Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Dividend paying Stocks
Old 08-20-2011, 03:44 PM   #1
Dryer sheet aficionado
 
Join Date: Apr 2008
Posts: 31
Dividend paying Stocks

Many of the pundits now say that high quality dividend paying stocks are currently a good investment to have in the current economy.
I hold such quality investments and they in total pretty much follow the performance of the Dow. Hardly seems like a relatively safe investment.
Your thoughts please?
__________________

__________________
swodo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-20-2011, 05:36 PM   #2
Full time employment: Posting here.
 
Join Date: May 2011
Location: Marco island
Posts: 813
If you are going for income then dividend paying stocks may be a good idea. However a 4% dividend doesn't mean much if the stock loses 50 % of it's value if you are going for appreciation. There are a lot of so called good companies that haven't come close to regaining there stock price in over a decade.
__________________

__________________
Gatordoc50 is offline   Reply With Quote
Old 08-20-2011, 05:37 PM   #3
Full time employment: Posting here.
 
Join Date: May 2011
Location: Marco island
Posts: 813
Quote:
Originally Posted by Gatordoc50
If you are going for income then dividend paying stocks may be a good idea. However a 4% dividend doesn't mean much if the stock loses 50 % of it's value if you are going for appreciation. There are a lot of so called good companies that haven't come close to regaining there stock price in over a decade.
Sorry for the misspells and grammar. Lol
__________________
Gatordoc50 is offline   Reply With Quote
Old 08-20-2011, 05:46 PM   #4
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,429
Quote:
Originally Posted by swodo View Post
Many of the pundits now say that high quality dividend paying stocks are currently a good investment to have in the current economy.
I hold such quality investments and they in total pretty much follow the performance of the Dow. Hardly seems like a relatively safe investment.
Your thoughts please?
It depends on your investment objectives and risk tolerance. Here are a couple of threads on dividends you might find interesting.
Tweedy Brown on Importance of Dividends in Total Return
Dividend Stock Portfolio Provide Higher SWR?
__________________
MichaelB is online now   Reply With Quote
Old 08-20-2011, 06:04 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
 
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
My answer to getting into dividend paying stocks is VHDYX. I freely admit my shortcomings when it comes to buying individual stocks. I have a low to medium risk tolerance.

I opened an account in VHDYX in Spring 2009.

VHDYX Vanguard High Dividend Yield Index Inv, mutual funds, quote, price - Morningstar
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Old 08-20-2011, 06:05 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,384
Quote:
Originally Posted by swodo View Post
Many of the pundits now say that high quality dividend paying stocks are currently a good investment to have in the current economy.
I hold such quality investments and they in total pretty much follow the performance of the Dow. Hardly seems like a relatively safe investment.
Your thoughts please?
The purpose of dividend investment is income, not market returns.

If what you are intersted in is market returns, save yourself a lot of work and grief and buy indexes according to your AA.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Old 08-20-2011, 06:51 PM   #7
Thinks s/he gets paid by the post
grumpy's Avatar
 
Join Date: Jul 2004
Posts: 1,321
I don't know which dividend payers you are looking at but many of mine have held up pretty well lately. I started buying many of these near their lows following the 2008 debacle. Even with the Dow down from 12800 to 10400 they are still above my average cost and I have been collecting (and reinvesting dividends).

Some examples are: AEP, EXC, JNJ, MMP, MMC, VZ, . I hold positions in 14 other dividend payers with an overall average yield on my cost over 5%. I am continuing to buy on the dips.
__________________
...you can check out any time you like, but you can never leave...
grumpy is offline   Reply With Quote
Old 08-20-2011, 07:18 PM   #8
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by swodo View Post
Many of the pundits now say that high quality dividend paying stocks are currently a good investment to have in the current economy.
I hold such quality investments and they in total pretty much follow the performance of the Dow. Hardly seems like a relatively safe investment.
Your thoughts please?
Here's a blog post of the Dividend Growth Investor laying a direct smackdown on the 4% SWR:
Dividend Growth Investor: Why I am a dividend growth investor?

Of course they don't assess the relative amounts of capital between the two portfolios needed to achieve the same dollar amount of inflation-adjusted annual spending. I guess the trick would be rigorous screening and regular purchases of individual stocks to achieve above-average returns which would also produce above-average dividends.

