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Thoughts On Dividend Growth Investing, Total Returns, And Required Minimum Distributions

A question that sometimes drives me hazy: am I or are the others crazy? - Albert Einstein

I'm a big proponent of Lowell Millers' The Single Best Investment. I invest for quite a few friends and relatives and have required almost every one of them to read the introduction and first 46 pages.

Some see it as an investing manual of some sort. I see the information as one more arrow in an investing quiver. I haven't seen his other books referred to as some kind of manuals.

1978 The momentum-gap method: The super new way to discover what stocks to buy, when to buy them, when to sell.

1984 The Perfect Investment: How to Choose Money-Making Stocks No Matter What the Market is Doing.

Do investors believe that Miller quit thinking of a better way after he wrote it? Have you decided that one certain method is for you, and quit, in essence, taking in more information to process? My guess is that those that need to read that last line the most, will not.

Think left and think right and think low and think high. Oh, the thinks you can think up if only you try! - Dr. Seuss

I don't have anything against dividend growth investing, in fact I devote the larger part of my IRA to just it. Sometimes proponents of DGI get lambasted in the comment sections by those that say total return is all that counts. Very few are prepared to make a portfolio public. On the other hand, if they show a portfolio with little time behind it, the dividend growth proponents will say, "just wait until the next correction."

Those are the main reasons I waited until I had five years of public tracking of my portfolio before sharing my portfolio and thoughts. Here is my last months report.

Because things can disappear on the internet, I have copied and pasted all my monthly reports on a blog site. I don't plan on blogging. I don't want to teach anyone anything, just get them to keep an open mind, learning all they can on investing.

I recently noted a perfect example of what I am referring to. A highly thought of contributor wrote this in the comment section of one of his articles: "CEFs and Preferred Stocks may have a part to play down the road. I need to learn more about each." In the comment section of the same article, the same author wrote: "I like to re-read Lowell Miller's book every year."

That goes perfectly to my point. Investors will reinforce their way of thinking. How can serious investment decisions be made if one doesn't take the time to research and understand all the vehicles? Repeating the same thing over and over doesn't make it so.

Chains of habit are too light to be felt until they are too heavy to be broken - Warren Buffet

I digress. What I really intended with this article was to get investors to think about their required minimum distribution, perhaps in a new way, with regards to dividend growth investing, income investing, and total return.

For perspective, I will reiterate that I don't expect to have to take funds from my IRA before RMD kicks in.

I stated my goal in my first article: MY PLAN is to use some of my extra income to grow the "dividend" side of my portfolio faster than it would have if I had started out, and stayed with, all dividend growth stocks, while at the same time, growing the high yield side large enough to cover my RMD, so that all the "dividend" side is available to reinvest.

A very intelligent, at least imo, poster on another site stated:

"It shouldn't be a surprise if at some point the required RMD % withdrawal exceeds the dividend % income."

If you read my first article you will understand why I liked the statement, it confirms my view on my own investing. There is some more confirmation bias.

This was my reply: I love actual numbers. My m.o. doesn't fit, but we can see how David Van Knapp would have fared, if he had to use year end 2010 to figure RMD.

His portfolio value and dividends by year:


Portfolio Value

Dividend received in year
















It isn't the dividends current year that matter, it is the following years dividends that need to cover the RMD, so I lined them up.

If he had to take his first RMD on his 2010 value:


Dividends current year

Portfolio Value


RMD Following Year

Dividends received following year

Above or below RMD amount


































All divisors taken from Bankrate tables.

Everyone should be glad that David takes the time and makes the effort to do what he does. Just remember to keep in perspective what he is showing. He is showing what can be accomplished through dividend growth investing. That is it. It doesn't affect his retirement, it isn't presented as some sort of best in class, it isn't presented as the way to invest. In a comment on my last article, David explained why he puts in the effort:

"I created mine in the hope of inspiring others in investing, including spawning real comparisons, rather than back-tests as you mentioned in your article."

My guess is that doing what he does would fit the bill for many investors.

Let's look at another RMD scenario. Investors A and B, both 70, each have $125,000 in cash in their respective IRA's on December 31st of the year before they are required to take a required minimum distribution.

They decide to invest in stocks for the income. They cut down their list to two each from different sectors. Tobacco, telecommunications, conglomerates, insurance, and utilities / electric-gas. They stick with dividend champions.

Investor A gets first choice in each sector and goes for dividend growth.

He ends up with MO, TDS, MMM, ERIE, and UGI.



3yr dividend growth

Dividend on $25,000





















Avg. / Total




Investor B gets UVV, T, PG, ORI, and VVC.



3yr dividend growth

Dividend on $25,000





















Avg. / Total




Yields and 3 year dividend growth rates taken from the list Mr. Fish kindly provides.

The RMD on their $125,000 / 27.4 = $4562

Let us pretend that all their stocks raise their dividends on Jan. 1st, by their average raise.

Investor A $3,509 X 5.14% = $180 for a total dividend income of $3,689. Investor A needs to sell $873 worth of stock to reach his RMD.

Investor B $5,270 X 2.8% = $148 for a total dividend income of $5,418. Investor B has $856 to reinvest or hold in cash towards the next years RMD.

Yes, one can say that they would not buy such and such stock. Yes, one can say such and such stock may cut their dividend. Yes, one can say a lot of things, but try not to miss the concept.

More income compounding is better than less income compounding.

He who joyfully marches to music in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would suffice. - Albert Einstein

Sorry to any who thought there might be some recommendations in this article.

Investing for yourself is quite like independent study.

Disclosure: The author is long MO PG T.