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03-04-2014, 09:32 PM
(This post was last modified: 03-04-2014, 09:33 PM by Dividend Watcher.)
Just musing here . . .
After yesterday's and today's gyrations, I decided to log into my brokerage account to see whassup. I'll be damned if over $120 fell into my pocket this morning just for waking up and the March dividend season is just warming up. 
Haven't even looked in the wife's or mother-in-law's accounts yet.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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Most of my working life I had to work a full day to make a hundred bucks. Now the pension, social security, and the dividends just flow in like magic. It is so great, seems it ought to be criminal! Last year our gross dwarfed our previous working salaries. That is really a little bit of a stretch since the wife still brought in $38k as she still works 2 days per week. Even there, she used to get $54k when she was full time salary. That included lots of responsibility and about 50-55 hours per week. You surely are correct, this free money, especially the dividends, never fails to put a smile on my face.
Alex
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03-05-2014, 10:50 AM
(This post was last modified: 03-05-2014, 10:50 AM by fiveoh.)
The dividends are nice, and it is a great strategy if you need income. However, I'm starting to think I'd be better off in index funds. My portfolio has underperformed the market the last 2 years(-1% in 2012, -4% in 2013 vs SPY) and is down 1.5% vs the S&P this year. I wont need the income for another 10 years. If my return doesn't pick up, I'm thinking of switching to index funds and then transitioning to DGI when I need the income. I don't expect DGI to perform as strong in a bull market(like we've been in) so I'm trying to wait it out a few more years and see how it stacks up.
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My daughter is just getting a decent start at age 33. I opted to buy MAPTX and PXSV for her account which should be mostly growth oriented. The PXSV is up +10.6% since the purchase on a dip on 2/3. PXSV is a small cap value fund. It pays a small dividend of just over 1%. Her account also holds some DG and income types of stocks to help generate more cash flow that will be placed almost exclusively into growth stocks or funds. It is funny that her best performer is a stodgy old income stock, PBA, which is up 26% not counting dividends.
Her portfolio which is about equally weighted: AAPL, PBA, POT, PXSV, SDRL, TGP, WMB, MAPTX
On a strong market dip, I'll place any of her new cash into a tech index fund, up to normal weighting.
Alex
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(03-05-2014, 10:50 AM)fiveoh Wrote: The dividends are nice, and it is a great strategy if you need income. However, I'm starting to think I'd be better off in index funds. My portfolio has underperformed the market the last 2 years(-1% in 2012, -4% in 2013 vs SPY) and is down 1.5% vs the S&P this year. I wont need the income for another 10 years. If my return doesn't pick up, I'm thinking of switching to index funds and then transitioning to DGI when I need the income. I don't expect DGI to perform as strong in a bull market(like we've been in) so I'm trying to wait it out a few more years and see how it stacks up.
SCHD is a nice ETF I found on Schwab that invests in DGI type stocks. Something to consider if you decide to go that route.
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03-05-2014, 11:59 AM
(This post was last modified: 03-05-2014, 12:00 PM by fiveoh.)
(03-05-2014, 11:16 AM)hendi_alex Wrote: My daughter is just getting a decent start at age 33. I opted to buy MAPTX and PXSV for her account which should be mostly growth oriented. The PXSV is up +10.6% since the purchase on a dip on 2/3. PXSV is a small cap value fund. It pays a small dividend of just over 1%. Her account also holds some DG and income types of stocks to help generate more cash flow that will be placed almost exclusively into growth stocks or funds. It is funny that her best performer is a stodgy old income stock, PBA, which is up 26% not counting dividends.
Her portfolio which is about equally weighted: AAPL, PBA, POT, PXSV, SDRL, TGP, WMB, MAPTX
On a strong market dip, I'll place any of her new cash into a tech index fund, up to normal weighting.
So is your reasoning for doing this, you think a purely DGI strategy will underperform as far as total return goes?
