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  • Why Diageo Belongs In The Long-Term Investor's Portfolio [View article]
    MSW,
    I agree with your analysis. One note for dividend growth investors, DEO pays dividends semi-annually and has one smaller payment and one larger payment. Do not double its most recent higher payment as an annual yield as the Seeking Alpha Portfolio does mistakenly giving a 3.5% yield. The annualized yield is close to 3% as stated in this article. Also, DEO is a British company and tends to decrease its dividend in bad years (2009 -13% and 2010 -4%). Its 13 year dividend growth rate is 7%. I believe DEO is a good investment with a 3% yield and a 7% growth rate like suggested in this article. DEO just doesn't fit the dividend growth investor rules well with varying dividends, so don't sell on a dividend cut and take a longer term view.

    Long DEO!
    Sep 23, 2014. 06:11 PM | 3 Likes Like |Link to Comment
  • Can A Successful Dividend Portfolio Be Assembled In 2014? - Part 3 [View article]
    AP,

    What I mean is that the portfolio that I came up with from this exercise would be t, so, pm, mo, vz, cop, cvx, clx, mcd, lmt, gis, tgt with double weighted T, SO, PM, MO, VZ, COP to get to the "required" 4% yield from the stock list. That would put 22% of the portfolio in Telecom, 22% in cigarettes and 0% in healthcare. I'm not saying that an allocation must equal the S&P 500 but I would not want to invest in a portfolio with 22% in cigarettes. My portfolio has both MO and PM, but together they total 2.6% of my portfolio. I also have T and VZ in my portfolio with a total weight of 2.6%. I am concerned about suggesting to readers that the 12 stock portfolio that I came up with from this exercise with 22% each in cigarettes and Telcom is diversified. I would not be comfortable with that portfolio.

    What I am suggesting is to build a diversified portfolio and look at the valuation in total. My portfolio with 50 stocks has a maximum allocation of 2.6% to any stock. It has a 3.2% yield and a weighted average 9% dividend growth rate over the past 3 years. That totals a Chowder Rule of 12.2 and therefore passes the test used to select stocks in this exercise as a complete portfolio. Yes some positions are "overvalued" and some are "undervalued", but on average the portfolio is fairly valued and is better diversified. A well diversified portfolio is always going to have some positions that are overvalued and some that are undervalued.

    Each person can define "diversified" in their own way. Many would say that my portfolio is not diversified because it is not invested in the academic definition of diversified. I would suggest investors define diversification in their terms and invest in that diversified basket and not be overly concerned at buying every position at a value price because a diversified portfolio always has overvalued and undervalued positions.
    Sep 19, 2014. 02:39 PM | 5 Likes Like |Link to Comment
  • Can A Successful Dividend Portfolio Be Assembled In 2014? - Part 3 [View article]
    Bob, you put together a nice list of stocks to consider for those with diversified portfolios. About 75% of them are in my portfolio. But this list only represents 30% of my portfolio. I'm just concerned that trying to build a portfolio from this list may steer new investors wrong due to a lack of diversification.
    Sep 18, 2014. 04:47 PM | Likes Like |Link to Comment
  • Can A Successful Dividend Portfolio Be Assembled In 2014? - Part 3 [View article]
    Bob,

    I can't pick 24 of these 31. I own 15 in yield order: t, so, pm, mo, vz, cop, cvx, clx, mcd, lmt, gis, tgt, oxy, bax, xom and would buy any of those today.

    If I had to get the 4% yield from my list, I'd buy the highest yielding 12 and double weight the highest yielding 6 to get to the required 4%. That probably would not be a well diversified portfolio, but you are tying my hands by limiting me to this list of stocks and requiring a 4% average yield.

    What I am doing is buying the fifty stocks listed in my profile and double weighting many of the highest yielding ones to obtain my target yield. My portfolio yields 3.2% and is projected to grow earnings/dividends at 8% annually. Therefore, I expect my portfolio to provide an 11% total return over a full market cycle by adding the 3.2% current yield and 8% growth.

    With fifty positions and double weighting many of the highest yielding positions, my portfolio is fairly well diversified. Here is a list of my 50 positions. AFL BAX BP CAG CL CLX CMI COP CSX CVX DEO DUK EMR GE GIS HON IBM ITW JNJ K KMB KO KRFT LMT MCD MMM MO NSC OXY PEP PFE PG PM RDS.B RTN SJM SO SYY T TE TGT UL UNP UTX VOO VZ WAG WMT XOM. I'd wouldn't hesitate to buy my portfolio tomorrow if I were starting from scratch and moving my lifetime savings into it from a 401(k).

    I believe you are focusing too much on valuation and yield over diversification. I would look at the portfolio as a whole and not fixate too much on the individual prices.

