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  • Different Ways To Think About Dividend Re-Investment, Part 1 [View article]

    Important topic. I echo Rose's comment above - IMO it's not as important HOW you reinvest as long as you do. The acceleration impact on compounding is simply amazing, in any phase.

    During accumulation, my company 401(k) was set up for automatic reinvestment into my designated mix of stock and bond funds. The combination of twice monthly automatic contributions, and auto pilot reinvestment through all market conditions including 2000 and 2008, grew the balance exponentially in just 20 years. With very little effort on my part (except for occasional rebalancing). I couldn't invest in individual stocks and had no time to be an SDI. Plus the ready info, online tools and low trading fees weren't really available.

    Anyway, that all changed by the time I was laid off. Rolled everything into a self directed IRA and retired, but haven't contributed any new monies in 4 years. And yet using DGI I've not only been able to draw out substantial cash as dividends, but found there's enough left over to still have the (happy) problem of what to do about reinvestment.

    Having an established portfolio, I "dip" vs DRIP, i.e., add on every significant market pullback to whichever underweight position is presenting the best value at the time. I want to own more of all the great companies making up our DG portfolio. So whenever there's excess cash (at least quarterly, and sometimes monthly), I find no problem deploying it!

    Despite being in the distribution phase, I'm a young retiree, so our DG portfolio must deliver growing income for the next several decades at least. Im counting on that double compounding impact of dividend growth and regular (selective) reinvestment of excess dividends to get me to the finish line.

    Oct 10, 2015. 10:55 AM | 2 Likes Like |Link to Comment
  • My K.I.S.S. Dividend Portfolio: 3rd Quarter 2015 Update [View article]

    Thanks! I figured I'd just recover the foreign taxes when I file my 2015 return, but better not to have them withheld in the first place.

    Oct 8, 2015. 07:46 PM | 2 Likes Like |Link to Comment
  • My K.I.S.S. Dividend Portfolio: 3rd Quarter 2015 Update [View article]
    I own MDT in both an IRA and a brokerage account.

    There's been no withholding of foreign taxes in the IRA, but there's been a 20% withholding in the taxable brokerage account this year.

    Long MDT

    Oct 8, 2015. 02:50 PM | 2 Likes Like |Link to Comment
  • After 8 Years, It Was Time To Say Goodbye To McDonald's [View article]

    Thanks for this article.

    MCD is, to me, similar to GE (which I also own): I stubbornly hold on for potential that never quite seems realized. But, since I own them primarily for the income, I'm not expecting much near-term growth. As long as they keep paying dividends, I'm fine with modest increases if it keeps payout ratios from getting astronomical.

    I haven't exited either MCD or GE completely but I did reduce my positions by about one-third. But they pay me decently, so I'm willing to give them more time to work through their transitions and prove their worth.

    Trends like health food, fast casual, and food trucks are certainly a factor for MCD domestically. You mention Russia and Asia. That's important as MCD earns two-thirds of its revenues overseas. But even with the international challenges and currency headwinds, there does seem to be runway left for MCD to grow overseas. Which is why I'm keeping my (2/3) hand in play.

    Oct 8, 2015. 02:38 PM | 1 Like Like |Link to Comment
  • Quirky Or Sensible? Weighting A Dividend Growth Portfolio By Quality And Income [View article]
    Paul Wagner,

    << The 'equal weighting" issue aside, if you are willing to put 5% of your portfolio value at risk in one stock, why wouldn't you be willing to have each of your stocks represent about 5% of your portfolio.>>

    Simple answer: Because even excellent companies don't always have the established track record I'm looking for to protect my income stream. They need to "earn" the right to be at the maximum. That takes time.

    Most of my holdings are less than 5%. Some are legacy, some are younger CCC's, some are ones I've stopped adding to because of valuations, some have made acquisitions or splits or changes in dividend growth that put them "on watch," etc.

