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Old 10-26-2008, 10:43 AM   #61
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Safety comes from regular cash flows that can be expected to have a high degree of persistence, and are sufficient to fund our normal spending needs.
I don't know if you are talking about dividends but I have seen this language in regard to dividend investing. I like the concept but I missed the boat on purchasing good dividend payers a long time ago. I have not felt confident that buying dividend oriented mutual funds (which I could switch to now) really equates to buying good dividend blue chips and holding them for decades. Just to understand what I missed, when people talk about dividends of say X% I have assumed that the X% is a function of the current value of the stocks. Thus, if the market goes down 50% one year your dividends may remain at X% but that is half of what they were last year. Am I correct or am I missing some important factor?
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Old 10-26-2008, 10:59 AM   #62
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Donheff, usually it is more helpful to look at dividends per share, rather than per dollar invested.

For example, dividends per share of Wellesley have gone up this year, though not as much as dividends per dollar value of those shares since share price has declined. However, if one is living off dividends the dollar value is all on paper anyway.
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Old 10-26-2008, 11:01 AM   #63
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I don't know if you are talking about dividends but I have seen this language in regard to dividend investing. I like the concept but I missed the boat on purchasing good dividend payers a long time ago. I have not felt confident that buying dividend oriented mutual funds (which I could switch to now) really equates to buying good dividend blue chips and holding them for decades. Just to understand what I missed, when people talk about dividends of say X% I have assumed that the X% is a function of the current value of the stocks. Thus, if the market goes down 50% one year your dividends may remain at X% but that is half of what they were last year. Am I correct or am I missing some important factor?
Although dividends may be reduced or even eliminated, they tend to be very stable. So if you are getting 2.5% when your stock is at $50 (an annual dividend of $1.25), when that stock declines to $25 you will still get that annual $1.25. or it may even be increased. Your original yield stays with you unless the amount of the cash dividend is changed.

There are some securities such as royalty trusts and a few others classes where dividends float with the internal cash flows of the enterprise. In these cases the price of the security is likely to follow loosely the ups and downs of the payouts.

Ha
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Old 10-26-2008, 11:12 AM   #64
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Donheff, usually it is more helpful to look at dividends per share, rather than per dollar invested.
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Although dividends may be reduced or even eliminated, they tend to be very stable. So if you are getting 2.5% when your stock is at $50 (an annual dividend of $1.25), when that stock declines to $25 you will still get that annual $1.25. or it may even be increased. Your original yield stays with you unless the amount of the cash dividend is changed.
As I understand it, to get a good dividend return you need to buy the shares during your accumulation phase and hold long term. I missed that boat a long time back. If you buy "dividend oriented" mutual funds it seems like it would be hard to impossible to really match that "buy shares and hold" approach. What's up with the mutual funds?

Edit: forgot the thank you.
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Old 10-26-2008, 11:21 AM   #65
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What's up with the mutual funds?
Wellesley Admiral (VWIAX) 5.03% SEC yield listed on Friday, 10/24/08. Wellesley share price keeps up with inflation in the long term.

You aren't going to get a 9% return with Wellesley but then these days 5% seems pretty reasonable to me. This would be a good time to buy Wellesley, since share prices are low. I'm already at my AA percentages so I am not going to buy - - but if I weren't, I would.
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Old 10-26-2008, 11:28 AM   #66
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As I understand it, to get a good dividend return you need to buy the shares during your accumulation phase and hold long term.
There are many good yields available right now. There may also be good funds, I don't know. A problem tends to be that funds are sold by performance, so it may be hard for an manager to stick steadfastly to a dividend approach, as it may mean lagging others in strong markets. Another problem is that even a relatively low expense ratio for a managed fund- say .75%- cuts into the income available for fundholders. If the fund yields 3.5% gross, a 0.75% expense ratio cuts that to a net yield of 2.75%. So I would imagine that most dividend investors go for individual stocks.

There is a CEF,(Adams Express) with a low expense ratio and a high current discount from NAV. Although it is not managed for dividends per se, it might work for a committment of some dollars toward this goal as the discount pretty well makes up for the drain from expenses. This fund has no risk of forced selling from redemptions, as a holder cannot redeem her shares, only sell them to someone else. Hence the discount.

Ha
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