    I hope this is helpful.
    Sep 18, 2014. 03:55 PM | 7 Likes Like |Link to Comment
  • Swimming With Sharks: A Portfolio Strategy For The Individual Investor [View article]
    P. Frank,

    Thanks for a good read and sharing what you've learned from trading the markets. I love articles where others share what works and doesn't work from their experience. Although you are more of a growth investor and I am more of an income investor, there is much we can learn from each other.

    I'm glad you pointed out that the growth area of the market is the most shark infected. I was just waiting to put that in my comment until I read it in your article. I fully agree that TIME is the advantage that individual investors have over the pros. I love finding a stock that has temporary issues which allows me to buy and accumulate before the pros jump on its momentum when the issues subside. For example, JNJ and WAG in the past couple of years. Going forward, I'm buying TGT, MCD, GE and BP using the same logic. I've got the time to hold these stinkers with their high yields until times get better and the pros begin accumulating.

    Thanks again for a good read and good luck swimming among the sharks!
    Sep 6, 2014. 08:11 AM | 3 Likes Like |Link to Comment
  • Can You Live Off Of Dividend Growth Income In Retirement? [View article]
    Doug, Excellent article and examples. I too expect my income to grow faster than my expenses throughout my retirement just like your 100% dividend growth model. My DGI portfolio, listed in my SA Profile, has a 2.93% current yield and has provided a 9.8% dividend growth rate over the past three and five year time frames. My portfolio is a mix of high-yield-low-growth and lower-yield-higher-growth stocks that "on average" provide a high-yield high-growth portfolio. Thanks for this demonstration that shows what I meant in my last comment where I stated "my income model shows a greater need for income early in retirement with excess income later in retirement, therefore, taking SSI early makes sense".
    Aug 27, 2014. 09:16 PM | 6 Likes Like |Link to Comment
  • Why I Will Start Social Security At Age 62 [View article]
    RAS, Thank you for facilitating this early retirement discussion. A while back, I attempted to develop a long-term income plan for me and my wife. Thankfully, we worked hard, saved harder, and invested with a plan to retire in our 50's. I am now retired and my wife will soon follow.

    From my conservative calculations, our real "after-inflation" income will keep rising each year in retirement. My current plan is to begin SSI payments at 62 to supplement our income between 62 and 65. My income model shows a greater need for income early in retirement with excess income later in retirement, therefore, taking SSI early makes sense. But with less conservative assumptions, my rising investment income could eliminate the need to take early SSI payments. I'm glad to hear other early retirees reporting that their incomes keep rising in retirement and that they have delayed taking their SSI payments.

    Thanks again for a great article facilitating a wealth of information in the comments.
    Aug 26, 2014. 05:01 PM | 2 Likes Like |Link to Comment
  • Dividends Matter If They Matter To You [View article]
    Pen, as a former insider at two dividend aristocrats, I can assure you there is intense pressure to keep increasing the dividend. As the lead financial analyst at one company, I was responsible for developing the company's 10 year financial plan. My first input into the plan was the dividend and dividend increase. Not once did I run a scenario without the increasing dividend, and I ran thousands of scenarios over the years at the request of CEO and CFO.
    Aug 15, 2014. 09:29 AM | 6 Likes Like |Link to Comment
  • Dividends Matter If They Matter To You [View article]
    Thanks DVK for a great article and using one of my comments in the conclusion. I am honored that you felt my comment was worth repeating.

    In this article, you state "Some dividend investors see income optimization as their only goal. Others see it as a goal that stands ahead of total return, but they also follow total return. Still others use dividend investing techniques to achieve "growth and income." I agree that we each invest differently.

    I am more of a trader than most DGIs. My goal is to increase my net dividend income on each trade I make. I like to buy a DG stock when its yield is above its 5 year average. But unlike most traders, I stay 100% invested at all times. Therefore, I cannot make a trade unless there is a both a buying and selling opportunity. Sometimes the buying opportunity initiates the trade when I see something I want to own and then I look over my portfolio to see if there is something relatively less attractive to sell. If the buying opportunity is not better than my weakest holding, I do nothing. Sometimes the selling opportunity initiates the trade when a position has run up so much that the yield is no longer attractive. In the selling opportunity, I usually sell and put the proceeds into one or more of my existing positions. My focus is on the income, not the capital gain, but this process has resulted in an above S&P 500 total return over the past three years.

    Sometimes I get flamed by DGIs because I trade too much. Sometimes I get flamed by non-DGIs because my focus is on my income and not total return. I enjoy the activity of my technique but could stop trading at any point and become a buy-and-hold investor that lives off the portfolio's income.

    We are all different and we each have our own techniques. I'd like to hear more constructive comments from SA members about how they invest rather than trying to others in one box and attacking that box. I learn more when we share our successes than when we attack others that don't invest just like us.
    Aug 15, 2014. 08:19 AM | 5 Likes Like |Link to Comment
  • Dividends In Investing: How To Sleep Well At Night [View article]
    Cross, Thank you for sharing some of your portfolio and strategies. I understand how hard it is to share your portfolio if you are using options.

