Dividend paying Stocks

[TN_INVEST]

well you watch the income, ill watch my total return from both. a falling share price on a dividend payer isnt any better than a falling non dividend payer. especially if they fall the exact same amount in total return.

Your math may be correct, but we all know a lot of this stuff ain't always about math. Otherwise, we'd all have 100% of our money in the stuff that has averaged double digit returns over the past 100+ years (stocks).

Anyway, I think folks do need to be careful about jumping on the dividend bandwagon. Wasn't too long ago that folks wouldn't be caught dead with anything but those "new" economy stocks. Some fools even wrote stuff about Warren Buffet being left behind. And dividend paying stocks can go down in value and they can stop paying.

Here's one (there are many, many more...just Google stock aristocrats)
Chevron
Late 1990s it was trading in the $30s & $40s and paying just over $1 per year in dividends. Today it goes for $90+ a share and it's paying over $3 per share in dividends. That's an effective yield of about 10% if you didn't reinvest (heaven forbid you reinvested and compunded those suckers. You'd still be getting $3 per share, but your # of shares would have grown and the fact that the price per share more than doubled is almost too good to believe )

And as far as income goes, there is some interesting stuff out there about reverse dollar cost averaging and sequence of returns when it comes to generating income.

I can tell that you are sharp and you're likely to do just fine. Dividends ain't magic, but they do have a nice way of helping an investor hang in there during some rough times.

 

[clifp]

screwed? not at all .the almost 40- 50% allocation in the equities bucket makes that system just fine. that bucket can contain stocks,reits,gold ,commodities etc.

all that system does is make sure you can get through the valleys of about 15 years hopefully never selling at a loss. rebalancing is by years of money left not just performance.



the 2000's have been very unkind to new retirees. back to back recessions have caught many severly under stocked in safe money. that safe money is there for paying bills now and over the next few years. it has to be there in full ,under no un-certain terms. while purchasing power may fluctuate so will rates .

Trust me as 39 year old class of 1999 retiree with a tech heavy portfolio, with no paycheck and no pension, I am very familiar with challenges of investing over the last twelve years.

I even patted myself on the back, when I did my July 1 valuation, and I realized that wow my net worth hit an all time record high, despite no paycheck and living in an expensive state and investing/blowing 200K in a variety of tech startups, only one of which is likely to make any money. It wasn't until I discovered dividend investing in the early 2000s that I got handle on my retirement. Of course my enthusiasm soon cooled when I realized that inflation had decreased my real net worth by 26+% and instead of being 4% richer I was really 22% poor than when I retired. Most people consider the aughts to be a low inflation decade and many predict the next 10 to 20 year won't be so nice.

So let me ask you a couple of direct questions? How does the bucket strategy handle inflation? And how do you know when to refill the buckets from the 40-50% in stocks? Is there as specific S&P price and percentage gain what is the triggering mechanism that says I am going to sell stocks reinvested dividends and all and stick the money in a bucket?

 

[haha]

Anyway, I think folks do need to be careful about jumping on the dividend bandwagon. Wasn't too long ago that folks wouldn't be caught dead with anything but those "new" economy stocks. Some fools even wrote stuff about Warren Buffet being left behind. And dividend paying stocks can go down in value and they can stop paying.

For sure the plan is less important than the execution. I run a primarily dividend strategy, but I never reach for "high" dividends. I want reasonable, well covered, growing dividends from businesses with quality financials and at least reasonably defendable moats. The amount of the dividend is less important than the drivers of that dividend, and the good sense of the management.

I also want a shrinking equity capitalization and good and rising management stock ownership, from open market buys, not grants or (worse) options.

I want to be comfortable with the finances and management. Several decades ago it was easy to call companies and often talk to the CFO or CEO. Pretty much out of reach today, but I favor those companies that still have executives that I established direct relationships with. Some issues I owned over and over as time went by.

