Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Dividends and Inflation
Old 12-20-2017, 09:04 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 6,161
Dividends and Inflation

Wondering if some of the more astute investment types might provide some insight to an academic question.

Suppose one had X shares of a stock or fund. You bought that stock/fund in, say the 1960's and it paid $500 per year in dividends back then.

Since that time, you've held that stock but still hold the same number of shares because you never reinvested the dividends.

All things being equal relative to that company's performance, would you expect to see a steady $500 dividend or would inflation --or some other mechanism-- allow for those payouts to increase over time? A $500 dividend in the 60's was a lot more money that it is now.

More down to earth, if your current, unreinvested dividends were to cover your expenses, would you expect that those dividends would increase over time to keep up with inflation? If so, what are the drivers that make that happen? Was the old GE paying 1% per share back in the 40's and slowly increased it as inflation helped things along?

Or would one find oneself looking for better yields or find ways to buy more shares every decade or so?
__________________

__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko 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 12-21-2017, 02:45 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
My div growth portfolio grows divs by about 6-8% per year on average for last 20 years. Well ahead of inflation. No reinvestment. Current yield about 3.6%
__________________

Danmar is offline   Reply With Quote
Old 12-21-2017, 05:53 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 6,161
Quote:
Originally Posted by Danmar View Post
My div growth portfolio grows divs by about 6-8% per year on average for last 20 years. Well ahead of inflation. No reinvestment. Current yield about 3.6%
That's what has me wondering. My dividend dollars have remained fairly consistent over the past decade.

As far as I can tell, one of my funds (TRPrice Equity Income Fund PRFDX) was paying .17 cents a quarter in 1984 and is still paying .17 cents now.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 12-21-2017, 06:04 AM   #4
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Quote:
Originally Posted by marko View Post
That's what has me wondering. My dividend dollars have remained fairly consistent over the past decade.

As far as I can tell, one of my funds (TRPrice Equity Income Fund PRFDX) was paying .17 cents a quarter in 1984 and is still paying .17 cents now.
Were there any splits or other share purchases that happened without dividends being reinvested? Did the price go up so you have more value, just less dividends?

Generally, as prices of the shares go up, dividends increase to keep the same % return competitive with inflation. If you had a 10% return in 1984 due to inflation being so high in 1984, it may well be a 2% return now.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 12-21-2017, 06:35 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 6,161
Quote:
Originally Posted by Senator View Post
Were there any splits or other share purchases that happened without dividends being reinvested? Did the price go up so you have more value, just less dividends?

Generally, as prices of the shares go up, dividends increase to keep the same % return competitive with inflation. If you had a 10% return in 1984 due to inflation being so high in 1984, it may well be a 2% return now.
That may be the case; I didn't own that fund back then. What I do see is that my $$ have remained the same for the past 10 years however.

As my portfolio has grown over the past five years I have seen my dividend percentage shrink from 2.1 to 1.89 however. Same cash payout, just a lower percentage of the total.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 12-21-2017, 06:44 AM   #6
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,416
For the Vanguard S&P 500 index fund (VFIAX) the annual dividend per share was 1.34 in 2001. In 2016 it was 4.17. That's an annual increase of 7.9% over 15 years. Over the same time period inflation (as measured by the CPI) was about 2.1%, so dividends increased by about 5.8% per year in real (inflation-adjusted) terms.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 12-21-2017, 07:24 AM   #7
Full time employment: Posting here.
Bryan Barnfellow's Avatar
 
Join Date: Feb 2004
Location: Switzerland
Posts: 608
Quote:
Originally Posted by Danmar View Post
My div growth portfolio grows divs by about 6-8% per year on average for last 20 years. Well ahead of inflation. No reinvestment. Current yield about 3.6%
I also manage our own dividend growth portfolio, which produces approximately 40% of our overall income now that we are in retirement. Same growth as you have experienced, again over the last 22 years, with a current yield of about 4%.

Replication of results confirmed.

-BB
__________________
FIREd, April 1, 2015. My Retirement Benefits Package includes: 6 months vacation, twice a year.
Bryan Barnfellow is online now   Reply With Quote
Old 12-21-2017, 07:43 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
Quote:
Originally Posted by Bryan Barnfellow View Post
I also manage our own dividend growth portfolio, which produces approximately 40% of our overall income now that we are in retirement. Same growth as you have experienced, again over the last 22 years, with a current yield of about 4%.

Replication of results confirmed.

-BB
Excellent. My portfolio are all individual Canadian names. Mostly banks, telcos, and pipes. Total returns over 20 years about 12% CAGR.
Danmar is offline   Reply With Quote
Old 12-21-2017, 08:29 AM   #9
Full time employment: Posting here.
Bryan Barnfellow's Avatar
 
Join Date: Feb 2004
Location: Switzerland
Posts: 608
Quote:
Originally Posted by Danmar View Post
Excellent. My portfolio are all individual Canadian names. Mostly banks, telcos, and pipes. Total returns over 20 years about 12% CAGR.
Ours is a concentrated portfolio of 20 US blue chip dividend payers (many in the S&P Dividend Aristocrats list) plus two top REITS and two top Business Development Companies (BDCs). The rest of our income (60%) is in the form of pensions and annuities, along with US and Swiss social security; so, we are able to take a bit more risk in equities.

Cheers and best wishes for a prosperous 2018!

-BB
__________________
FIREd, April 1, 2015. My Retirement Benefits Package includes: 6 months vacation, twice a year.
Bryan Barnfellow is online now   Reply With Quote
Old 12-21-2017, 09:13 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
Quote:
Originally Posted by Bryan Barnfellow View Post
Ours is a concentrated portfolio of 20 US blue chip dividend payers (many in the S&P Dividend Aristocrats list) plus two top REITS and two top Business Development Companies (BDCs). The rest of our income (60%) is in the form of pensions and annuities, along with US and Swiss social security; so, we are able to take a bit more risk in equities.

Cheers and best wishes for a prosperous 2018!

-BB
Thank you and likewise to you. My divs now represent 40-50% of our spending with the rest company pension. Govt pension not started yet but will not be material. Agree that a good sized pension would allow more risk everything else being the same. My actual portfolio is 100% equity but if I capitalize the pension value I’m at about 65/35 equity to fixed income.
Danmar is offline   Reply With Quote
Old 12-21-2017, 02:37 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 4,505
At the very broadest theoretical level:

"Inflation" is the increase in consumer prices. That's an expense to us consumers.

But, consumer prices are revenue to consumer products firms. If those firms can make profits go up as fast as revenue, and pay a constant percent of profits as dividends, then dividends can go up with prices.
__________________

Independent is offline   Reply With Quote
Reply

Tags
dividends, inflation


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
Inflation linked savings bonds report negative inflation soupcxan FIRE and Money 20 06-04-2015 01:39 PM
Long term capital gains and qualified dividends and 0% taxation haha FIRE and Money 18 01-13-2013 05:45 PM
Inflation Protected Assets vs. Inflation arebelspy FIRECalc support 5 05-17-2011 12:19 PM
Implied inflation rate in an inflation adjusted SPIA cashflo2u2 FIRE and Money 6 04-30-2008 08:24 PM
Inflation or No Inflation? Donner FIRE and Money 16 01-19-2005 01:58 PM

» Quick Links

 
All times are GMT -6. The time now is 06:46 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×