What If Long-Term Dividend Investors Buy Before A Crash? [View article]
Tim:
Your response was awesome. I want to highlight one part:
"Would you be pissed off owning dividend stocks that turned $10,000 into $350,000 total wealth if you later found out that you could have had $390,000 in total wealth if you owned a plain vanilla S&P 500 Index?"
It's funny you mention "total wealth." Most DGIers that hang around these parts, like me, immediately say, "But what's the income stream?" SPY has a 2% yield, which is $7800. Most if us would be saying, "I can find a group of 20-40 stocks that will yield me 4-5% combined with that lesser money, giving us an income of $14,000-$17,000, and will probably raise on average 7-8%, no matter what the market says it is worth."
To the young guy that generated Tim's response, I am in my mid 30s. If I figured out/understood DGI at your age, I know I could have retired by 45, guaranteed. When I run numbers, it always comes out to 22-24 years for the mega payout to be understood of planting the seeds early on DGI. Keep doing what you are doing.
To I030426 (please get a better name), a great question about holding cash. I think what Tim's point is on the article, if you paid $5/share too much now, will that matter over 30 years? No, because you still got the compounding versus missing the stock at all. That's a tough hurdle mentally to break through and one I still struggle with, along with many investors. You need what you feel is a fair return on your investment, and that is determined by entry point. Chowder would say, "Keep on investing. I don't know if it's too high or too low, but stocks that I bought at their highs still went higher."
There is nothing wrong with scaling. Buy 1/3 of a full position to start if you are not sure. It at least engages you in watching the stock and then finding a better entry point later. And then you at least get paid to wait.
I'll shut up now and keep on reading the comments.
The Business Model Of The Dividend Growth Investor [View article]
Is it earnings that matter, or is it (free) cash flow? Earnings can be manipulated to a certain degree. Cash is cash. Either you have more coming in than out or you don't and if it's the latter, there is only so much room for a dividend, growing dividend or not.
I understand what you are trying to ask, but there are a couple of points that I want to highlight.
"all of your stocks went up and you had a 100% gain in fourteen months."
Not all of them have to go up for this to occur. You could have some massive winners with a couple of losers and this happens.
"Wouldn't you sell part of the holdings you believe might be overvalued ..."
Overvalued to whom? To your analysis? You can use a tool like FASTGraphs (Chuck, you can pay me later:) ) to go by historical trends but Mr. Carnevale had a wonderful article not too long ago showing EMC back in the 90s. It was completely disconnected from the reality of the business but people didn't care - it skyrocketed anyway. Just because something is overvalued doesn't mean it can't become more overvalued. The real question is: How good are you disconnecting the emotional aspect of investing to protect your gains and not watch them disappear?
"look for opportunities to methodically try building your wealth,"
This was the point I really wanted to get to. Remember this is the Dividend and Income section, though Richjoy would prefer it is called the Growth and Income section. Is your PRIMARY goal to grow the pile or RECEIVE SOME INCOME from the pile you originally invested? My personal goal is the latter. If I were to sell anything, it would be done with the first purpose of diversification to protect the income stream. My second goal is to increase the overall income (a higher yielding stock than what I sold) of the portfolio with the next purchase (taking the tax consequences out of the conversation for this point). And my third purpose is to see historically that this new company has grown the dividend faster than inflation, and preferably twice inflation.
I don't know if this was your answer, but this is one person's perspective on how the thought process goes.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
RAS:
I will eventually get through all the comments but before I forget, I am going under the assumption you did this in a tax-deferred account? If you did this in a taxable account, I think the amount of years would be far greater to break-even on the income stream as you would have to "set aside" some cash to pay the tax on the capital gains.
Twenty Dividend Stocks I Recently Purchased For My IRA Rollover [View article]
KMR is the same underlying company as KMP, the MLP part of Kinder Morgan. Yes, KMP pays in distributions via cash, KMR pays distributions via stock. KMI is the general partner of both parts and pays a dividend and continues to get more of the IDR as things move forward.