Ha

 

[FIREd]

For sure the plan is less important than the execution. I run a primarily dividend strategy, but I never reach for "high" dividends. I want reasonable, well covered, growing dividends from businesses with quality financials and at least reasonably defendable moats. The amount of the dividend is less important than the drivers of that dividend, and the good sense of the management.

I also want a shrinking equity capitalization and good and rising management stock ownership, from open market buys, not grants or (worse) options.

Ha

That leaves you with very few choices, doesn't it?

I have found fewer than 30 US stocks that meet my own criteria (reasonable, well covered, and growing dividends with quality financials). Once I take valuation into account, the pool of possible candidates is even smaller (currently only 8 stocks out of the 30 are on my buy list).

I understand that some people would rather keep their stock picks private, but I would love to know what's on your list of acceptable stocks right now (acceptable from the long term income investor point of view that is).

 

[clifp]

That leaves you with very few choices, doesn't it?

I have found fewer than 30 US stocks that meet my own criteria (reasonable, well covered, and growing dividends with quality financials). Once I take valuation into account, the pool of possible candidates is even smaller (currently only 8 stocks out of the 30 are on my buy list).

I understand that some people would rather keep their stock picks private, but I would love to know what's on your list of acceptable stocks right now (acceptable from the long term income investor point of view that is).

Here is the M* Dividend Investor buy list. ABT, AEP, T, BBT, GE, HCN, JNJ, PAYX, PG, NS, SE, WR, WFC.

To this list I add INTC, KMI, PFE, MSFT, WMT, RBCAA a small regional bank which actually raised dividends from 2006-2011 and O below 30.

 

[FIREd]

Here is the M* Dividend Investor buy list. ABT, AEP, T, BBT, GE, HCN, JNJ, PAYX, PG, NS, SE, WR, WFC.

To this list I add INTC, KMI, PFE, MSFT, WMT, RBCAA a small regional bank which actually raised dividends from 2006-2011 and O below 30.

I own many of the names listed above but I am surprised to see companies on that list that have not been so friendly to dividend investors in recent years. GE and PFE used to be favorites of mine, but the recent dividend cuts were unsettling.

 

[CyclingInvestor]

That leaves you with very few choices, doesn't it?

I have found fewer than 30 US stocks that meet my own criteria (reasonable, well covered, and growing dividends with quality financials). Once I take valuation into account, the pool of possible candidates is even smaller (currently only 8 stocks out of the 30 are on my buy list).

I understand that some people would rather keep their stock picks private, but I would love to know what's on your list of acceptable stocks right now (acceptable from the long term income investor point of view that is).

My list of 'acceptably' priced quality stocks (most of which I own) are ABT, ADP, AFL, EMR, GE, ITW, JNJ, KO, MDT, MMM, MSFT, PG, SYY, UTX, WMT. GE barely makes the list for quality reasons. ADP and KO barely make the list for price reasons.

 

[FIREd]

My list of 'acceptably' priced quality stocks (most of which I own) are ABT, ADP, AFL, EMR, GE, ITW, JNJ, KO, MDT, MMM, MSFT, PG, SYY, UTX, WMT. GE barely makes the list for quality reasons. ADP and KO barely make the list for price reasons.

Thank you very much. This is similar to my own list (I excluded ADP, KO and GE from my buy list for the reasons you mentioned).

UTX was off my radar screen so thank you for bringing that one up to my attention. I'll have to take a closer look.

 

[clifp]

PFE is on Josh Peters (M* Dividend newsletter) **** list for their capricious dividend cut. It should be on mine list also since I owned at the time, but with the price back down to $17 and the yield up to 4.5%... I guess I'm glutton for punishment.. I wrote a put @17.50, I am indifferent if gets exercised or not.
I think GE should get a pass because it is 1/2 a bank, and lets face it the Treasury and Fed called the shots regarding Bank dividends the last few years.

KO, ADP are also on my good company but too pricy list.

