01-03-2014, 11:40 AM
(01-02-2014, 11:07 AM)hendi_alex Wrote: I wonder what relationship, if any, exists between dividend growth and total returns? It could be that a portfolio that is structured purely toward dividend growth is one that is structured toward chronic under performance. After all, higher dividend payouts are usually a trait of more mature, slower growing companies which can't find more productive use of the cash. On the other hand, smaller cap companies tend to be faster growing and can deploy all of their cash into organic growth that turns out to be the best use of that cash, better both for the company and for the share holder.
I'm a big believer in dividend stocks, but think that getting 100% focused on a DG type portfolio could be counter productive to one's wealth, especially for those with decades before retirement. Does anyone have any thoughts on what allocation, if any, one should give to smaller cap growth companies?
There is no one Investing style which will work for everyone it really depends upon your goals, timeframe, interests, personality, and many other factors. Look at the results mentioned in an article by The Passive Income site:
"Money Sense ran a column where readers could submit their TFSA value. Since everyone plays under the same rule, it can be interesting to see how you do compared with others
Here are the results in summary – with $25,500 many were able to invest well on their own. (See article here)$300,000
$72,212
$61,700
$60,500
$50,876
$48,300
$46,350
…
$41,645 <– That’s me. I am definitely not number 9 but I think I have done pretty good."
My results were less than the top 9, but my YOC (or total investment) has grown to 5.25% and is still growing. I'm interested in the Income generated, not the size of the pot.
Certainly, by investing in riskier stocks or a great growth stock one may show fantastic results, in the short term. Would the results continue in the long term is questionable.
For me slow and steady dividend growth is good enough, for others allocating a portion to DG and investing some in Growth stocks, small cap stocks, IPO's, or other strategies my work for them.
Life would be boring if we all invested the same way.