Though they are all under the same umbrella, one is the parent and one is the child.
During Accumulation Phase, It's OK To Be Concentrated [View article]
Great point. I think people believe I have to have 20,30, 50 positions to start or I just can't do this, so I will wait. It's kind of like the Confucian saying, "A journey of a thousand miles begin with a single step." Start with one or two positions then search a different industry for the third, then something else for the fourth. Eventually you will have the diversity you need.
Self Directed IRAs: Tax Advantaged Investment Income From Novel Investments [View article]
Not only that. Let's say you want a rental property in your IRA. You can only use the money in your IRA and nothing else. You can't mix "personal" money and retirement money. Big no-no. How you would get caught I have no idea, but you can create a big mess if you don't have enough cash cushion.
My Dividend Growth Portfolio: Q1 Update [View article]
Integrator:
I am not looking through your entire blog, but how much is invested? What is your portfolio dividend yield currently? I know I could work backwards and figure it out, but I am just too lazy to try.
Linn Energy - A Stock To Buy With REIT Dividends [View article]
Why would you need to know basis for a Roth? the gov't got their slice when you put it in. You don't need to know what gains or losses came from what you took out of the Roth. The same applies for an IRA or 401K distribution as well. The only difference is that distribution is fully taxed.
A Real Dividend Growth Machine: Q1 2013 Review [View article]
Dang, buyitcheap (comment #2)!!. Now you are into my stream of consciousness. In my state, you don't need a prenup (though it would help). What I would do is this if one is getting married:
If you are getting married on April 10th, you have all the statement and account values as of April 9th. You have concrete documentation of what you brought to the marriage and keep is as a separate account. You intermingle funds, you are screwed In a community property state like mine, the EARNINGS or future value of the account is split 50:50 (theory, reality may be different) because you were together. Using #s:
You go in with $50,000. 5 years later, you get divorced and the account is $100,000. She gets 50% of the earnings (or $25K). You get 75K.
Please note: I am not a lawyer. I am just going through the fun as we speak and wish I never knew this. But the reason I was originally writing was DGM's comment:
"...in my Roth IRA will not be taxed. I showed in a previous article that taxes have a negative effect on long-term compounding of dividend income, so it is helpful to reduce the impact of taxes whenever possible."
Those that are deferring taxes must look at the purchasing power. You will nearly ALWAYS be better going Roth first before anything else. In fact, here is a link to a free book to explain it better than I can. Enjoy. http://bit.ly/XlU17Q
Dividend Growth Investing And The Reluctant Spouse [View article]
NIschill:
Thank you for your comment. As I said in my first comment, I wasn't trying to hijack the thread, but when someone goes from not caring to caring a lot, you unfortunately have to put up your guard, whether you are the man or the woman. Like you, I have not hidden anything from my wife or my lawyer and you can't do anything that is outside of paying the bills when a divorce is filed. I can't buy or sell one share of stock right now even if I wanted to, But she will want more than 50%, way more, in a state that is community property. Even at under age 40, she will be better off than probably 90% of all households in this country, and better than 98% of those in our age group.
I am happy to see you have your financial house in order even if your spouse does not. Since the filing, my wife has been a bigger financial doofus (along with some other family decisions) than I even realized. You think the fight will be bad over splitting assets, wait till she hears I want 50% time with my two kids.
DD
P.S. I have my article 95% penned, I am waiting for things to be finalized to put numbers to it without any consequence. Stay tuned.
Dividend Growth Investing And The Reluctant Spouse [View article]
Bob:
I commend the article, but the article is skewed to age and the longevity of your marriage. My wife was in the same boat. And then in November, she says she wants to know the finances. So I gather everything together, sum everything up in 3 pages in terms of accounts, brokerage, life insurance, who to contact, how to dispose of assets, etc. Two months later, she files for divorce. More than just a coincidence.