However, Medtronics is a very nice addition to my potential buy list. Wide moat company with growing market as more of us need replacement parts. It is one of those stock that I look at the 10 year history and just shake my head at the concept of an efficient market.
Revenue 2.5X
Income 3.1x
EPS 3.6X
Dividends 3.9X
Book Value $5.25 (2002) $14.76 today
Stock price 10 years ago $45 $31 today

With a 3.1% yield what's not to like.?

 

[haha]

I understand that some people would rather keep their stock picks private, but I would love to know what's on your list of acceptable stocks right now (acceptable from the long term income investor point of view that is).

I am afraid of doing this, because I might find myself trying to defend my choices or argue about them, which I really do not like, and I think that it can have negative results. Also, my portfolio or the stocks that I consider attractive may change quickly, and I do not want to feel an update responsibility.

I will say that many of the stocks mentioned above are on my list, and may or may not be in my portfolio at this time. One difference is that I look for opportunites in oil and gas and oil service, because I do feel that we are closing in on peak oil production rates.

Oil and gas is however not a particularly stable area, which is also true in general for commodity stocks.

Ha

 

[FIREd]

I am afraid of doing this, because I might find myself trying to defend my choices or argue about them, which I really do not like, and I think that it can have negative results. Also, my portfolio or the stocks that I consider attractive may change quickly, and I do not want to feel an update responsibility.

I will say that many of the stocks mentioned above are on my list, and may or may not be in my portfolio at this time. One difference is that I look for opportunites in oil and gas and oil service, because I do feel that we are closing in on peak oil production rates.

Oil and gas is however not a particularly stable area, which is also true in general for commodity stocks.

Ha

Thanks for your candor. I understand your reservations.

 

[mathjak107]

Trust me as 39 year old class of 1999 retiree with a tech heavy portfolio, with no paycheck and no pension, I am very familiar with challenges of investing over the last twelve years.

I even patted myself on the back, when I did my July 1 valuation, and I realized that wow my net worth hit an all time record high, despite no paycheck and living in an expensive state and investing/blowing 200K in a variety of tech startups, only one of which is likely to make any money. It wasn't until I discovered dividend investing in the early 2000s that I got handle on my retirement. Of course my enthusiasm soon cooled when I realized that inflation had decreased my real net worth by 26+% and instead of being 4% richer I was really 22% poor than when I retired. Most people consider the aughts to be a low inflation decade and many predict the next 10 to 20 year won't be so nice.

So let me ask you a couple of direct questions? How does the bucket strategy handle inflation? And how do you know when to refill the buckets from the 40-50% in stocks? Is there as specific S&P price and percentage gain what is the triggering mechanism that says I am going to sell stocks reinvested dividends and all and stick the money in a bucket?

inflation is handled by the equities bucket, it can be anything you like. stocks,reits,gold,commodities etc. it deals with inflation no different than any other portfolio thats about 50/50.

rebalancing the buckets is easy. you can do it whenever stocks are up or wait until you get closer to 13-15 years out .

the conservative way with slightly less return is to rebalance whenever markets are up so you are always looking at a 15 year window every few years and buckets are pretty close to full most of the time...

the more riskier way although still not much risk is to let your stock bucket run for 13-15 years and then in one shot refill . that will give you the biggest bang for the buck.

whats interesting here is you can be 80 years old and 80% in equiteis if you wait until the first 2 buckets are just about empty. but the fact is time plays an important part and since almost 15 years has elapsed the odds are there is almost no risk of selling at a loss.

could markets be down 15 years later ? sure they could but its never happened. thats why i prefer the slightly more conservative approach of refunding when markets are up at any point in time.