(03-05-2014, 11:47 AM)EricL Wrote: (03-05-2014, 10:50 AM)fiveoh Wrote: The dividends are nice, and it is a great strategy if you need income. However, I'm starting to think I'd be better off in index funds. My portfolio has underperformed the market the last 2 years(-1% in 2012, -4% in 2013 vs SPY) and is down 1.5% vs the S&P this year. I wont need the income for another 10 years. If my return doesn't pick up, I'm thinking of switching to index funds and then transitioning to DGI when I need the income. I don't expect DGI to perform as strong in a bull market(like we've been in) so I'm trying to wait it out a few more years and see how it stacks up.
SCHD is a nice ETF I found on Schwab that invests in DGI type stocks. Something to consider if you decide to go that route.
Thanks, I'll check it out. Although, I'm looking for a higher TR and am thinking div stocks will be somewhat lower than the market average.
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I love it too, DW. The start of March brought a bunch of dividends in for me as well. Paydays from PFE, COP, INTC, AFL, PSX, WFC, and F in the past few days.
To fiveoh's point, I do believe in benchmarking, but I worry that two years is not a good sample size. If one's dividend growth portfolio, like mine, is concentrated in large blue-chips, then I think it is not unlikely to trail the market a bit in gangbuster years like 2013. But when the next correction hits -- and it will -- I expect the same stocks to hold up a little better than the overall market. It is not that such stocks chronically underperform the market, it is that they are a bit less volatile.
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Keep in mind that many blue chip DGI type stocks have low beta's, meaning they are less volatile than the market. This can cause you to lag a bit in the current market as it keeps going up in a near straight line. However, when #$%^ hits the fan, you'll be happy you are in the boring DGI stocks as they probably won't fall nearly as much as the rest of the market and the majority of them will continue to pay and raise dividends.
Remember its a marathon, not a sprint. Its easy to forget that and be distracted by everything going up and the market setting new highs every day. Things can change in a hurry. When they do I'm guessing you'll see the tide shift in the other direction and you'll outperform the benchmarks you are talking about.
(03-05-2014, 10:50 AM)fiveoh Wrote: The dividends are nice, and it is a great strategy if you need income. However, I'm starting to think I'd be better off in index funds. My portfolio has underperformed the market the last 2 years(-1% in 2012, -4% in 2013 vs SPY) and is down 1.5% vs the S&P this year. I wont need the income for another 10 years. If my return doesn't pick up, I'm thinking of switching to index funds and then transitioning to DGI when I need the income. I don't expect DGI to perform as strong in a bull market(like we've been in) so I'm trying to wait it out a few more years and see how it stacks up.
I consider the Income my portfolio generates and the Income increase, year by year what's important. My portfolio currently generates 6.3% in dividends on my investments and the dividend growth was just over 6% last year. Already this year 5 of the 20 stocks have increased the dividend by 5.8% (with no annual fees on my holdings, not even .005%).
Why would I care if my portfolio meets, beats or is less than the market?
Why would I want to pay an annual fee (regardless how small. On a $500,000 portfolio a .005% fee would be $2,500) to invest in an index fund which may or may not generate income (more likely it would not)?
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I'm hoping you guys are right about DGI being low beta and holding up better in a downturn. I'm going to try and give it at least 5 years... but im a little discouraged at the moment.
Sorry for derailing the thread. I got divs from afl, cop, psx and wfc this month as well. 
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(03-05-2014, 05:00 PM)fiveoh Wrote: I'm hoping you guys are right about DGI being low beta and holding up better in a downturn. I'm going to try and give it at least 5 years... but im a little discouraged at the moment.
Sorry for derailing the thread. I got divs from afl, cop, psx and wfc this month as well.
Here is one article that talks a bit on the subject.
http://seekingalpha.com/article/2060313-...arket-peak
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I don't trust any single investing philosophy, so only would trust DGI strategies for a max of perhaps 25% of the portfolio value. And as a current retiree, would not buy a single DGI stock for long term hold unless it was yielding north of 4%. If younger would probably consider up the the 25% figure, but would only be buying/accumulating when shares were selling at a steep discount to current values.
Alex
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