I don't want my comment to become a pity party. I will write an article when the divorce is final in terms of costs of divorce, split of assets, and my guess of how long this will delay my retirement, not ours (who cares about hers anymore?) I just spoke to one of my patients who just said, "Divorce for women is their new mid-life crisis." OK, so my comment is not the most upbeat, but it is a word of caution for the younger guys who peruse these articles to see if your spouse has never been interested and all of a sudden is, be wary.
What If Long-Term Dividend Investors Buy Before A Crash? [View article]
Your response was awesome. I want to highlight one part:
"Would you be pissed off owning dividend stocks that turned $10,000 into $350,000 total wealth if you later found out that you could have had $390,000 in total wealth if you owned a plain vanilla S&P 500 Index?"
It's funny you mention "total wealth." Most DGIers that hang around these parts, like me, immediately say, "But what's the income stream?" SPY has a 2% yield, which is $7800. Most if us would be saying, "I can find a group of 20-40 stocks that will yield me 4-5% combined with that lesser money, giving us an income of $14,000-$17,000, and will probably raise on average 7-8%, no matter what the market says it is worth."
To the young guy that generated Tim's response, I am in my mid 30s. If I figured out/understood DGI at your age, I know I could have retired by 45, guaranteed. When I run numbers, it always comes out to 22-24 years for the mega payout to be understood of planting the seeds early on DGI. Keep doing what you are doing.
To I030426 (please get a better name), a great question about holding cash. I think what Tim's point is on the article, if you paid $5/share too much now, will that matter over 30 years? No, because you still got the compounding versus missing the stock at all. That's a tough hurdle mentally to break through and one I still struggle with, along with many investors. You need what you feel is a fair return on your investment, and that is determined by entry point. Chowder would say, "Keep on investing. I don't know if it's too high or too low, but stocks that I bought at their highs still went higher."
There is nothing wrong with scaling. Buy 1/3 of a full position to start if you are not sure. It at least engages you in watching the stock and then finding a better entry point later. And then you at least get paid to wait.
I'll shut up now and keep on reading the comments.
DD
The Business Model Of The Dividend Growth Investor [View article]
DD
Please Do Not Invest Like This [View article]
I understand what you are trying to ask, but there are a couple of points that I want to highlight.
"all of your stocks went up and you had a 100% gain in fourteen months."
Not all of them have to go up for this to occur. You could have some massive winners with a couple of losers and this happens.
"Wouldn't you sell part of the holdings you believe might be overvalued ..."
Overvalued to whom? To your analysis? You can use a tool like FASTGraphs (Chuck, you can pay me later:) ) to go by historical trends but Mr. Carnevale had a wonderful article not too long ago showing EMC back in the 90s. It was completely disconnected from the reality of the business but people didn't care - it skyrocketed anyway. Just because something is overvalued doesn't mean it can't become more overvalued. The real question is: How good are you disconnecting the emotional aspect of investing to protect your gains and not watch them disappear?
"look for opportunities to methodically try building your wealth,"
This was the point I really wanted to get to. Remember this is the Dividend and Income section, though Richjoy would prefer it is called the Growth and Income section. Is your PRIMARY goal to grow the pile or RECEIVE SOME INCOME from the pile you originally invested? My personal goal is the latter. If I were to sell anything, it would be done with the first purpose of diversification to protect the income stream. My second goal is to increase the overall income (a higher yielding stock than what I sold) of the portfolio with the next purchase (taking the tax consequences out of the conversation for this point). And my third purpose is to see historically that this new company has grown the dividend faster than inflation, and preferably twice inflation.
I don't know if this was your answer, but this is one person's perspective on how the thought process goes.
DD
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
I will eventually get through all the comments but before I forget, I am going under the assumption you did this in a tax-deferred account? If you did this in a taxable account, I think the amount of years would be far greater to break-even on the income stream as you would have to "set aside" some cash to pay the tax on the capital gains.
Excellent analysis on some crucial points.
