06-23-2014, 07:50 AM
I read the article and comment stream yesterday and, frankly, did not find it very helpful. The assumptions break down in the real world, IMO.
Here is how I look at it with my portfolio, but first a couple of thoughts about my particular circumstances, because without that context a lot of what gets written about dividend growth strategies do not make as much sense as they do with it.
My wife and I are both retired during the past year or so. Kathy stopped working as a graphic designer at the age of 58 because she has a genetic, degenerative eye disorder and, being legally blind, was having increasing difficulty doing her job. She gets a small pension from the state of Missouri and a smaller one from Oregon, having worked in public higher education. She applied for and received SS disabilty. I retired at the age of 62, also from public higher education. I receive a small pension from Oregon, an early retirement stipend from my college that will continue until I am 65 and I took SS at the age of 62. The sources of income meet our monthly living expenses. Now that we are getting settled in Merida, Yucatan, Mexico we think we are going to be able to put some of this income into savings, although we are planning a trip to Europe next year - there are places Kathy wants to see while she still has some eyesight left.
We also have a couple of smallish IRAs, totaling about $165,000. Those are 90% invested in 34 or so dividend growth names. If anyone wants to see what they are, look up rnsmth's profile on SA. Our current yield is 3.9% - or an average of about $470 a month in dividends. We are reinvesting all dividends back into the companies that paid them.
At the start of 2013 I estimated the amount of dividends I would receive based on the forward dividend rate for my companies - the rate that Yahoo uses. I did not estimate the increased number of shares I would have cause that would have just been too much work for my little brain.
I repeated the exercise this weekend. I added an underweight position in APU since then, but given the 7% + current yield, the income it provides is not underweight. Today's estimate includes all the dividend increases announced since January and it also included the increased share counts resulting from reinvesting all the dividends back into the companies that paid them. These results, looking at income over the next 12 months - excluding the effect of future dividend increase announcements and increased share counts from divvy reinvestment - is 12% higher than January's estimate. I am pleased.
To me this is the key number - the growth in dividends that comes from 1) companies increasing their dividends and 2) increased shares from dividend reinvestment. I have higher yield / lower divvy growth companies, moderate yield / higher divvy growth companies and higher yield / higher divvy growth companies. I will not hold a company that does not increase its dividends.
My early retirement stipend will end in two and a half years. Our dividend income will more than cover that, if we need it. Our plan is to keep reinvesting dividends for as long as possible, and we think we will be able to get to RMD age doing that, or another 8 years for me and another 11 years for Kathy.
Here is how I look at it with my portfolio, but first a couple of thoughts about my particular circumstances, because without that context a lot of what gets written about dividend growth strategies do not make as much sense as they do with it.
My wife and I are both retired during the past year or so. Kathy stopped working as a graphic designer at the age of 58 because she has a genetic, degenerative eye disorder and, being legally blind, was having increasing difficulty doing her job. She gets a small pension from the state of Missouri and a smaller one from Oregon, having worked in public higher education. She applied for and received SS disabilty. I retired at the age of 62, also from public higher education. I receive a small pension from Oregon, an early retirement stipend from my college that will continue until I am 65 and I took SS at the age of 62. The sources of income meet our monthly living expenses. Now that we are getting settled in Merida, Yucatan, Mexico we think we are going to be able to put some of this income into savings, although we are planning a trip to Europe next year - there are places Kathy wants to see while she still has some eyesight left.
We also have a couple of smallish IRAs, totaling about $165,000. Those are 90% invested in 34 or so dividend growth names. If anyone wants to see what they are, look up rnsmth's profile on SA. Our current yield is 3.9% - or an average of about $470 a month in dividends. We are reinvesting all dividends back into the companies that paid them.
At the start of 2013 I estimated the amount of dividends I would receive based on the forward dividend rate for my companies - the rate that Yahoo uses. I did not estimate the increased number of shares I would have cause that would have just been too much work for my little brain.
I repeated the exercise this weekend. I added an underweight position in APU since then, but given the 7% + current yield, the income it provides is not underweight. Today's estimate includes all the dividend increases announced since January and it also included the increased share counts resulting from reinvesting all the dividends back into the companies that paid them. These results, looking at income over the next 12 months - excluding the effect of future dividend increase announcements and increased share counts from divvy reinvestment - is 12% higher than January's estimate. I am pleased.
To me this is the key number - the growth in dividends that comes from 1) companies increasing their dividends and 2) increased shares from dividend reinvestment. I have higher yield / lower divvy growth companies, moderate yield / higher divvy growth companies and higher yield / higher divvy growth companies. I will not hold a company that does not increase its dividends.
My early retirement stipend will end in two and a half years. Our dividend income will more than cover that, if we need it. Our plan is to keep reinvesting dividends for as long as possible, and we think we will be able to get to RMD age doing that, or another 8 years for me and another 11 years for Kathy.
