Yep, OP has clearly staked a claim to being a better money manager than the professionals who are in charge of large mutual funds. Nobody is going to convince him otherwise, so best of luck to him and I hope he never finds out otherwise.
Can we do this dividend stock thing one more time?
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Well, in this one instance, they didn't know better than I. Actually, my guess is they did know, but perhaps their fund's charter?(or, whatever)? caused them to hold onto the financial stocks.
Bestwifeever
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I'm beginning to feel like I'm playing dodge ball here.
OK, DVY is at a 7 year high. I was saying that (actually I wasn't saying that) but I am now, that if the DVY people didn't hold on to all those financial stocks until the companies decreased or eliminated their dividends that DVY would be much higher than it is now (the seven year high would even be higher). Yes/no? Didn't anybody else wonder why DVY was holding onto the financial stocks?
However, I do think we are sort of slipping away from the original point (but, I still find this all interesting).
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I guess the question to ask yourself is could you survive on just the dividends these stocks give off? If yes, then they become more like bonds in that you don't have to worry at all about price. Being older makes our spending decisions sometimes more urgent.
The DJIA was paying high dividends in the 1930's, 4.7% in 1930 alone and that yield went up as the market declined. Didn't stop the market from taking years to recover.
What is the collective dividend yield of the stocks you will be holding?
Bestwifeever
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I loved dodge ball until that version with lots of balls got popular.
REWahoo
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The original point being "are individual dividend paying stocks more risky than bond funds"?
Yes.
I like dividend stocks.
No, they aren't as safe as bonds individually.
But I bet my portfolio of individual stocks is safer than a portfolio of bonds when inflation risk is included.
Our portfolio dropped about 40% in the big recession! our dividend income dropped by less than 10%.
Every one of the past 5 years our dividend income has grown faster than inflation. And we have more than made up for the loss during the recession.
We find dividend income much more stable than stock prices and much more generous than bonds and of course.
In addition, we pay 0 fees and almost zero trading costs.
Lessons I have learned...
Never chase yield! I did that once and got slapped hard.
Diversification is very important.
To the OP, if you want a fun, active dividend player, take a look at O (Reality Income).
The may not have as long a history as some of the others, but they pay monthly, increase often and are one of the more solid plays in real estate.
No, they aren't as safe as bonds individually.
But I bet my portfolio of individual stocks is safer than a portfolio of bonds when inflation risk is included.
Our portfolio dropped about 40% in the big recession! our dividend income dropped by less than 10%.
Every one of the past 5 years our dividend income has grown faster than inflation. And we have more than made up for the loss during the recession.
We find dividend income much more stable than stock prices and much more generous than bonds and of course.
In addition, we pay 0 fees and almost zero trading costs.
Lessons I have learned...
Never chase yield! I did that once and got slapped hard.
Diversification is very important.
To the OP, if you want a fun, active dividend player, take a look at O (Reality Income).
The may not have as long a history as some of the others, but they pay monthly, increase often and are one of the more solid plays in real estate.
I see two questions here. One asks if dividend paying equities are riskier than bonds. Over a long period, the risk of inflation is just as great as the risk of capital loss, and the likelihood is that a dividend stream will grow with inflation, so if one is certain to not need the capital, dividend paying funds are not necessarily riskier.
The other asks if individual dividend stocks are riskier than dividend oriented ETFs or funds. No doubt (IMHO) a diversified fund lowers risk of reduced dividend flow and loss of principle.
The other asks if individual dividend stocks are riskier than dividend oriented ETFs or funds. No doubt (IMHO) a diversified fund lowers risk of reduced dividend flow and loss of principle.
NW-Bound
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I just looked and saw that DVY runs neck-to-neck with SPY since the market bottom in March 2009, the latter being a long-time ETF surrogate of the S&P 500. That was price-wise. As DVY's dividend is higher than SPY, its total return might be a bit higher.
Anyway, as long as Redduck does not go overboard with dividend stocks, and stays diversified with something like at least 20 stocks, I do not see that his is a high-risk approach. Redduck may not beat professional managers, but then he might. As I have tried to point out repeatedly, managers of large MFs do not have the agility of small investors. I can dump my 500 or 1000 shares of a stock at one click of my mouse, but a large MF needs time to get out of several hundred million dollars worth of a stock. Of course an individual investor may make dumb mistakes or act hastily too.
And then, a retiree needs something to do with all his free time too. What else would Redduck spend his time on? Measuring speaker open-air responses in the backyard by frequency sweeping? Get into cooking and try different French dishes?