    To your point, though: I have been concentrating our overly diversified portfolio the past 18 months to focus more on "best ideas." At its max, the portfolio had 74 positions. It's currently 58 (including a few small spin off positions).

    My goal is around 50 and I am comfortable with that. As Chowder has said, if you own just the top 2 or 3 in each sector, you'll get to a sizeable number of holdings fairly quickly. Most are so establishished, and so widely covered, they don't require a lot of monitoring.

    I don't ever see myself with just 20-25 holdings. But glad that works for you.

    Oct 8, 2015. 12:10 PM | Likes Like |Link to Comment
  • Retirement Strategy: The Simplicity Of A More Secure Retirement Portfolio For Regular Folks [View article]

    << We own a bunch of "your" stocks, plus PEP, WMT, VZ, INTC -- similar types of companies. Was stunned the other day to find that Fidelity rated our asset allocation "most aggressive." HUH?? >>

    Ditto. LOL. I actually called my Fidelity account manager about that, more out of amusement than anything else.

    Their automated software calculates a 95% allocation to domestic stock on my IRA, which defaults to "Most Aggressive." When in reality, like you, it's mostly boring blue chips or quality CCC contenders and challengers spinning off tons of dividends each month with relatively low volatility.

    Adviser is completely mystified by my DG strategy and doesn't understand why (as a retiree) I don't have an annuity, index equity funds, and at least 40% bonds. But then he sheepishly admits "you seem to know what you're doing" and "it seems to be working for you," and leaves it at that.

    He gets the AUM but no extra fees from me, no siree. :)

    Oct 6, 2015. 06:11 PM | 3 Likes Like |Link to Comment
  • Top 10 Healthcare Stocks For Dividend Growth And Income [View article]

    Excellent work here, thanks for your diligence on this important sector. I concur with your view, and that of many commenters, that healthcare continues to offer both growth and income growth (despite the generally low yields typical of R&D oriented industries), making it a good diversifier for most portfolios.

    I've gone the "mini-ETF" route with health care too, though not entirely by design. Some holdings, like BDX, simply got away from me in price before I could build a full position. Others, like BAX and MDT, executed spin offs (BXLT) or acquisitions (Covidian) and conversions that substantially changed the nature of their businesses or tax structures, and hence their roles - and risk profiles - in our portfolio. Some, like NVS, are legacy holdings from my pre-DGI days. I used to own PFE and ABT/ABBV but foolishly sold all three, the latter shortly after they split (and before I had an investing plan).

    There is so much rapid change and volatility in this sector, especially the pure biotech plays, that valuation remains a huge challenge. That's what's kept me out of GILD, AMGN, CELG and the like so far. I dislike excessive volatility and uncertainty, and only good old wide-moat champion JNJ seems in any way predictable. Which may explain why JNJ is my largest health care position. Ha!

    Health care REITs are another way to play in this space and I own three from the CCC: HCN, HCP and OHI. VTR is on my watch list. In addition to MOB's, SNF's and hospitals, some host biotech start-ups in life sciences facilities. So REITs are an indirect way to get further exposure to the explosive growth in health care, while capitalizing on higher yields.

    Nice work, again, Eric. Keep 'em coming!

    Oct 6, 2015. 12:34 AM | 1 Like Like |Link to Comment
  • Quirky Or Sensible? Weighting A Dividend Growth Portfolio By Quality And Income [View article]

    Yup. Exactly.

    No way I'm going to hold a LMT, MSFT, BCE or EPD in the same amounts as a PG, KO, T or JNJ. Different industries/geographies mean different business cycles, different pressures, and and different risks. And yet they are all worthy companies that work just fine together in my overall portfolio. Some for yield, some for dividend growth, some defensive, some cyclical, etc.

    Oct 5, 2015. 11:39 PM | 1 Like Like |Link to Comment
  • Quirky Or Sensible? Weighting A Dividend Growth Portfolio By Quality And Income [View article]

    << If that stock isn't good enough to equal weight, then you shouldn't be buying it.>>

    Really? So you would hold a BBB- rated, 13 year DG, quality health care REIT like OHI (with its high interest rate sensitivity and non-qualified dividends), in the exact same proportion as an AAA rated, 53 year DG, health care dividend superstar like JNJ? Interesting.

