Any dividend growth investors out there?

[TeeRar]

Two big caveats for foreign dividends are they are usually taxed at marginal rates so they are better in an IRA or other qualified money accounts, and you are of course subject to currency rate risk.
.......

A caveat to your caveat (caveat squared?)
A Roth IRA does NOT allow a mechanism to apply foreign tax credits so be careful there

I don't like funds - not open, closed, or ETFs - I want all the mistakes to be my own thank you!

my top 15
AFL
JNJ
INTC
GE
PG
SYY
EPD
MSFT
GWW
MO
UTX
PAYX
NLY
CVX
MMM

Those 15 are yielding about 4% right now (simple weighted avg) and, as a group can easily raise their divs by 7% a year.

Broke my own rule and did not sell GE when it cut it's dividend. Another rule = drop a stock if it doesn't raise it's dividend in a 2 year period has MSFT on the chopping block but I suspect they'll raise.

I also juice the returns by buying additional shares and writing covered calls to span an ex-div date.

 

[Leonidas]

I thought Mr. Softee (MSFT) just raised his dividend last year.

 

[TeeRar]

I thought Mr. Softee (MSFT) just raised his dividend last year.

MSFT "normally" raises in Nov (payable in Dec). They didn't do that this year (2009).

Like a lot of companies I think they will play a semantics game and raise it on the 5th,6th, 7th, or 8th quarter - this way they can still "say" they raised their dividend every year.

 

[Danmar]

This is my first post. Sorry if it repeats others. Seems to me that a good strategy is to invest in dividend paying stocks because the divs grow (usually) over time offsetting the ravages of inflation. Also the taxes on dividends are lower than interest and even capital gains(at least in my Country-Canada).I have just retired and will be able to live nicely on my portfolio dividends and pension. No need to draw principal for the forseeable future. Portfolio is 100% equity all in very large well established Canadian companies. Only one minor case of dividends cut in the last year. Current yield about 3.75% I have little fear of cuts in the future. Dividends on my portfolio have historically grown by 5-8% over last 30 years. As a cushion I have 2 years expenses in cash. What do you think? Am I missing something?

 

[W2R]

This is my first post. Sorry if it repeats others. Seems to me that a good strategy is to invest in dividend paying stocks because the divs grow (usually) over time offsetting the ravages of inflation. Also the taxes on dividends are lower than interest and even capital gains(at least in my Country-Canada).I have just retired and will be able to live nicely on my portfolio dividends and pension. No need to draw principal for the forseeable future. Portfolio is 100% equity all in very large well established Canadian companies. Only one minor case of dividends cut in the last year. Current yield about 3.75% I have little fear of cuts in the future. Dividends on my portfolio have historically grown by 5-8% over last 30 years. As a cushion I have 2 years expenses in cash. What do you think? Am I missing something?

Hi, and welcome to the Early Retirement Forum.

Often/usually new retirees prefer to lower their risk through diversification, including fixed income investments such as bonds, CD's, REITs, and so on in their portfolio and many of us limit equities to less than half of our portfolio.

I am also a new retiree and probably will not withdraw any more than my dividends. At least, in 2010 my planned withdrawals will equal my 2009 dividends. The asset allocation that I personally prefer is 45:55 (stocks:fixed). This asset allocation served me well during the economic woes of 2008-2009.

 

[Danmar]

Thanks for the reply. I understand asset allocation benefits, but believe in my case the tax , yield, and inflation advantages outweigh them. Without principal drawdowns for the foreseeable future I believe I can maximize my retirement finances this way. Perhaps more importantly, having a generous pension that equals about half my spending requirements seems like a fixed income stream to me and I view this as a fixed income replacement. If the market declines I don't really care very much as long as dividends are maintained. My portfolio is only down about 10% since it's peak and dividends are intact. I expect they will start growing again by the end of 2010. More thoughts are very welcome.

 

[mef623]

This is my first post. Sorry if it repeats others. Seems to me that a good strategy is to invest in dividend paying stocks because the divs grow (usually) over time offsetting the ravages of inflation. Also the taxes on dividends are lower than interest and even capital gains(at least in my Country-Canada).I have just retired and will be able to live nicely on my portfolio dividends and pension. No need to draw principal for the forseeable future. Portfolio is 100% equity all in very large well established Canadian companies. Only one minor case of dividends cut in the last year. Current yield about 3.75% I have little fear of cuts in the future. Dividends on my portfolio have historically grown by 5-8% over last 30 years. As a cushion I have 2 years expenses in cash. What do you think? Am I missing something?