I hold many individual stocks, and as I do not trade daily, still have plenty of time to spend on above diversions because it's not the season for RV'ing, nor the time to ride my motorcycle into forest trails. Heh heh heh...
Anyway, as long as Redduck does not go overboard with dividend stocks, and stays diversified with something like at least 20 stocks, I do not see that his is a high-risk approach. Redduck may not beat professional managers, but then he might. As I have tried to point out repeatedly, managers of large MFs do not have the agility of small investors. I can dump my 500 or 1000 shares of a stock at one click of my mouse, but a large MF needs time to get out of several hundred million dollars worth of a stock. Of course an individual investor may make dumb mistakes or act hastily too.
And then, a retiree needs something to do with all his free time too. What else would Redduck spend his time on? Measuring speaker open-air responses in the backyard by frequency sweeping? Get into cooking and try different French dishes?
I hold many individual stocks, and as I do not trade daily, still have plenty of time to spend on above diversions because it's not the season for RV'ing, nor the time to ride my motorcycle into forest trails. Heh heh heh...
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Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Vanguard High Dividend Yield Index (VHDYX) currently yields 3.06% (379 stocks, 13% financial). Here is a comparison with Total Stk Mkt (VTSMX) and Total Bond Mkt (VBTLX).
Didn't seem to provide much cushion in the 2008 meltdown. My opinion is that buying stocks is buying volatility. No way to get one and avoid the other.
Didn't seem to provide much cushion in the 2008 meltdown. My opinion is that buying stocks is buying volatility. No way to get one and avoid the other.
OK, according to Morningstar my dividend yield TTM (whatever that means) is 3.22
No, I couldn't survive on what these stocks give off--but, that was never the plan. Actually, I'm also too conservative to only just hold dividend stocks. But, I also have Social Security, the RMD kicks into place this year, I work about 8 hours a week, I have no debt. I have at least three years of cash/short term bond funds if I need it. I don't see me having to sell anything (in next few years, anyway), unless I want to.
And, no, I don't really need worry about the price. But, of course, that could change depending on all kinds of circumstances out my control.
And, I checked: I've been involved in this Dividend Income thing for about a bit more than 3 years.
Yes, I learned the chasing yield lesson early on. I actually thought what I was buying was pretty safe, but the high yield should have tipped me off.
I do own O. I recently bought it, but only after Value Line upgraded its safety rating. I still consider it one of my riskier holdings.
there's a lot of research out there showing that increasing your stock holdings, sort of a reverse glide path of stocks, as you age, is the best system, provided you still cover your short term needs with stable, non stock, holdings.
As to dividend stocks, check the betas of the stocks you invest in. As stated elsewhere in the thread, dividend stock is still stock. The underlying value of the stock will move with the market (just like long term bond prices move with interest rates). If you look for dividend payers that have low beta, you'll see them follow the market to a lesser degree.
As to dividend stocks, check the betas of the stocks you invest in. As stated elsewhere in the thread, dividend stock is still stock. The underlying value of the stock will move with the market (just like long term bond prices move with interest rates). If you look for dividend payers that have low beta, you'll see them follow the market to a lesser degree.
Well, I think this is kind of a buy and hold thing. (On Seeking Alpha they call it "Buy and Monitor"). But, I find there is very little selling involved. Interesting enough (at least to me) it is considered good strategy to sell a stock when it advances so much that the dividend yield drops because of the rise in the stock's price. Then, the idea is to buy a stock or two that currently has a higher dividend yield than the one you just sold.
Anyway, I do wonder if this whole style of investing will blow up and eventually become a nightmare. But, of course, I don't know what might cause that nightmare to happen. However, if it does happen, I'll regret not being 60-70% in bonds.
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I know my own psychology in down markets and have expressly designed my investing around it. It's a very personal issue. BTW, I have 65% equities right now.
For others my only good general advise is to deal with regret issues before they can happen. Generally the mistakes are made in up markets. So for remembering down markets, you look at how you felt maybe in February 2009. Then multiply that by a factor like 200% to take into account really really bad markets like the 1930's.
Bernstein's recent treatise on stocks/bonds (only $5) is a really good read too: Amazon.com: Deep Risk: How History Informs Portfolio Design (Investing for Adults) eBook: William Bernstein: Kindle Store
Dash man
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I own about 20 dividend stocks in lieu of owning any bonds or bond funds. In today's environment, I believe bonds are much higher risk in relation to their return than dividend stocks. I do select stocks with low P/E ratios compared to the market, though some have risen over time. Most are in taxable accounts, so I hesitate to sell them.
