth! They showed where low yielding stocks with consistent dividend growth, compounded over time, is what makes dividend investing successful. Now ... if a company stops dividend growth, or drops the dividend altogether, that's different. Then you may have to sell. But if I have a stock 20 years from now providing 100% yields on initial cost, I'm not selling anything. But, that's just me. Afterall, that's what my objective is!