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Old 10-08-2011, 01:07 PM   #21
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Most rich people cannot relate to the middle class, much less the poor. They may try their best and have the best intentions, but they really don't know what we are going through. When a RICH person goes to bat for me, I get very careful and take it with a grain of salt.
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Old 10-08-2011, 01:35 PM   #22
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Most rich people cannot relate to the middle class, much less the poor. They may try their best and have the best intentions, but they really don't know what we are going through. When a RICH person goes to bat for me, I get very careful and take it with a grain of salt.
And how does this affect your Dividend Strategy?

-ERD50
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Old 10-08-2011, 08:28 PM   #23
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Bragging is fine (to a point). I'm just saying the number shouldn't be thrown out as anything significant in forward looking decisions (which are the only ones that matter, other than for education purposes - what's done is done)

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I'll quibble a bit. One of theories behind a dividend income approach is that dividends growth keeps up with inflation. Calculating your yield on cost helps you determine that.

One of other theories behind dividend investing is over the long term dividend yield and dividend growth are of equal value. Hence a company with 2% yield but an expected dividend growth rate of 8% is equivalent to company with a 8% yield and 2% growth rate since they both add up to 10%. (In practice the 8% yield is worth more all things being equal because of uncertainty of future growth.) It is helpful to know your yield on cost when comparing your holdings.
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Old 10-08-2011, 08:42 PM   #24
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Most rich people cannot relate to the middle class, much less the poor. They may try their best and have the best intentions, but they really don't know what we are going through. When a RICH person goes to bat for me, I get very careful and take it with a grain of salt.
Middle class?
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Old 10-08-2011, 09:02 PM   #25
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I'll quibble a bit. One of theories behind a dividend income approach is that dividends growth keeps up with inflation. Calculating your yield on cost helps you determine that.

One of other theories behind dividend investing is over the long term dividend yield and dividend growth are of equal value. Hence a company with 2% yield but an expected dividend growth rate of 8% is equivalent to company with a 8% yield and 2% growth rate since they both add up to 10%. (In practice the 8% yield is worth more all things being equal because of uncertainty of future growth.)
I'm not sure we quibbling, even a bit. I don't have any issues at all with a dividend strategy. Though I look at things in terms of total return, but divs are part of total return, so it's all the same to me. Div paying stocks may well be a good approach to total return.

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It is helpful to know your yield on cost when comparing your holdings.
Seems to me, that would tell you how you've done historically. That might be useful looking forward, but it might not. It seems like you're saying if I bought a stock that went up 100%, and another went up 10%, that that is helpful when comparing holdings? Or is just a measure of when I bought them and how they did in the past?

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Old 10-12-2011, 04:21 PM   #26
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Yield on cost is a meaningless number whose sole purpose is to make you feel good. Nothing wrong with that, EXCEPT when you get fooled into treating your yield on cost as meaningful and start to make decisions based on it.

I disabused myself on it a while back, when I was shifting some dividend-paying stocks from a taxable account to an IRA, by selling it from the taxable and simultaneously buying it in the IRA.
Say I had originally paid $20 at $1 dividend (5% yield) and it had grown to $40 at $2 dividend. So my yield-on-cost is now 10%.

But wait....a flurry of paperwork and the shares have moved from one account to another. Am I still getting 10% YOC in the new account? When computing the YOC, do I use the original cost as what I paid long ago in the old account, or what I paid for the exact same number of shares in the exact same stock in the new account?
That mental exercise convinced me that YOC has no concrete reality, that it's just a bogus computation comparing numbers from two different points in time. You can divide today's price by today's dividend, or you can divide yesterday's price by yesterday's dividend---but you can't divide today's price by yesterday's dividend.

Anyway, the whole thing is a fallacy. Companies don't pay dividends in "yield". What companies pay is dividends in dollars.
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