    Mike can answer for himself, of course, but I don't see him saying that his Role Players won't do a better job in the future of producing income. Just that they don't yet exhibit all the credentials (yield, DG track record, rating, etc.) that give him high confidence in that outcome.


    PS Long MSFT, COST and many of the Role Players here as well as many of the DGI superstars.
    Oct 5, 2015. 07:23 PM | 7 Likes Like |Link to Comment
  • Starbucks: My Mind Says Sell But My Heart Says Hold [View article]

    << Sometimes I worry about this sort of scenario due to the high premium SBUX shares demand and wonder if I should take these funds and put them towards a more undervalued company with much higher yield (effectively giving myself a HUGE dividend increase in the process). >>

    Can't speak for you or anyone else, but I can say for me: when I've done this in the past, I've almost always regretted it (MMM comes to mind). It's very difficult to be correct on both the sell and the buy decision.

    So my approach has been this: if a stock like SBUX that I plan to hold a very long time seems overvalued but still fits my portfolio, I don't trim. I don't sell. I simply stop adding to it. I'd rather trim or sell a laggard than a successful company like SBUX that's doing exactly what I purchased it for - to grow income and dividends.

    Oct 5, 2015. 07:03 PM | 3 Likes Like |Link to Comment
  • Dividends & Income Digest: 'Keep Calm, Don't Panic' - George Schneider On Taking Control Of Your Investment Mindset With Dividends, Not Emotions... And Other Thoughts [View article]
    Robyn - nice interview, well constructed questions.

    George - nothing like "been there, done that" (e.g., 1974, 1987, 2000, 2008) to inform one's investing approach and risk tolerance, is there? :)

    I like the rationale behind your DG strategy, and follow a similar approach myself. However, like a few other commenters, I find your FTG portfolio to be too yield focused, too risky and too concentrated - for either young or older investors.

    Capital preservation is important to many retirees, even those focused primarily on (growing) dividend income. And for younger investors, or young retirees, some growth and/or dividend growth is certainly warranted. Not sure I see enough protection against either of these risks in FTG.

    I prefer a more diversified range of dividend payers and dividend growers, spanning all (not just these) sectors, and only (as Bob Wells notes) investment grade. Preferably VL 1 or 2 for financial safety and BBB+ or higher, as a "moat" around potential credit downgrades.

    My balanced DG portfolio yields less than FTG, and has lagged the S&P in total return. But it still pays more than twice the income of S&P, multiples of the dividend growth, and will most likely prove its mettle when interest rates rise and/or the eventual downturn hits.

    Bottom line - I love the philosophy and wisdom you share here, but most of your FTG holdings are not for me.

    It's a big tent though, plenty of room for different investing approaches. I respect your ideas and applaud you on your successes to date.

    Oct 5, 2015. 06:53 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: The Simplicity Of A More Secure Retirement Portfolio For Regular Folks [View article]

    Simplicity - check. Secure income - check. Could not agree more with your advice here! I own about 70% of the stocks on your list, plus many other 40+ year DG leading companies like ADP, CL, KMB, PEP and BDX.

    One of my learnings post-retirement is that even without a regular paycheck and regular 401(k) contributions, I need to keep the compounding machine going. DG stocks provide some of that fuel via dividend growth. But, like you, I also reinvest excess dividends above and beyond what we need to live on.

    I've recently adjusted my retirement budget to include an "investment contribution" line item (something never suggested by any adviser I've ever consulted). Of course, that contribution is nowhere near the amount contributed during my working years. But even modest reinvestment is already yielding an acceleration impact on our retirement portfolio, in just a few short years.

    Thanks, RS. It's always a pleasure to read your articles.

