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

To: Elroy who wrote (6059)	10/12/2010 1:06:26 AM
From: Kip S	1 Recommendation Respond to of 34328

I completely agree with you, Elroy. Say you bought something 20 years ago. Its dividend has grown dramatically and so has its price. It now has a yield on cost of 20%, but its current yield is 2%. What should you do? Most likely, you should sell with a very large capital gain and redeploy those assets into something with a better dividend and equal or better prospects. Even after paying taxes (if in a taxable account), moving into something with a 4% dividend puts you substantially ahead in dividend income. I believe using yield on cost as a decision variable will, at a minimum, increase the likelihood of an unwise decision.

To: Elroy who wrote (6059)	10/12/2010 2:40:12 AM
From: Dinesh	Respond to of 34328

deleted

To: Elroy who wrote (6059)	10/12/2010 1:59:03 PM
From: gregor	Read Replies (2) \| Respond to of 34328

But isn't the theme of Steve's thread about yield on cost since his main objective is to buy stocks that have a solid history of raising the dividends every year? If that premise holds then the current price of the security is immaterial since your objective is about income stream. You were right on in emphasizing that unless you have a better alternative why would you want to sell. I also would adhere to I think what this discussion is about. If at some point because of capital gains, the current benefit of taking profits gets you ahead of the projected dividend stream it's best to take the capital gain and redeploy the capital elsewhere. How you do this is the question? I am sure the mathematical formula would be quite complicated however there would have to be some rules of thumb that could simplify the dilemma for us. Gregor

To: Elroy who wrote (6059)	10/12/2010 7:19:48 PM
From: Cogito Ergo Sum	Respond to of 34328

It's interesting how different folks have different ways of looking at the market... yet we all have similar ultimate goals.. I mentioned 'and taking various factors into account' in my post to Tom.. Yield on cost is only one factor.. I find current yield to be deceiving when looking at a yield play I purchased that has suddenly popped.. measuring a short term cap gain against current yield makes the cap gain look more impressive.. that is my point.. so I measure what I'm really earning on my original outlay against the short term cap gains (yield) I can book from a sell .. I look at the probability of increased dividends, likelihood of a pullback (which itself has many variables).. etc etc.. Yield on cost as a buy/sell metric on its own is useless.. but a part of a package... very valuable.. to me.. OK I'll stop now.. :O) TBS