I’m old, so I’m supposed to have about 60-70% of my investments in bonds. Two reasons I don’t like this idea: 1. it doesn’t seem to generate much income; 2. it’s not very interesting.
So, I have been slowly changing over my bond funds to a group of individual dividend paying stocks. I’m planning on having maybe 40-50% of my bonds funds morph into these individual stocks.
I know that there are mutual funds that concentrate on dividends. I was once in one—DVY. I watched it crash and burn. I remember thinking as it was crashing (and burning): “Why are they still holding all those financial-type companies?” I also remember thinking, “Well, duck, they surely know better than you.” They didn’t.
This transition of mine (bonds-to-stocks) has been going on for about two years.
It seems the transaction fees compare favorably to mutual fund fees as there is very little selling of dividend stocks.
Also, it does not take much research (at least the way I do it) to pick individual dividend stocks. But, it is kind of fun and interesting. It’s kind of like Midpack enjoying creating graphs and charts). Well, maybe it’s not, but that’s what came to mind.
I select what I consider “safe stocks.” They need to be safe, because I am substituting them for the safety of bonds (in bond funds).
Why do I consider these stocks safe? I check them out on Value Line (OK, stop that eye-rolling right now!). The stocks that I almost always pick have the highest rating for Safety (rank 1) and the highest rating for Financial Strength (A++). (OK, when I feel frisky I may buy a stock that has a financial strength of A+). I also want a stock that has a dividend yield of 2.8% or higher. That minimum in the past has dropped to 2.5%.
Then, I see how many years in a row they have been raising their dividends.
This is sort of amazing (at least to me) because MCD (McDonalds) has raised their dividend 37 years in a row; PG (Procter & Gamble), 60 years; Exxon (XOM) 31 years--even when the Exxon Valdez had that minor oil leak and destroyed an ocean, XOM kept raising its dividend. Anyhow, there are others that have pretty good track records and seem safe (to me). Oh, yeah, KO (Coke) 51 years. (I own all of the above). There are a bunch that fall into the 8-15 year increased dividends category. I realize that this is “cherry picking,” but, many dividend investors do pick pretty much the same cherries.
I understand there have been many companies that were “safe” at one time that cut or stopped their dividends or went bankrupt. But, these were probably not companies that dividend investors would be holding when this bad stuff actually took place.
I also understand that this dividend stuff is definitely the “flavor of the month” and that it will never replace chocolate, but it seems it’s still a pretty good way of generating an income stream. Or, it might be a lot of fuzzy and wishful thinking. Seniors often don’t see clearly and may end up wandering down paths that they shouldn’t wander down. The thing is, I know there must be danger on this path, I just don’t see it.
Anybody with clearer vision (and a thought or two)?
So, I have been slowly changing over my bond funds to a group of individual dividend paying stocks. I’m planning on having maybe 40-50% of my bonds funds morph into these individual stocks.
I know that there are mutual funds that concentrate on dividends. I was once in one—DVY. I watched it crash and burn. I remember thinking as it was crashing (and burning): “Why are they still holding all those financial-type companies?” I also remember thinking, “Well, duck, they surely know better than you.” They didn’t.
This transition of mine (bonds-to-stocks) has been going on for about two years.
It seems the transaction fees compare favorably to mutual fund fees as there is very little selling of dividend stocks.
Also, it does not take much research (at least the way I do it) to pick individual dividend stocks. But, it is kind of fun and interesting. It’s kind of like Midpack enjoying creating graphs and charts). Well, maybe it’s not, but that’s what came to mind.
I select what I consider “safe stocks.” They need to be safe, because I am substituting them for the safety of bonds (in bond funds).
Why do I consider these stocks safe? I check them out on Value Line (OK, stop that eye-rolling right now!). The stocks that I almost always pick have the highest rating for Safety (rank 1) and the highest rating for Financial Strength (A++). (OK, when I feel frisky I may buy a stock that has a financial strength of A+). I also want a stock that has a dividend yield of 2.8% or higher. That minimum in the past has dropped to 2.5%.
Then, I see how many years in a row they have been raising their dividends.
This is sort of amazing (at least to me) because MCD (McDonalds) has raised their dividend 37 years in a row; PG (Procter & Gamble), 60 years; Exxon (XOM) 31 years--even when the Exxon Valdez had that minor oil leak and destroyed an ocean, XOM kept raising its dividend. Anyhow, there are others that have pretty good track records and seem safe (to me). Oh, yeah, KO (Coke) 51 years. (I own all of the above). There are a bunch that fall into the 8-15 year increased dividends category. I realize that this is “cherry picking,” but, many dividend investors do pick pretty much the same cherries.
I understand there have been many companies that were “safe” at one time that cut or stopped their dividends or went bankrupt. But, these were probably not companies that dividend investors would be holding when this bad stuff actually took place.
I also understand that this dividend stuff is definitely the “flavor of the month” and that it will never replace chocolate, but it seems it’s still a pretty good way of generating an income stream. Or, it might be a lot of fuzzy and wishful thinking. Seniors often don’t see clearly and may end up wandering down paths that they shouldn’t wander down. The thing is, I know there must be danger on this path, I just don’t see it.
Anybody with clearer vision (and a thought or two)?
why are you trying to goose your income? Do you really need to take the added risk to pay the bills? 
