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

To: Paul Senior who wrote (3558)	1/31/2010 3:49:35 PM
From: Kip S	1 Recommendation Read Replies (1) \| Respond to of 34328

To Paul, dabum2, and other who see it the same way, I have no vested interest in this argument. I just think it is a mistake to not look at current yield. I do want to disagree with one point: Just because an investment made a while back had done well in terms of dividends, does not mean it will continue to do well. Look at BankAmerica's incredible dividend growth from 1998 (or earlier) on. We all know what happened. Similarly, there is no reason to think that if you sell a quality stock and move into another quality stock you are either 1.) moving out of something good into something less good or, 2.) market timing. Good investments do not necessarily stay good investments forever. I know they didn't pay dividends and so, perhaps, are not the best examples, but think of Microsoft or Dell in the 1990s vs. the 2000s. Just because something was good does not mean it will always be good. My preferred holding period is the same as Warren Buffett's--forever. If something does not meet my needs, though, I will eventually sell it. Because it has been good to me in the past is not a reason to believe it meets my current needs. Here's an example. I bought Exxon around 55 four years ago for some exposure to the energy sector. It had a current yield of about 2.5%--low for my goals, but I wanted the exposure. As oil prices rose, the share price took off up into the 90s. The dividend was increased healthily, but nowhere near the share price gains. I decided that holding the stock, with a current yield of 1.6% no longer met my needs. I sold, paid capital gains taxes, and redeployed into Kimberly Clark at a 4% yield. Even after paying taxes @ 15% my income more than doubled. This seems like a good move to me, and I am happy with it. I am not interested in "unconvincing" anyone about their strategies. I am only arguing that if you ignore current yield, you are ignoring an important input into the decision-making process and are likely to end up with suboptimal results. Kip