In other words, if you want to avoid consuming principal then you gotta be willing to work longer or harder.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 08-20-2011, 07:21 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
its all about total return just like any stock. there is no magic in a dividend. in fact dividends are cut just at the worst of times if your trying to live off them directly.

usually you end up selling shares at a loss to make up the income shortfall.

you can create a dividend off any stock. just sell a little piece each year. whether the company does it or you do it the net effect is the same.

watch your total return ,its all that counts.
__________________
mathjak107 is offline   Reply With Quote
Old 08-20-2011, 08:06 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,384
Quote:
Originally Posted by mathjak107 View Post
its all about total return just like any stock. there is no magic in a dividend. in fact dividends are cut just at the worst of times if your trying to live off them directly.

usually you end up selling shares at a loss to make up the income shortfall.

you can create a dividend off any stock. just sell a little piece each year. whether the company does it or you do it the net effect is the same.

watch your total return ,its all that counts.
Thank you. I guess I must be deluded, because I have been living off dividend stocks for over 2 decades. Perhaps I have unknowingly joined the communion of the undead?

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Old 08-20-2011, 08:09 PM   #11
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by mathjak107 View Post
its all about total return just like any stock. there is no magic in a dividend.
That's the way it seems to me, but I keep suspecting I must be missing something when I keep reading stuff about "preserving principle" or "living off dividends". What are they talking about? I know there are some tax differences between dividends and capital appreciation, but they seem relatively trivial. Aside from that, it's all just money. If you invest through mutual funds, you can instruct your fund manager to reinvest dividends and distributions, and then you can just be concerned with the market value and how it changes from year to year as you contribute and withdraw. If you no longer contribute, you might consider the initial market value as the "principle" and withdraw any excess that accumulates as your "dividend".
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 08-20-2011, 08:17 PM   #12
Full time employment: Posting here.
Ronnieboy's Avatar
 
Join Date: Feb 2008
Posts: 646
Quote:
Originally Posted by haha View Post
Thank you. I guess I must be deluded, because I have been living off dividend stocks for over 2 decades. Perhaps I have unknowingly joined the communion of the undead?

Ha
Zombie alert!!

At least your dividends will continue to pay either way

I believe CyclingInvestor will have the same comment.

Dividend stocks will be part of my retirement plan.
__________________
I don't want to spend my entire life at work. I deserve more. - Want2retire aka W2R
Ronnieboy is offline   Reply With Quote
Old 08-20-2011, 08:21 PM   #13
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,081
Unclemick will be along shortly to psst on this thread...
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 08-20-2011, 09:08 PM   #14
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
Quote:
Originally Posted by Ronnieboy View Post
Zombie alert!!

At least your dividends will continue to pay either way

I believe CyclingInvestor will have the same comment.

Dividend stocks will be part of my retirement plan.
And mine...as part of my index funds

More than one way to Rome. Just don't fall into the trap of thinking it is less risky than a total return approach. TANSTAAFL.

DD
__________________
At 54% of FIRE target
DblDoc is offline   Reply With Quote
Old 08-20-2011, 09:12 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by haha View Post
The purpose of dividend investment is income, not market returns.

If what you are intersted in is market returns, save yourself a lot of work and grief and buy indexes according to your AA.

Ha
Quote:
Originally Posted by Nords View Post
Here's a blog post of the Dividend Growth Investor laying a direct smackdown on the 4% SWR:
Dividend Growth Investor: Why I am a dividend growth investor?

Of course they don't assess the relative amounts of capital between the two portfolios needed to achieve the same dollar amount of inflation-adjusted annual spending. I guess the trick would be rigorous screening and regular purchases of individual stocks to achieve above-average returns which would also produce above-average dividends.

In other words, if you want to avoid consuming principal then you gotta be willing to work longer or harder.

Despite mine and others love for dividend investing (it has become even more popular in the last few years even Cramer talks about dividends several times per show) there isn't a lot of data that it is superior to total return investing. Part of the reason I think this is true is because so much of the research has focused on the accumulation phase, and for the most part (there is a Vanguard study which is an exception) the withdrawal stage studies are awfully simplistic. The other possibility is that Mathjack and other are right, and dividends aren't a magic bullet.