DD
Twenty Dividend Stocks I Recently Purchased For My IRA Rollover [View article]
Though they are all under the same umbrella, one is the parent and one is the child.
Not All Dividend Increases Are The Same: 2 Dividend Trends That Can Make A Difference [View article]
2 stocks just raised their dividend $.10 per share for the year.
Stock A's dividend went from $.20/yr to $.30/yr (a 50% increase)
Stock B just went from $1 to $1.10/yr (only a 10% increase)
As someone else mentioned, it says nothing about yield, nothing about total dividends paid, just one facet of a complex issue.
During Accumulation Phase, It's OK To Be Concentrated [View article]
DD
Self Directed IRAs: Tax Advantaged Investment Income From Novel Investments [View article]
DD
My Dividend Growth Portfolio: Q1 Update [View article]
I am not looking through your entire blog, but how much is invested? What is your portfolio dividend yield currently? I know I could work backwards and figure it out, but I am just too lazy to try.
DD
Linn Energy - A Stock To Buy With REIT Dividends [View article]
DD
A Real Dividend Growth Machine: Q1 2013 Review [View article]
If you are getting married on April 10th, you have all the statement and account values as of April 9th. You have concrete documentation of what you brought to the marriage and keep is as a separate account. You intermingle funds, you are screwed In a community property state like mine, the EARNINGS or future value of the account is split 50:50 (theory, reality may be different) because you were together. Using #s:
You go in with $50,000. 5 years later, you get divorced and the account is $100,000. She gets 50% of the earnings (or $25K). You get 75K.
Please note: I am not a lawyer. I am just going through the fun as we speak and wish I never knew this. But the reason I was originally writing was DGM's comment:
"...in my Roth IRA will not be taxed. I showed in a previous article that taxes have a negative effect on long-term compounding of dividend income, so it is helpful to reduce the impact of taxes whenever possible."
Those that are deferring taxes must look at the purchasing power. You will nearly ALWAYS be better going Roth first before anything else. In fact, here is a link to a free book to explain it better than I can. Enjoy. http://bit.ly/XlU17Q
DD
Dividend Growth Investing And The Reluctant Spouse [View article]
Thank you for your comment. As I said in my first comment, I wasn't trying to hijack the thread, but when someone goes from not caring to caring a lot, you unfortunately have to put up your guard, whether you are the man or the woman. Like you, I have not hidden anything from my wife or my lawyer and you can't do anything that is outside of paying the bills when a divorce is filed. I can't buy or sell one share of stock right now even if I wanted to, But she will want more than 50%, way more, in a state that is community property. Even at under age 40, she will be better off than probably 90% of all households in this country, and better than 98% of those in our age group.
I am happy to see you have your financial house in order even if your spouse does not. Since the filing, my wife has been a bigger financial doofus (along with some other family decisions) than I even realized. You think the fight will be bad over splitting assets, wait till she hears I want 50% time with my two kids.
DD
P.S. I have my article 95% penned, I am waiting for things to be finalized to put numbers to it without any consequence. Stay tuned.
Dividend Growth Investing And The Reluctant Spouse [View article]
I commend the article, but the article is skewed to age and the longevity of your marriage. My wife was in the same boat. And then in November, she says she wants to know the finances. So I gather everything together, sum everything up in 3 pages in terms of accounts, brokerage, life insurance, who to contact, how to dispose of assets, etc. Two months later, she files for divorce. More than just a coincidence.
I don't want my comment to become a pity party. I will write an article when the divorce is final in terms of costs of divorce, split of assets, and my guess of how long this will delay my retirement, not ours (who cares about hers anymore?) I just spoke to one of my patients who just said, "Divorce for women is their new mid-life crisis." OK, so my comment is not the most upbeat, but it is a word of caution for the younger guys who peruse these articles to see if your spouse has never been interested and all of a sudden is, be wary.
DD
Making The Case For Which BHP Billiton To Own [View article]
Charlie Munger Built His Fortune By Seeking Income First, Capital Gains Later [View article]
DD