Dividend investing- do you get a 3% yield?

[ats5g]

There's always SDY, DTD, DLN, and DTN.

[CitricAcid]

As others have said, banks have ridiculous yield rates right now, some of which I feel will be maintained (JPM, WFC, BAC). But, to avoid those as is understandable, how about some of the sin tobacco stocks? Philip Morris (PM) is yielding 3.34% and US smokeless tobacco (UST) is yielding 4.92% UST Also has a good history of dividend increases. For a bond closed-end fund, check out EDD for emerging markets debt.

[flatrock]

I have been thinking about this from a different angle. Im considering maxing out my roth IRA as well as my wife's with a combination of Vanguard Dividend Growth fund and Blackrock Dividend achiever's . The plan is generating a tax free dividend stream at retirement. Anything above the 10K for the Roths would go in a taxable account with individual stock picks.

[Marquette]

Quote:

Originally Posted by flatrock I have been thinking about this from a different angle. Im considering maxing out my roth IRA as well as my wife's with a combination of Vanguard Dividend Growth fund and Blackrock Dividend achiever's . The plan is generating a tax free dividend stream at retirement. Anything above the 10K for the Roths would go in a taxable account with individual stock picks.

What's your time horizon? If it's far enough in the future, you could always load up on a broader basket of equities now and then switch your allocation to dividends in the future.

[Ronnieboy]

What is wrong with this plan?:

Own VKI (Van Kempen Advantage Municipal Income Trust II) get paid supposedly tax free $0.06/share/monthly (6.5%). Own enough shares to get your monthly income needed to retire (i.e. 66,700 shares for $4k/mo again tax free).

And live off that?

[jIMOh]

Quote:

Originally Posted by Ronnieboy What is wrong with this plan?: Own VKI (Van Kempen Advantage Municipal Income Trust II) get paid supposedly tax free $0.06/share/monthly (6.5%). Own enough shares to get your monthly income needed to retire (i.e. 66,700 shares for $4k/mo again tax free). And live off that?

Inflation-I doubt that income stream could be sustained for 40 years or longer. Dividends are more reliable.

[CitricAcid]

I would second Marquette's suggestion on understanding the time horizon. If it is far enough in the future, you would want more types of investments that have potential for growth (tax-free because it's Roth) and then you could switch over to dividends when the more consistent income stream is necessary for distributions.

[FinanceDude]

You should be able to get 3% out of the right balanced or equity income fund with your eyes closed.........

[RustyShackleford]

Quote:

Originally Posted by soupcxan Vanguard has two 100% equity mutual funds that I have owned that are currently yielding +3.5%. Equity Income Fund (VEIPX) and High Dividend Yield Index (VHDYX). There's also an ETF based on the latter (VYM).

I've got VYM too. What do folks think about liquidating some blue-chip
high-yielding stuff like PEP and JNJ into the VYM position, in order to
simplify portfolio ?

[Yipee-Ki-O]

As others have mentioned, it should be fairly easy to come up with a portfolio of dividend paying stocks which collectively pay over 3% these days. My portfolio of 24 individual non-REIT stocks yields 3.61% as of todays market close. Adding my 6 REIT's bumps the yield up to 4.17%.

My first DRIP stock purchase was Procter & Gamble back in 1991. From that time forward I used an individual membership in NAIC and a newsletter called The Moneypaper to start additional DRIP's as funds permitted. I also have a big chunk of stock in my former employer, Merck, acquired via stock grants and their ESPP. In addition to the individual stocks, I also receive some dividends from investments in Dodge & Cox's Stock and International Funds, DVY and Vanguard's REIT Index Fund.

I found Mergent's Dividend Achiever's book and my subscription to The Moneypaper both to be quite helpful in putting together a dividend portfolio (disclaimer: no personal financial interest in either publication). I enjoyed the process of buying individual stocks, though I know some think it's too much trouble and too risky. My plan was (and is) to sell off the whole block of stock in any one company acquired through a Dividend Reinvestment Plan. That greatly simplifies the cost basis calculation. I saved the last plan statement of the year and that year's 1099 for each stock and have them tucked away in manilla folders in a file cabinet. But my game plan is to rarely sell and instead just to use the dividends as income.

I've just been retired for a couple of years, but at least up to this point I've been quite pleased with how a dividend strategy is working out. As someone often reminds over at another discussion board, "There's more than one way to Dublin."

[CitricAcid]

Quote:

Originally Posted by RustyShackleford I've got VYM too. What do folks think about liquidating some blue-chip high-yielding stuff like PEP and JNJ into the VYM position, in order to simplify portfolio ?

JNJ and PEP are tough ones, JNJ has had a recent big run up, so, depending on when you bought, now might be a good time to switch over to a higher yielding ETF like VYM if you are looking for substantial dividend income. PEP is a company that has consistently increased their earnings and dividends over the years and is trading at a good P/E and PEG, with solid dividends. They are tied in very much to commodity pricing though with their food sales, which may end up hurting their bottom line. Seek other opinions, but I would say PEP is a hold and JNJ to change to VYM (this is all if you are looking for dividend income)

[RustyShackleford]

Quote:

Originally Posted by CitricAcid ... I would say PEP is a hold and JNJ to change to VYM (this is all if you are looking for dividend income)

I guess I'm seeking two things:

1. To add the "value tilt" that most people seem to like.

2. To simplify my portfolio.

[CitricAcid]

Quote:

Originally Posted by RustyShackleford I guess I'm seeking two things: 1. To add the "value tilt" that most people seem to like. 2. To simplify my portfolio.

PEP is a consumer staple (not a necessity because it's, well, snack food... but it is mroe recession proof than many other stocks... very similar to JNJ in this way), it has shown it can consistently pay its dividend (2.5% yield) grow their earnings and are trading at a 19 P/E. This does not necessarily tilt it to "value" (19 P/E), but it would still be a good stock for dividend growth (2003 - $0.16, 2004 $0.23, 2005 $0.26, 2006 $0.30, 2007 $0.375, 2008 $0.425)