That's my strategy. I concentrate less on current yield and more on growth. I've got about 15 years before retirement (I'm 37.), so I'm happy to wait it out.

Mike

 

[Danmar]

Good for you. When I was your age I hadn't even started saving for retirement. At 37 you should be primarily into equities. Obviously growth is your current objective and you should probably consider DRIP's to get the compounding effect of growth over an extended period.

 

[brewer12345]

Danmar, at this stage you should be focused on disaster proofing your finances more than anything else. So what if oil prices crash and take the Canadian economy down? No doubt 5 minutes thought would yield several other disaster scenarios for an all Canuck equity portfolio.

 

[Danmar]

Agree but we have been through a disaster in the past 18 months and my portfolio held up although some sleepless nights for sure. As it turns out we could live solely off my pension which I haven't started to draw yet. Taxes and inflation will eat away the fixed income portion (in my case the pension) but I expect the dividends to increase and offset inflation. Eventually your gov't will need to drastically raise rates or endure much higher inflation. Higher taxes too probably. Fixed income will be in for a rough ride I think. Your advice is welcome-thanks. PS Don't have any oil co's and Canada is more than oil.

 

[mef623]

Good for you. When I was your age I hadn't even started saving for retirement. At 37 you should be primarily into equities. Obviously growth is your current objective and you should probably consider DRIP's to get the compounding effect of growth over an extended period.

$8 commissions and a good discount broker that reinvests my dividends in equities does tend to work out nicely!

Mike

 

[kybec29]

What are you buying/watching as a Dividend Growth Investor? Here are the 6 stocks that I'm focusing my 2010 investents on for current AND future income:

PM - Have some, will add below $48.00 (Strong growth, yield ~5%)
MO - Have some, will add lots below $19.25 (Strong FCF, yield ~7%)
XOM - Have some, will add below $68.00 (Strong FCF, yield +2.5%)
CVX - Initiate position at $76.00 (solid growth, +3.5% div)
WFC - Initiate position below $26 (future div growth)
JPM - Initiate position at below $41 (future div growth)

Will also be watching for...
GE - below $14.25 (to initiate position for future growth)
KO - below $52.00 (add to position)
PG - $58.00 (to initiate position)
JNJ - $59.00 (to add to postion)
ABT - below $46.00 (to initiate position)

 

[cardude]

Danmar, at this stage you should be focused on disaster proofing your finances more than anything else

I agree. With that much saved my biggest concern would be to stress test the portfolio against the worst possible scenarios.

I don't think 100% equities is wise, and 2 years of cash does not seem near enough with that big of a portfolio and spend rate. What if your big(wow!) pension goes *poof* somehow?

I guess my main point is you've got more than enough, so why take the extra risk? Why not 50stock/50cash*fixed*risk-free to lessen the worry level?

 

[JPatrick]

I have three div stocks that don't cause me lost sleep.
DUK and SE for their solid yield.
EMR has a lesser yield, but a solid record of div increases.
Also nice is the fact that all have fee friendly DRIP programs.

As a public service, I'll refrain from sharing the nonsleepers.

 

[mef623]

What are you buying/watching as a Dividend Growth Investor? Here are the 6 stocks that I'm focusing my 2010 investents on for current AND future income:

PM - Have some, will add below $48.00 (Strong growth, yield ~5%)
MO - Have some, will add lots below $19.25 (Strong FCF, yield ~7%)
XOM - Have some, will add below $68.00 (Strong FCF, yield +2.5%)
CVX - Initiate position at $76.00 (solid growth, +3.5% div)
WFC - Initiate position below $26 (future div growth)
JPM - Initiate position at below $41 (future div growth)

Will also be watching for...
GE - below $14.25 (to initiate position for future growth)
KO - below $52.00 (add to position)
PG - $58.00 (to initiate position)
JNJ - $59.00 (to add to postion)
ABT - below $46.00 (to initiate position)

My target is about 30 stocks, with the group diversified based on the industries' representation in the S&P. I'll post here once I've finished. High yield is nice, but consistent dividend growth is more important.