My favorite dividend stock over the past 5 years has been Main Street Capital (MAIN) which performed better than the S&P 500 during the crisis and has recovered much better, all while paying a generous dividend around 6%. I also have Realty Income (O), with the balance being blue chip type stocks such as BMY, XOM, DUK, JNJ, KMB, etc. I don't own any of the standard financial stocks, but a stock like MAIN is a business development company that invests in established small companies seeking alternative financing rather than a bank. To me, their performance coming out of the financial crisis says it all.
My favorite dividend stock over the past 5 years has been Main Street Capital (MAIN) which performed better than the S&P 500 during the crisis and has recovered much better, all while paying a generous dividend around 6%. I also have Realty Income (O), with the balance being blue chip type stocks such as BMY, XOM, DUK, JNJ, KMB, etc. I don't own any of the standard financial stocks, but a stock like MAIN is a business development company that invests in established small companies seeking alternative financing rather than a bank. To me, their performance coming out of the financial crisis says it all.
Erd50, let's try this again.
I said that I thought they surely knew better than I did. But, I had the nagging idea that holding on to the financial stocks was not wise. I still l think I was right. Anyhow, it was a thought. I never said I was vastly superior or immune (never said it or even thought it). However, all this was a catalyst to do something myself (I may have chosen the wrong thing to do).
However, I'm not a do-it-yourselfer. You seem to be a diy guy (from what I gather). Now, I'm not sure what your motives are for doing things yourself. Maybe you feel you can do things better or more inexpensively (or both) than an expert in a specific field. Maybe you just enjoy the process of diy. Maybe you see other ways of doing something that you feel suits your needs better. And, maybe I've completely missed your motives. But, I wouldn't think your wanting to do things yourself would be driven by arrogance. Me either.
So, here I am asking, just what did I ask?--it's been awhile, something about risk of "safe" dividend stocks vs. risk of bonds funds. I stated that I thought I knew something that the DVY managers didn't or couldn't take into account. Maybe the word "knew" was loaded and a better word could be used. "Noticed" or "observed" might have been better words.
Anyhow, I decided to be a diy guy re: this one portion of a portion of my portfolio. I gave some reasons regarding my motives and thinking.
+++
I've included two quotes from two different posts in this reply and I'm curious to see how this is going to look. Wish me luck.
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DVY is an index tracker. There is no smart manager running it.
"
The investment seeks to track the investment results of an index composed of relatively high dividend paying U.S. equities. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It seeks to track the investment results of the Dow Jones U.S. Select Dividend Index (the "underlying index"), which measures the performance of a selected group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time."
"
The investment seeks to track the investment results of an index composed of relatively high dividend paying U.S. equities. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It seeks to track the investment results of the Dow Jones U.S. Select Dividend Index (the "underlying index"), which measures the performance of a selected group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time."
grumpy
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This was a darn good idea in 2008 - now not so much. What is it about buy low, sell high you don't understand?
I am certainly willing to believe that your intent was more innocuous than how you came across. Written language is notoriously bad at conveying emotions, and I guess we just have to ascribe your earlier post to the limitations of the medium.
I really think, though, that you've already gotten the answer to your original question. Lsbcal, for example, posted the chart of VHDYX vs. VTSMX vs. VBTLX. The two stock funds tracked each other closely when the stock market crashed in 2008, whereas the bond fund was steady as a rock. Relying on dividend producing blue chip stocks instead of bonds is almost certainly not going to allow you to avoid this kind of potential for crazy price fluctuations in the future. If you need to avoid the volatility, you really should stick with bonds.
You have cited one example where you may very well have outguessed the broad market indexes and come out ahead. Can you do this sort of market timing consistently and successfully? I doubt it, but if you want to try you certainly don't need my input or approval to buy a basket of high dividend producers and monitor them for reasons to sell. As I said before, I wish you well and hopefully your investments will generate a nice profit.
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Major Tom
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I'm not sure what unnerves me more - the possibility of loss of principle, or loss of principal. As someone who has a somewhat flexible stance on some issues, I'll pick the latter.
Now where is that Handy Forum Words thread when you need it..........
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How come you sold some of your stocks last year? I wonder if I bought them.
Wait a minute, it sounds as if you had the same thoughts/feelings/intuition I had. By the way, I did not play it correctly either. I paid attention to the news, I just didn't know what to do about it.
I did the highlighting in the above quote which was taken from another thread.
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I have done well in the last few years with TOT (5.2%) and MO (5.4%). Just don't hold TOT in a tax sheltered account, because the French government takes a 30% cut of the dividends and you'll want to be able to get a credit for that when you file your income taxes.
