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How Much Dividend Income Growth Do You Need?
I just recently retired@65 years of age. I am beginning the distribution phase of my retirement. I started focusing on Dividend Growth investing within the last 5-years but wish I had started much earlier. I regularly read Seeking Alpha articles and am a user of David Fish's CCC model. I calculate both a beta and a CAGR for my overall portfolio. During the distribution phase of retirement I will need the dividend growth to cover inflation as my pension is a fixed amount and will lose purchasing power over time.
During the recent market fluctuations I found it helpful to reflect on "why" I owned certain stocks - what was my intention for owning it. I found that I owned some stocks as a coreholding with an intent to hold long-term. I owned others for income. These generally had higher yields and higher 5-yr DGR rates. I owned some for growth. The growth category had less emphasis on dividend income or growth as one would expect. My last category was more speculative and included some bio techs with no dividends.
Previously I had tracked my diversification by categories like REITS, BDCs, Consumer Staples, TECH, MLPs, Consumer Discretionary etc. While I will continue to track the categories, I think I will find it helpful to remember my intention for holding a stock in the portfolio. If a growth stock ceases to grow or an income stock ceases to grow a dividend, it may not be the right fit for that part of my portfolio. For now, Core is 55% of my invested capital and provides about 60% of my dividend income. The Income portion is 16.5% of my investment and provides 27.5% of the dividend income? The Growth portion of the portfolio is 18.5% of my investments and 12.5% of the dividend income. The more speculative investments are approximately 10% -largely due to a biotech that I have owned for about 5- years. There is no dividend on this category.
I just started thinking about the portfolio from this perspective . I am not saying these are the "right" mix but as an initial exercise, it is providing yet another way to reflect on my portfolio. I have not yet calculated the CAGR by these "intentions"
Many thanks to the author for suggestions on how to change the portfolio over time.
Feb 16 11:58 AM
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