End Game for Central Banks

[fenders53]

(03-02-2021, 09:18 AM)ken-do-nim Wrote:

(03-02-2021, 08:21 AM)fenders53 Wrote:

(03-02-2021, 07:59 AM)ken-do-nim Wrote:

(03-02-2021, 12:02 AM)crimsonghost747 Wrote: I believe the word "growth" in dividend growth investing is my main hedge against inflation.
My plan is to live off the dividend income, so as long as my portfolio's annual dividend growth rate is higher than inflation, then that should lead to a situation where I have more purchasing power each year compared to the last one.

The other option is to live off of the dividends after inflation is accounted for.  Let's say the inflation rate in a given year is 2.4%, and you are 100% invested in AT&T with its 7.4% dividend.  If you only draw 5% of those dividends and allow the rest to reinvest, you'll keep up with inflation.  If you say draw 4% and allow 3.4% to reinvest, you'll have more purchasing power each year as well.  

It might be an approach worth considering if someone's nest egg at retirement isn't quite high enough to go into the typical 2-2.5% range of the dividend growth stocks to have enough income.

Pull up a long-term chart on T.  It doesn't give one the comfort to bet the farm.  They are the king of bad M&A.  If I wasn't playing option interest tricks to boost the income I'd have little interest in it.  A basket of DGI stocks that grow the dividend can work against inflation, but you do need a very large port if this will be your only source of income. 

It depends where you desire to live during retirement of course.

Good point.  I sometimes think too highly of AT&T because they are such a huge company; I wonder how many people realize they own CNN, Time Warner, HBO, etc.  The DirectTV purchase is heavily weighing them down but I'm hopeful they will throw that off and start to grow again.  That said, it may be possible to build a dividend portfolio that comes to the same average of 7.4% yield that you can have more confidence in.

I don't hate T, and occasionally even own 500 shares on a very hard dip.  See above comments, I game it for additional income because I expect the capital may continue to erode.  I can find 100 solid stocks with a growing 2.5% yield that have outperformed T over most any time period in total return. T stock price is down maybe 25% over the past 20yrs?  AVG S&P stock is up maybe 8% annually over that period.  So cut that in half and subtract it from the 7.4%.  Just diversify with some actual lower yield dividend growers and the end result will likely be better.  It's proven and will certainly be safer.  There is no safe 7 1/2% yield when short-term rates are about zero.  There is always a catch when the market turns sour.  A March 2020 or 2008 lookback will clearly illustrate that.