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  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Steve, that is a very reasonable comment. I do not believe that having a smattering of higher yielding holdings takes you out of the mainstream and I agree they should not be all be lumped together as being super high risk. It is those investors that go virtually all in to the BDC, mREIT, MLP realm that concern me. Again, there are examples of such people here on the boards if you read through comments on various articles.
    Aug 20 06:07 PM | Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Adam, you are beating the drum hard. Personally, over time, as an outsider (a "total returner") I've noted roughly three different subtypes of dividend focused investors that post here:

    There is a mainstream group that focuses primarily on blue chip, reasonable yielding stocks that have growing earnings to sustain a growing dividend. While their primary objective is a growing income stream, they are cognizant of the market value of their holdings and are accepting of gains in their portfolio value even if they prefer not to utilize them to fund their cash needs. I identify strongly with the investing principals of this group even though I focus more on capital gains and allocating among different asset classes.

    There is a second group of strongly rules-bound dividend investors. For example, they focus rigidly on metrics such as dividend payment histories avoiding any company that has not paid an increasing dividend for a certain number of years...regardless of how compelling the investment story may be.

    Finally, there are the dividend speculators...those are the ones you are addressing in this article. Their objective is maximizing yield through holding BDC's, MLP's, mREIT's as the largest investments in their portfolios. They appear to believe yield is always safer than capital gains even at the far fringes of the risk spectrum....or perhaps, as Bob Wells suggested, they are just greedy.

    For those here though that are trying to learn about this form of investing, please pay attention to the mainstreamers. Don't get intimidated by the rules-bound "squeaky wheels" that refuse to view the world of investing as the complex spectrum that it is or by those speculators who will brag about how much income they are getting from their relatively small portfolios (and, in one case, about other fringe benefits resulting therefrom!). The investment world and economy are complex and there is no free lunch. Slow, steady and nimble will give you the best chance to get to where you want to be in the long run. I'm not telling anyone how to invest, I'm just expressing my opinion.
    Aug 20 02:57 PM | 4 Likes Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    Thanks Doug and agree this is probably a tangent that should we should let go unless someone else wants to discuss it further.
    Aug 19 10:20 PM | Likes Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    Doug, appreciate your feedback. Just a nuance to your comment though. It is, of course, the Treasury that determines what debt to issue and not the Fed. You are correct that the average maturity is lengthening but that has little or no effect on how the Fed may conduct monetary policy. The Fed will likely choose to increase short term rates early next year...probably by increasing the amount of interest paid on reserves. This would flatten the yield curve presuming long rates stay relatively stable as you suggest. Nonetheless, increased short rates would take some or all of the juice out of the so-called carry trade (borrowing short and investing long) so firms, like mREIT's, that borrow short and invest long could suffer sooner rather than later as a result. It not just absolute rate movements that might matter, but relative movements along the yield curve as well. I'm not sure how well the average investor really understands this.
    Aug 19 09:29 PM | 3 Likes Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    B3player, love your moniker. I wonder how many people get what a B3 is. I've taken the fake way out...I've had a Nord Electro for years...first the 2 now the 4. Sorry for digressing but love seeing a tone wheeler chatting about investments. You on the Keyboard Corner forum?
    Aug 19 08:19 PM | 1 Like Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    Amen Adam. I am curious, though, what your thought process was when you picked 7% as an implied dividing line between reasonable and unreasonable average yield expectations. I can't say exactly what mine would be, but it would be less than 7%...maybe 4 to 5%.

    I do think that to invest in the things you need to invest in to get to that average yield that you need to be prepared to weather a paper hit to your principal when rates start to rise. In this respect I would be mindful of mREIT's or leveraged CEF's in particular as they may be extremely sensitive to interest rate changes...especially if the rate curve flattens or inverts.

    My opinion is that one should stay with the tried and true...a diversified portfolio of reasonable yielding equities and bonds...and, if there is still a cash flow deficiency, consider selectively mining capital gains to make up the difference. Think flexibly..not dogmatically. I'm not telling anyone how to invest, I'm just expressing my opinion.
    Aug 19 08:06 PM | 5 Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Happy to find some common ground...and sorry for being snarky about the topic in a couple other recent articles but it's something that has been bothering me and I couldn't seem to get any traction in expressing my concern.

    Dave, with you on not buying anything recently. Last thing I bought was AMT about a year far so good on that one (the way I measure things at least) but not feeling a strong conviction on anything else right now. Happy about the KMR/KMI deal as I noted in one of the articles on the topic.

    jstratt...I like ADP too but I actually sold (well donated) it at the end of last year when it crossed 80....thought it was well ahead of itself. Thought MMM was too but finally decided ADP should be the victim. It's treading water so far this year as you know. I've kept it on my "might jump back in" list but I think it's still pricey right now like most everything else.

    That's two of only three or four individual stock transactions I can recall making in 2013....this year, just a bit of neutral rearranging between taxable and tax deferred accounts so far....pondering trimming positions in BXP and AVB.
    Aug 13 02:23 PM | 2 Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Dave, there is little difference between how you and I judge when and what individual stocks to buy. The difference is what you and I consider to be the bottom line. Nonetheless, my concern lies with the dividend growth corollary to the sell low/buy high emotional problem you raise.

    As you acknowledge, it is also hard reach income critical mass with a DG with any strategy it requires long term patience and discipline. But, again as a manifestation of a lack of discipline, I think some dividend investors for a variety of possible reasons, fail to maintain the sound investment standards you personally appear to practice by seeking ever higher yielding investments to get to whatever their critical mass level is.