It is undoubtedly simpler to buy index funds and do annual rebalancing.

As Nords says it is does require more capital to get portfolio that lets you live off the dividends. For instance the yield on VHDYX is 2.72% and the yield for the 10 stocks suggested the Dividend growth investor is 3.0%. So if you want to withdraw 40k/year strictly from the income requires 1.33 to 1.47 million. My portfolio has yield of 4.2% but that is because I have number of MLP like KMP,MMP, BLP, and SPH that yield in the 6-7.5% range and my largest holding Intel has 4.4% yield, so that balances out my index funds like VTI 1.8% yield or Well Fargo WFC at 2.0%.

The benefit to me is that I am pretty confident that next year I'll receive at least $44,697 in dividends and I actually expect that amount to increase by a couple of thousand due to dividend increases. The dividend plus additional interest from CDs and Vanguard GNMA fund and rental income is what I can budget for living expenses. Having the high degree of confidence on next years income, makes it easier to cope with market volatility and reduces the chance I'll do something silly like sell at the bottom.

I have only been doing this for a 11 years, so HaHa and I must have Folie a Deux
__________________
clifp is offline   Reply With Quote
Old 08-20-2011, 09:28 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,384
One thing frequently ignored is that serious dividend investors like to get a lot more information on their intended investments than most indexers or total return investors. It takes considrable amount of work and time and some skill.

This doesn't guarantee that it will be successful for a given investor, but this type of investing does have a much longer history than modern total return investing.

Dividend investors are not disinterested in total return, they just are not planning to harvest any of the price increases for living expenses.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Old 08-20-2011, 09:29 PM   #17
Thinks s/he gets paid by the post
JPatrick's Avatar
 
Join Date: Jun 2005
Posts: 2,494
Quote:
Originally Posted by swodo View Post
I hold such quality investments and they in total pretty much follow the performance of the Dow. Hardly seems like a relatively safe investment.
Your thoughts please?
Well they have not all followed the DOW.
Take DVY for instance, it has fallen, but roughly half as much as the DOW over the past 6 months. The magic is probably as simple as the fact that it is an index and one or two, or twenty failures won't sink it.
Up against most any index, DVY comes out on top and you get that nice 3.5 div. My figures are for the past 6 months.
I've bought quite a lot of DVY over the past two weeks, and I'm planning to pick up more if it falls back to its recent low.
__________________
JPatrick is offline   Reply With Quote
Old 08-20-2011, 10:26 PM   #18
Recycles dryer sheets
 
Join Date: May 2011
Posts: 154
I haven't seen anyone mention utility stocks. They have a nice dividend and are a safe investment.

Index funds...I'm not that crazy over them even though their rates are cheaper. My 401K is Vanguard, so you know mostly what it consitsts of. When the mkt hits bottom, they will be a great investment because everything will go up.

But when the mkt hits the top, you need a good managed fund imo.

Plus...I love PTTRX for a total return fund. Can't wait until Dec to see the HUGE CG we get. VTBIX is a good bond.

I sold all my index funds right before the correction and will get back in when I think the upcoming recession is over. YES...a recession is on its way.
__________________
heirloom is offline   Reply With Quote
Old 08-20-2011, 10:28 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
Quote:
Originally Posted by REWahoo View Post
Unclemick will be along shortly to psst on this thread...


heh heh heh
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 08-21-2011, 01:08 AM   #20
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by clifp View Post
I have only been doing this for a 11 years, so HaHa and I must have Folie a Deux
I've noticed that most of the dividend-investing skeptics appear to still be in the accumulation phase, while most of the dividend-investing believers are in the ER phase.

It's possible that correlation does not equal causation. But in this instance I think dividend investing is a better path to ER than most.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Market Timing Strategy Earl E Retyre FIRE and Money 141 10-28-2011 03:09 PM
Are real estate stocks low now? GregLee Stock Picking and Market Strategy 13 08-31-2011 09:09 PM
Value and Dividend Producing Stocks and Securities chinaco FIRE and Money 21 08-11-2011 04:09 PM
The Debt Ceiling and stocks eddieb Stock Picking and Market Strategy 2 07-25-2011 08:27 PM

 

 
All times are GMT -6. The time now is 11:09 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.