Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: seminole who wrote (4387)	4/7/2010 5:55:09 PM
From: Steve Felix	Respond to of 34328

I believe a lot depends on our ages and stages. Most things I've read lean to starting out with somewhat higher yields to get the money flowing for reinvestment. ____________________________________________________________ Dividend Growth or Dividend Yield Should you seek dividend growth or dividend yield in a retirement portfolio? I recommend both. I call the combination a Dividend Blend. A fast grower almost always starts out at a low initial yield. If the dividend amount grows at 10% per year, which is excellent, it takes just over 7 years to double. That is a long time. If the initial dividend amount were 2.5% with a 10% per year growth rate, you would have to wait 7 years to reach a withdrawal rate of 5% of the original balance (ignoring inflation). A high yielder often comes with slow growth, sometimes none. You may have to reinvest a portion of the income stream to keep up with inflation. With a Dividend Blend, you use a portion of the high yielder’s excess to cover the middle years while waiting for the fast grower to take over. You start out with a withdrawal rate of 5% or more (plus inflation). There are two fine points. The excess from the high yielder can be reinvested in more shares of the high yielder, assuming that the price is right. It does not have to be invested in TIPS or money market funds. The price of a fast grower is likely to command a premium. This leaves you at the mercy of the marketplace. The size of this premium varies according to public preferences, not simply by corporate performance. This can work in your favor. Often, it does. It can also work against you. John Walter Russell March 27, 2008 early-retirement-planning-insights.com