    Oct 5, 2015. 06:11 PM | 8 Likes Like |Link to Comment
  • Quirky Or Sensible? Weighting A Dividend Growth Portfolio By Quality And Income [View article]

    << ... a fairly simple way to put more faith in my best ideas while being open-minded about other possibilities....By the middle of 2014, I starting weighting my portfolio by "quality tiers," and I also was beginning to base the size of each position not on dollars invested but on expected annual income.>>

    Coincidentally, I came to the same conclusion at about the same time, and now follow a very similar strategy. One difference is that I set a maximum of 5% of portfolio value for any one position in addition to the income tiers - basically just a comfort threshold around how much capital I'm willing to put at risk.

    I also set "soft" guidelines on sector % (ranging from 5-20%), another risk mitigation move that keeps some stability to the portfolio. That turned out to be a good thing with the recent energy downturn, for example, as only 20% of holdings (and so far, knock on wood, virtually none of the income) were impacted.

    My 24 core stocks (equivalent of your DGI superstars) account for 57% of the income vs. a goal of 60%+. Almost there! And much overlap with your list.

    My 27 satellite stocks (like your Role Players) account for 32% of the income vs. a goal of 35%. Like you, I occasionally promote or demote between Core and Satellite if a company has proven - or dis-proven - its original thesis. Again, quite a bit of overlap with your list, although I consider leading pairs like T/VZ and KO/PEP all to be core.

    My 7 "extras" (I like your term better than speculative, because none of my additional stocks are really speculative) account for 7% of the income. The final 3% of income comes from bond funds.

    Great info here. Definitely a "journey" and not a destination. Fascinating to see the evolution around, and diversity of, DGI approaches over time. Thanks for sharing your latest!

    Oct 5, 2015. 05:46 PM | 3 Likes Like |Link to Comment
  • Designing A Dividend Growth Portfolio For A Specific Retirement Yield Objective: Part 1 [View article]

    Excellent article. Love the principles.

    There does seem to be a "sweet spot" of 3%-5% yield where the DGI risk/return trade-off seems worth it (esp. vs T bills). The blended yield on our retirement portfolio is about 4%. But few individual holdings yield exactly that amount.

    I heartily agree with DVK's comment above about the importance of diversifying by yield and dividend growth rates. Having a sufficient number of holdings comprising both dividend payers and dividend growers assures some continuity of income and income growth regardless of market price action.

    Also loved your point about the importance of identifying sources and uses of cash, and your personal risk tolerance.

    Long before creating an investment plan, we nailed down a realistic retirement budget. Once we realized dividends only needed to cover 2/3 of expenses (Social Security covers the rest), we were able to ratchet down the yield risk considerably in our stock picks. And because SS is essentially "fixed income," it provides a margin of income safety allowing us to be 90%+ in DG stocks.

    We are by no means wealthy, and got a late start investing. It took a decade to pay off my student loans. We each went through divorces that cut our respective net worths in half. And yet I retired in my mid-50's, and we're living very comfortably, using the principles you espouse in this article.

    Oh - and I like your picks here, too. Long SO, HCP, JNJ.

    Oct 4, 2015. 01:58 PM | 2 Likes Like |Link to Comment
  • Starbucks: My Mind Says Sell But My Heart Says Hold [View article]

    I'm a retiree, not a 20-somethng, and even my DG portfolio needs both growth and income.

    My view on SBUX is that it still has a long growth runway ahead. China, for example, is nowhere near saturated and represents a lot of future opportunity. SBUX combines good business, a strong brand, and premium pricing with social responsibility that matches the values of today's consumers. SBUX has supplanted MCD and its ilk in that regard, as we witness competitors struggling to make the shift.

    My SBUX average basis is around $42 and my big regret is that I didn't buy more sooner. Definitely not trimming or selling, and looking for a better price point to add more. A lot more.

    Surely there are companies with lesser prospects to trim if one wants to raise cash. I'm letting this winner run!

    Oct 3, 2015. 10:46 AM | 3 Likes Like |Link to Comment