    Now I understand and agree that the relationship between yield and risk is not linear for every security, but collectively I believe it is. So the question/concern in my mind is: Does dividend growth force one to be disciplined and ignore market fluctuations or is the manifestation of the lack of discipline for some transferred to compromising sound investment practices and buying too many high risk income producing assets? For some I see here on the boards, the answer is unfortunately...yes.

    I'm not sure what the break point is, but, taking it to an extreme, I am guessing that if you, Dave, were short of your critical mass from dividends alone, you would rather stick with your roster of stalwarts and utilize capital gains if need be than invest all you have in BDC's and mREIT's to reach your critical mass.

    I just want anyone who may be thinking about being a dividend focused investor to keep this in mind. Read carefully what some of the better practitioners here say. Stick with sound investment standards first and foremost. If you can't get to your critical mass doing that, think flexibly. Do not lock yourself into the belief that income is better or safer than utilizing capital gains under all circumstances. I do not believe that is not what experienced dividend growth such as yourself, DVK, etc. advocate. I see too many rigid positions about income versus capital gains expressed here by people who are probably rightfully fighting their inner demons to stay disciplined. But taking it to an extreme will, IMO only increase the chance that you will end up where you didn't want to be in the first place.
    Aug 13 12:36 PM | 9 Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Bjorn, that's an interenting approach but I agree with DD that such a mix is way too wild a ride given my situation. Is there any cutting edge research on retirement investment strategies? Michael Kitces has had some interesting suggestions recently...don't know if you have ever run across him. I know a lot of people are forgetting about us Baby Boomers already so if there's nothing specific that's OK.
    Aug 12 08:30 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Bjorn, I am sorry for the unwelcoming tone you had to experience here and worse that the comments became degrading and is shameful. Unfortunately, you unknowingly walked into a hornet's nest that you couldn't possibly have foreseen given that this is your first time commenting on Seeking Alpha.

    As you can see the group that dominates this section, Dividend Growth Investors (a term you may have never even heard before) has little respect for someone who has a doctorate in economics / your case, I see from the prestigious University of Chicago. Investment advisors are held in even lower regard if that is any solace.

    So, the best I can do is welcome you to the wild west world of crowd-sourced investment advice and hope that you will give it a second chance because the ability to have access to someone with your level of knowledge and information could be an invaluable resource to the discussions here. I would also hope that in the future, when someone who doesn't have the benefit of the contentious history of this section makes their first comment, that "the veterans" put the human being in them forward first and keep the knife in their pocket until the person at least gets their feet a little wet.
    Aug 12 06:32 PM | 4 Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Well I guess you are a gambler then RS....and glad to hear that you are!
    Aug 12 04:47 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Thank you for the clarification Robert and sorry if I misinterpreted your approach. To clarify though, would you ever sell a stock simply to realize and utilize a capital gain?
    Aug 12 04:19 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Dave, I agree that many DG stocks do provide great total returns, but that's not the point of this particular sub-thread. The issue here is that the author stated that investing for appreciation is "gambling". In addition, Pen and Robert Schwartz, for example, have stated that appreciation is completely irrelevant to them. Based on past exchanges, I know that you are not averse to incorporating some growth component into you investing strategy even though your primary goal is a creating reliable and growing dividend stream. I think your approach is much safer and sounder than one who completely ignores the benefits of appreciation. Have I characterized your approach correctly?
    Aug 12 04:06 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    You know Bob, I'm OK with that because much more often than not strong dividend growth results mostly from strong earnings and FCF growth (share buybacks too but let's not open that can of worms) which will ultimately lead to appreciation so it's there even if the DGI doesn't want it. I would much rather see DGI's make that choice than to move to ever-increasing current yield options...not that all do but clearly there are a significant number that do.
    Aug 12 12:09 PM | Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    jstratt, I don't think RS is really anti-appreciation as shown by his back-handed acknowledgment here. He though, like other dividend-focused authors, likes to try to falsely paint total return as a pure stock trading strategy as evidenced by his bullet point:

    "I believe that investors who choose a strategy of picking stocks that could increase in value are actually gambling".

    I think such statements at least as absurd as "Dividends Don't Matter" and are made to stir controversy (for hits/audience building, etc.) but, in my view, they undermine his credibility as a contributor. As I've said, I invest in many of the same stocks that DGI's do, I am happy to receive dividends and find them relevant. I also expect appreciation. So if I own a companies like BAX or CMCSA for example, that pay dividends but expecting appreciation as well, does that make me a "gambler"?

    I think showing data analyzing dividend paying versus non-dividend paying companies is at best deceptive. It would be interesting to see if you took a large diversified sample of dividend-paying companies, drew a line at the median yield point and then looked at the total return for those with yields above versus below the median yield point, which group would show the higher total return.

    Here's the point. If I am a relatively conservative investor that needs/desires a higher return on my equity investments, I have two choices. I could buy companies with ever higher yields, or I could buy a lower yielding company with appreciation potential. For example I bought MMM at 69 three year ago. It's now over 140....that's almost a 30% annualized return. Could it fall back some? Sure but, over time, it will appreciate and I embrace that aspect. I am afraid that some DGI's have taken the "fear of appreciation" too far and instead decide to solely move to ever-higher yielding options rather than looking for option that would combine yield and appreciation to provide a stronger and safer overall return. That I think is the real meeting point in the dividend versus growth debate. I don't see dividend and growth as a versus but, instead, as a team.

    I'm not telling anyone how to invest...just expressing my opinion. Need to limit my commenting time so please don't be offended if I don't engage in a further discussion at this time (I'm sure some will be happy).
    Aug 12 11:47 AM | 3 Likes Like |Link to Comment