Mike

 

[popowich]

Example long term holdings are MO and KMP that have been a great dividend payers and growers at the same time for me.

I recently picked up some FTR at 7.50 which at that time made it a 13%+ dividend.

As long as the dividend holds I'll hang on to that one.

 

[DeborahB]

I guess I live a little closer to the edge but I watch these investments closely. I'm retiring in June or July at 62. Lately I've been buying dividend stocks, too. I bought most of these when they were a lot lower in price than they are now.

BPO CPNO EDE EGOV (for growth & income) EPR FGP OLN RAI WWE GE

Some of these are a bit speculative, I realize that. But I need high yields if I can get them, for now.

 

[jimnjana]

I previously mentioned BBEP as one of my MLP holdings, that had suspended distributions. Recently they announced that they had settled with KWK and that the distro will be reinstated at least at the $1.50 per unit level. That would be a yield over 10% at current level. I would expect that the distro will be increased as KWK is now the largest shareholder and they will have two of the seats on the Board of Directors. Might be worth a look.

 

[popowich]

$8 commissions and a good discount broker that reinvests my dividends in equities does tend to work out nicely!

I missed the OP in my first response. To get the best long term value from dividend paying companies you should not be investing with a broker that charges commissions. I use Scottrade and their $7 trades for regular investing but you can get free trades and reinvestment from other companies. Do your own research to find one. I used to use Mellon Investing or something like that for some DRIP's but I can't seem to find their site now.. maybe they were one of the bank causalities. Anyway, you usually need to put up something like $1000 for an initial investment and then $50 monthly and then you automatically have an investment that is cost averaging over time with the dividends automatically purchasing new shares. I had a DRIP in HME set up this way for many years. I used to rent an apartment from them and at the time renters also got a 2% discount on the stock purchases.

 

[Brat]

Given the down equity market I looked again at dividend stocks. When I calculated the payout ratio (Div/Eps) I was stunned to find that STON, MMP and EPD paid out more than their earnings. What gives?

 

[brewer12345]

Given the down equity market I looked again at dividend stocks. When I calculated the payout ratio (Div/Eps) I was stunned to find that STON, MMP and EPD paid out more than their earnings. What gives?

STON and I believe MMP are MLPs, dunno about EPD. MLPs typically are run on the basis of cash flow and frequently are in businesses whose economics do not fit GAAP very well. So in the case of STON, they have a lot of non-cash expenses. A large one is the cost of the land as part of cost of goods sold when they sell a cemetary plot. The accounting requirement is to recognize a sizable charge against earnings. In actual fact, most of STON's properties have some astronomical number of years' sales worth of plots (100 years? can't remember but it is long) and of course the entire charge is not a cash cost they incur as you would if you were, say, a dealership selling a car. Most MLPs have similar types of issues.

The way to look at these businesses is to see if they can sustainably generate sufficient cash over time and whether they are overly levered.

 

[Zathras]

...To get the best long term value from dividend paying companies you should not be investing with a broker that charges commissions...

I disagree with the commission issue.
While it is always good to pay less, or nothing, in commissions, it is not nearly as critical to avoid them as it is with a more active trading method.
For example, if you pay $8 to buy 1000 shares and the dividends are reinvested without commission (is there any brokerage that charges for reinvestments?) that won't impact you much.
If you buy 1000 shares, sell 250 a little later, buy 500 more then sell 600 within a couple of years, commissions are going to play a much bigger role.

 

[jimnjana]

anybody in NZT? Adding small position as well as small position in PEI. Adding to BBEP and NYCB positions.

 

[kperkins]

sources for :dividend paying stocks
Dividend Aristocrats, Dividend Champions, Warren Buffet portfolio, compare against each other.

 

[KeyserSoze]

Does anyone own-----
LINE (9% Div)
CODI (10.5% Div)
PDLI (14.4% Div)
OTT (11.2% Div)
NLY (16.5% Div)
GOOD (11.5% Div)
Please add more to this list.

I have positions in LINE & NLY... Good yield, consistent growth... LINE has been fluctuating with the energy sector, but growth should continue...

Here are my top dividend producing positions...

NLY - 16.32% Div
BX - 8.58% Div
LINE - 9.56% Div
AGNC - 22.12% Div