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

To: Bocor who wrote (8829)	5/1/2011 9:31:46 PM
From: chowder	7 Recommendations Read Replies (4) \| Respond to of 34328

I shake my head every time I read an article like that. Although some dividend investor's don't get it, neither does the author of that article. Whenever someone says, did you beat the market, I say who cares. It isn't about beating the market. It's about building an income stream that is dependable, predictable and increasing. Sometimes your portfolio value for the year will outperform the index and some years it won't. Why should it matter to me either way when my focus is on the income stream? PG, ABT and JNJ haven't come close to outperforming the index over the last couple of years, but all of them continue to raise my income every year! On SA I go by the name of Chowder. The only index I want to beat is the Chowder Index. The Chowder Index means that this quarter's income from equities must be higher than the same quarter a year ago. If I am doing that, I don't need to concern myself with what the market is doing. An example of the Chowder Index looks like this, per my Son's account: 1st Qtr 09 ... $108.00 in dividends. 1st Qtr 10 ... $264.95 1st Qtr 11 ... $542.81 I have no idea if his value outperformed the market or not. I do know that the income stream is growing at a handsome rate. That's what I care about.

To: Bocor who wrote (8829)	5/1/2011 9:38:17 PM
From: Steve Felix	Respond to of 34328

Interesting, but imho his throwing out YOC altogether doesn't make sense either. Not sure who he is talking about, but if someone thinks that YOC is what their portfolio is earning this year on a total return basis, they need to go back to investing 101. His use of GICs doesn't really fit here imho. He is showing nothing more than reinvesting the income. If he wasn't showing reinvestment he wouldn't be showing a higher YOC. On the other hand, buying a share of JNJ in 2001 would have gained you .72 in dividends that has become $2.28 today without any income reinvestment. The YOC is up because the income being generated increased. "The reality is your current retirement income is based on the current dividend yield of the total value of your portfolio." Huh? ( Steve scratches head ) No, current income has everything to do with current income. That's it. If the market falls by half, and all my dividends keep coming in, my yield has doubled, but my income is the same. "The Yield on Cost Illusion" Suppose I bought a house ( JNJ example ) ten years ago for $140,000, and started renting it for $7200 a year. Now I get an offer of $657,200, while I am renting it for $22,800. Illusion or not, a great investment. "First, YOC is based on a period of several years – so it’s a cumulative return." Uh, no, each year will be different as far as YOC goes. $14 put down for that share of JNJ in 2001 is paying over 16% YOC of initial investment today. Last year was different and so was the year before that. Cumulative dividends returned since initial investment is a whole different ball game. I would agree that YOC doesn't have anything to do with managing a portfolio for income. Rising YOC just shows that dividends are increasing, which, all things being equal will increase overall portfolio value through an increasing stock price. Taken to the other extreme, if I cash my portfolio and simply buy 19,271 shares of CYS tomorrow, my income will go from sub 14k to over 46k. Hmmm... maybe not. lol!

To: Bocor who wrote (8829)	5/2/2011 12:05:21 PM
From: Kapusta Kid	Read Replies (1) \| Respond to of 34328

Lots of fuzzy thinking in that YOC article. I bought a few fixed rate preferreds 2 years ago for pennies on the dollar. My YOC was north of 30%. Guess what it is today? Hmmm, let me see, add the rate of..., subtract the tax-free...., divide by the long-term... I get > 30%. And, oh yeah, the price of the shares has quadrupled. And since interest rates are somewhere near zero, I'm kinda comfortable with 30%. Or is that an illusion? Or delusion? As for making the mistake of assigning a 30% YOC to one's entire portfolio, that would take more than a newbie. Only a mouth-breathing, knuckle-dragger would do that. I could see how the story might change in an environment of rising interest rates, but they've been dropping for 30 years. The author seems to think he's revealing a subtlety few can grasp, when, in fact, he's just plain wrong. Sheesh....