(DVY) and Dividend Investing

[charlottebandito]

Ok, I'm just learning the "new" concept of Dividend Investing and DRiPs have been reviewed here previously.  I was wondering what your thoughts were on the ETF (DVY) Dow Jones Select Dividend Index that seems to be a basket of 50 highest paying divvy stocks comprised of the DJ Total Market.  What are some thoughts on using that as a Dividend Investing vehicle (broker reinvests divvies for free) for a taxable account?

Obviously that would help tremendously with paperwork that everyone seems to convey here, but would that be a great option other than DRiPs?  I'm going to be purchasing more books on the subject of Dividend Investing.

I'm 33.  Thanks guys.

 

[maddythebeagle]

I think that would be a good etf. I think the biggest issue with etfs is that you dont get dollar cost averaging. Have you looked something like sharebuilder where you could buy smaller amounts. What is the expense ratio on this etf?

I actually like drips and dont think the records are too bad.

Also, on the issue of having in a taxable account, you should look at your current tax bracket to see what the dividend tax rate is (I think it is 5% in the 15 % bracket) and is being lowered to 0 in 2008. Another drawback on the etf is that you will have to pay some distribution every year and drips you wouldnt unless you sell.

 

[glenlogie]

I bought this with sharebuilder for $4. I remember the expense ratio is 0.40%. The dividends are reinvested for free which I can change when I retire. You might want to go in with one of the $50 rebate codes you can find on fatwallet.com. I signed up with them that way. It took about a month to get it but eventually it appeared on the money market side of my account and I could withdraw it. Helps a little. Anyways, good luck

 

[Nords]

I was wondering what your thoughts were on the ETF (DVY) Dow Jones Select Dividend Index that seems to be a basket of 50 highest paying divvy stocks comprised of the DJ Total Market.  What are some thoughts on using that as a Dividend Investing vehicle (broker reinvests divvies for free) for a taxable account?

Obviously that would help tremendously with paperwork that everyone seems to convey here, but would that be a great option other than DRiPs?  I'm going to be purchasing more books on the subject of Dividend Investing.

I'm 33.  Thanks guys.

I love DVY.  It's actually 100 stocks now but it's been a winner since it was introduced and the growth (on top of the dividends) has been an unexpected bonus.  Our retirement portfolio is value and a big chunk of it is small-cap but I think I'm a closet dividend investor.

I don't understand the paperwork frustration (unless people are doing their tracking only on paper).  Fidelity's website will show cost basis all the way down to individual share lots and their software allows you to sell those individual lots.  Software like Quicken or Money also simplifies that tracking (your biggest hassle is keeping up with the data entry).

DCA'ing into ETFs is not always price-effective.  One alternative is to DCA into a mutual fund and then sweep the holdings into an ETF once or twice a year, another option is to pile up cash until the commission on the purchase drops to a puny fraction of a basis point.

 

[charlottebandito]

Thanks guys. I've noticed that there was another ETF concentrating on dividend investing: (PEY) Powershares High Yield Equity Dividend Achievers Portfolio. Looks like it's primarily comprised of Finance and Utilities.

 

[JPatrick]

Ok, I'm just learning the "new" concept of Dividend Investing and DRiPs have been reviewed here previously.  I was wondering what your thoughts were on the ETF (DVY) Dow Jones Select Dividend Index that seems to be a basket of 50 highest paying divvy stocks comprised of the DJ Total Market.  What are some thoughts on using that as a Dividend Investing vehicle (broker reinvests divvies for free) for a taxable account?

Obviously that would help tremendously with paperwork that everyone seems to convey here, but would that be a great option other than DRiPs?  I'm going to be purchasing more books on the subject of Dividend Investing.

I'm 33.  Thanks guys.

If you can buy your initial DVY shares for under $10 AND if your broker will invest the div for free, it is a no brainer. I'd do it. I've owned DVY for about 8 months.  Three nice 4% plus div, and I wrote calls on two occasions for an extra kicker.  My broker will not reinvest the div for free, so I just take the cash and use it elsewhere.
I love the DRIP concept also. Key thing here is to find plans that don't nickel/dime you to death.  CIN is one of my favorites. Been doing it for many years. Total cost?  zero.

Here's a list of good stocks that do drips.  I haven't looked at their fees lately so I can't comment on the costs, but the stocks are quality.
The table below highlights 15 quality stocks that offer direct-purchase plans. Each of these firms will waive its initial minimum if an investor commits to automatic monthly investments. Interestingly, to make the minimum automatic investment in each of these 15 companies would require a total monthly commitment of $650.

To join the direct-purchase plans for these companies, obtain enrollment information by calling the toll-free numbers provided.

Stock Min. Initial Investment Min. Auto. Investment Contact
Allstate ALL $500  $50  800-448-7007
Altria MO 500 50 800-448-7007
Bank of America BAC 1,000 50 800-842-7629
Best Buy BBY 500 50 877-498-8861
Cash America CSH 250 50 800-842-7629
ConocoPhillips COP 250 25 800-842-7629
ExxonMobil XOM 250 50 800-252-1800
Guidant GDT 250 50 800-448-7007
Medtronic MDT 250 25 888-648-8154
Merck MRK 350 50 800-831-8248
Microsoft MSFT 1,000 50 800-842-7629
Nike NKE 500 50 800-448-7007
Questar STR 250 50 800-729-6788
Staples SPLS 250 25 800-842-7629
Wal-Mart WMT

 

[grumpy]

For dividend stock investing try Buy & Hold Securities:

https://www.buyandhold.com/

For $7 a month you get two trades or for $15 a month you get unlimited trades. Minimum buy is $50. Dividends can be reinvested at no charge. You can buy from a list of several thousand companies, even if they don't have DRIP programs. You do not need to already own a share of a company. There is no record keeping burden.

Grumpy

 

[maddythebeagle]

Most of the "direct stock" plans have high optional cash and div. rein. fees and many you would be just as well using a sharebuilder-type account or discount broker. I do Exxon and they have no fees. I also do Aflac and Pfizer that dont have fees. I know that BAC is also fee-free.

Otherwise, most of my others required me to get the 1st share.

 

[wildcat]

I think if you are long-term you should just DCA into value index funds. Yield is slightly less but no broker fees and the sector breakout is somewhat similar. Remember fees kill.

 

[mikew]

I am thinking that I will split the dividend stock portion of my portfolio. 50% will go for DVY. I am hoping for a base yield and diversification. I will use the other 50% for individual stocks to push up the average yield. (I am considering doing the same thing with REITS using VNQ.)

In my case, DCA and drips aren’t practical options because of my transaction costs on sending small amounts of money back to the US.

Any thoughts on this? Thanks

 

[maddythebeagle]

Where do you live. You dont have to send optional cash purchases on drips through the mail. You could set up a bill pay account in the u.s. and make purchases with that. I use my bill pay for all of my drip purchases (easy to dollar cost average and can setup for monthly payments).

 

[mikew]

I live in Japan. Even with bill pay, I would need to fund the bill pay account each month. Better than paying directly to individual drips but still cost prohibitive. It would also be a pain to have to go and make money orders every month.