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

To: Steve Felix who wrote (3676)	2/5/2010 2:08:52 PM
From: E_K_S	Respond to of 34328

Hi Steve - I recently added EMPIRE DISTRICT ELCT (NYSE: EDE), PEPCO HOLDINGS INC (NYSE: POM) and more SHIP FINC INTL (NYSE: SFL) to my dividend paying stocks. finance.yahoo.com I now receive a blended dividend yield of 7% with the chunk of money I deployed today. I am not sure how much the stocks will grow, but I am confident that over the long term they will be worth more than I paid today. I try to allocate a certain amount of cash reserves each quarter to work into the market. I have about 13% of the portfolio in cash yielding 2% in the credit union and in a GNMA fund. The taxable portfolio now generates about a 5.6% yield up from 3.5%. From time to time I replenish my cash reserves by peeling off stocks where I have large capital gains and/or harvest tax losses to offset my portfolio income. EKS

To: Steve Felix who wrote (3676)	2/5/2010 6:54:05 PM
From: Grommit	Read Replies (2) \| Respond to of 34328

Maybe I do not explain things clearly, so I will try one more time. I disagree with this statement: "With these I think EKS made the point that if you buy the right stocks and hold them long term, the price you pay today won't matter much in the end." Let's say that there are 2 stocks, both pay the same $$ dividend per share, have the same earnings per share and all that, and incredibly, in the future they will have the same $$ dividend increases per year. And their stock price will go up in step -- the same % per year. Here is the difference, stock #1 sells for 10% less than #2 today. This is true today, and it will always sell for exactly 10% less than #2. So does it matter which one you buy, "in the end"? Yes. If stock #2 gives me a 8% compound annual return of dividends, then #1 would have a 10% higher return, or 8.8% annual. And if #2 went up in value 3% a year, well, #1 did also. It is a tie there. I'll take 8.8% over 8.0%, so it matters -- significantly. Another example: We have the same stock. Fred buys it today for $10. Ethel buys it tomorrow for 10% less, $9. She got lucky. They hold it forever and it pays nice, increasing dividends. Does it matter? Ethel's dividend ROI is 10% higher, just like in the prior example (actually 11.1111% here). So it matters here too. But she also has a capital gain advantage. If the price after 20 years is $20, Fred made a 100% gain, and Ethel made 122%. The price that you pay for a stock matters, no matter how good it performs in the future. You may not care because you made 1000%, and you may not care if you have $6.1 million vs $6.7 million, but it could really matter if retirement is iffy. Corollary: This is why I think that valuation matters -- PE, EBITDA/EV, Price/Book, or whatever metric you use. grommit