 

[mathjak107]

I own many of the names listed above but I am surprised to see companies on that list that have not been so friendly to dividend investors in recent years. GE and PFE used to be favorites of mine, but the recent dividend cuts were unsettling.

exactly my point all along here and why i dont consider dividends safe enough for my safe money bucket.

they may very well be excellent investments but they still should be treated like stocks ,allowed to bloom without siphoning money off every quarter and diluting my future results from it.

i would re-invest those dividends and let the stock run for a few years.

in the bucket system those reinvested dividends could florish up to 15 years if you wanted before selling any.

not that bucket systems are a magic bullet but that they do make it easier to have a plan and stratagy that keeps things in the time frames they work best in.

 

[youbet]

Snake Oil.

 

[Zathras]

Snake Oil.

Are you referring to Buckets, Dividends, or something else?

 

[Zathras]

My list is mostly included in above posts. To that I would add O. Also nicknamed the monthly dividend company.
It is a REIT, but not an 'unlisted' REIT. Thanks Math for the warning btw.

 

[TN_INVEST]

My list is mostly included in above posts. To that I would add O. Also nicknamed the monthly dividend company.
It is a REIT, but not an 'unlisted' REIT. Thanks Math for the warning btw.

I too like some REITs. I had a little fun a few years back when the real estate market in some areas started to implode. I said folks own lots of stuff jn their houses that ain't going to fit in their apartments or in mom's basement. The light bulb went off and I picked up some Public Storage (PSA).

Maybe some of you math whizzes can dissect their financials. Me, I just had a hunch on an idea.

 

[HFWR]

Are you referring to Buckets, Dividends, or something else?

Dividend stock...

 

[Brat]

A week ago I took a look at O again and pulled apart their investments. The ~5% income from vineyards bothered me until I took a look at their location. I don't know the acquisition valuations... but the Sterling operation in the Napa valley region is fantastic. The beverage company in the lease back agreement is large.

Question about where to hold O, PSA and maybe NM: in or out of the IRA?

 

[Gatordoc50]

quite a few. i actually like the ray lucia way but there are many ohers..

Ready

heres a nice discussion of other ideas

http://www.early-retirement.org/forums/f28/details-of-your-buckets-57541.html

I'm reading his book now. How do you feel about variable annuities in bucket 1? I think he is off base there. He seems to really like annuities.

 

[mathjak107]

im in favor of immeadiate annuities but variable ,never.

 

[Gatordoc50]

im in favor of immeadiate annuities but variable ,never.

Thanks for your response. I'm in the process of helping my mother with her finances and unfortunately she was sold a variable annuity and I'm trying to figure out what to do with it. I'm considering having her take out the max penalty free per month and reinvesting.

 

[Gone4Good]

Dividend investing has a couple of short-comings that limit its attractiveness to me.

1) Diversification: Focusing on "high quality" high yield stocks necessarily means investing large chunks of your net worth in a handful of individual companies. Whatever benefits there might be to this strategy, lack of diversification is a large potential concern. There are plenty of retirees (including at least one from these forums) who had a bank heavy dividend portfolio and got wiped out this last go round. I notice that the M* list has 4 regulated utilities out of 13. I wonder how many banks they had in 2006 or 7.

2) Time commitment: "Investing" the amount of time necessary to really know a company (reading 10-Ks and Qs, listening to conference calls, listening to competitor calls, doing industry research, building financial models) is far too much work to do when there are plenty of other things I'd rather spend my time with.

 

[Brat]

I'm reading his book now. How do you feel about variable annuities in bucket 1? I think he is off base there. He seems to really like annuities.

I always consider the POV of any investment advisor. They make a lot of money on variable annuities (and unlisted REITs). I wouldn't touch them. An immediate annuity in bucket 1 would be worth a look but if they don't calc out better than a Treasury why take the risk?

 

[mathjak107]

immeadiate annuities almost always pay a heck of alot more than a treasury. today i can get almost a 5-6% withdrawl rate and pass it on to my spouse forever. thats where the power is.

to get that level of pensionized income would require tying up lots more dough in bonds , if you even have it..