    I too trade more frequently than the average DGI. I like to trade the same 50 or so DGI stocks. I buy them when their yields are attractive to their 5 year historic dividend yield and sell them when their yields are low compared to their history. I overweight high beta after market pullbacks. But my focus is on the income and not the total return. I increase my income with every trade. But this does not mean that I do not have a high total return. My three year CAGR is 21.22% with a 10.7 standard deviation. Therefore, our total returns are similar even though our methods are completely different. I will admit that the bull market probably has a lot to do with this. Maybe I'm a hybrid DGI investor. I'll just keep doing what works for me and sharing it with anyone who wants to listen. My portfolio is always 100% invested and is listed in my profile. I usually post a comment with each trade I make. There are many ways to be successful in the market. I don't think anyone trades exactly like me. The closest would probably be David Crosetti. Right Dave?
    Aug 14, 2014. 04:27 PM | Likes Like |Link to Comment
  • Dividends In Investing: How To Sleep Well At Night [View article]
    Eric, a rising dividend income is the most important measure for me too. Sorry I let Cross knock me out of my Single Best Investment zone. I think I'll have to go re-read the book for the 100th time to get my head back on straight. I actually do re-read that book at least once per month!

    Now, back to Warrior mode!
    Aug 13, 2014. 04:47 PM | 3 Likes Like |Link to Comment
  • Dividends In Investing: How To Sleep Well At Night [View article]
    So here's the risk adjusted return information for the S&P 500 . I'll use the Sharpe Ratio to determine risk adjusted performance. The Sharpe Ratio formula is ((portfolio return - risk free rate of return) / standard deviation). Let's use the 10-year treasury as the risk free return at 2.5%.

    For the S&P 500, the 36 month return as of 7/31/2014 was 19.52%, its standard deviation was 12.2%. Here is where I got these numbers: http://bit.ly/1vJ9rGz . So the S&P 500's Sharpe Ratio is (19.52 - 2.5) / 12.2 which totals 1.40.

    For SDY (The S&P Aristocrat High-yield Index) the the 36 month return as of 7/31/2014 was 16.6%, its standard deviation was 10.45%. Here is where I got these numbers: http://bit.ly/1vJ9rGz .
    So the SDY's Sharpe Ratio is (16.6 - 2.5) / 10.45 which totals 1.35.

    Therefore, the S&P 500's 19.5% return only slightly outperformed the SDY's 16.6% return on a risk adjusted basis.

    Now you can calculate your portfolio's Sharpe Ratio and compare your risk adjusted performance to the market. Since the Sharpe Ratio tells you the amount of return per unit of risk, the higher the number the better. My dividend growth portfolio's 36 month Sharpe Ratio was 1.75 which is above the S&P 500's 1.40 and therefore is outperforming on a risk adjusted basis.

    Sorry to get so technical to prove a point.
    Aug 13, 2014. 04:26 PM | 3 Likes Like |Link to Comment
  • Dividends In Investing: How To Sleep Well At Night [View article]
    Cross,

    Whoppie, you beat the S&P 500 index year-to-date. But return needs to be risk adjusted. Did you take more risk than your benchmark? Are you invested in small cap stocks or foreign stocks? Share your portfolio with us and we'll tell you if you are really outperforming. Dividend stocks have lower volatility than the market so if Eric under-performed the market on a year-to-date basis, he may actually be outperforming on a risk-adjusted basis. I'm sure you know all of this, right? So then why are you grilling Eric? Come on, share your portfolio like dividend investors do and we'll get this comment section really smoking. Are you up to the challenge?
    Aug 13, 2014. 02:01 PM | 6 Likes Like |Link to Comment
  • Dividends In Investing: How To Sleep Well At Night [View article]
    Great article Eric! I too suggest the book "The Single Best Investment" by Lowell Miller to everyone who will listen. I've given free copies to many friends that have asked for my investment assistance. When I ask, "did you read the book yet", I keep getting the same answer. "Haven't had time yet." Like RNSmith said, when the student is ready, the teacher will appear.

    Lowell Miller's book changed my life by changing my focus from bouncing stock prices and principle values to the steady increase in my dividend income. Your article is a good primer for the book and the SA authors you name are also my favorites. Investors who are confused by all the banter on SA about whether dividends matter or not need to read this book and decide if dividend growth investing is right for them. I have found peace and confidence in the chaotic market by using the principles taught in this book and it appears that you have too.

    Keep up the Warrior's attitude!
    Aug 13, 2014. 07:55 AM | 8 Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    @ Pen

    I'm not endorsing XIV. I was just pointing out that the 23% annualized return that Varan wants to sign up for may be available based on Prof. Bjorn's comments. But with the high return comes frequent 35% draw downs. I wouldn't touch this, but it sounds perfect for Varan.
    Aug 13, 2014. 06:27 AM | 2 Likes Like |Link to Comment
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