03-26-2013, 03:18 PM
(03-22-2013, 08:41 PM)Kerim Wrote: But as a very general matter, with a high-quality dividend growth stock like MCD, over a long time horizon, it is reasonable to expect the share price to increase along with the dividend payout, such that the dividend yield stays more or less in something of a range. Outside of a temporary and market-wide shock, MCD's yield is unlikely to get up to 5 percent, because as the payout rises, more people will buy it, bidding up the price. So don't be scared of new highs in a quality DG stock. It may just mean that the price is following the dividends, as it should.
Wise words. This is the real magic of DG investing, which I think is poorly appreciated. When you tell some people you're into dividend growth, they assume you only care about the income stream and that you don't care what happens to the stock price. That is not entirely false, but it misses the point that by carefully choosing stocks that are able to grow earnings and dividends consistently, I've also put myself in the best possible position to benefit from share price gains as well. As the earnings and dividends increase, the stock price will come along for the ride. MCD is a perfect example of this. It is not a short term strategy, though!