Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
those who retired in 2000 are 1/2 broke at this point as cut or eliminated dividends ,stock prices and interest all failed to keep them from having to liquidate shares at a loss and spend excessive rates of principal.
down is down no matter what . no one can predict anymore whats going to be . the days of 2/3 up and only 1/3 of the time down are gone,at least for now.
if that ultimate goal was building a portfolio for retirement the game changed this past decade..
it takes creative planning ,un-conventional insurance products ,luck and a good selection of equities all rolled into a good well conceived plan . whether they pay dividends or not is secondary in my book.. when a typical retirement portfolio has 1/2 its investments dead in the water because bonds and cash are spinning off very little the survival rate of that portfolio is cut drastically. the pressure on equities is un-realistic now. the dividend is a moot point because its not stable enough to plan around either.
i keep 7 years of withdrawls in cash and cash instruments,another 7 years in bonds and un-traded reits, finally the rest is in equities.
in my plan all dividends are always re-invested ,never counted on as spending money directly. when markets are up ill sell some equities and re-fill the income buckets.
not that this is the only way but no plan should ever count on spending dividends directly to pay bills. its just bad planning as dividends are not the same as interest.
dividends reduce your share price and then count on profits and markets to bring that price back up so it can be paid out again. interest is paid over and above your principal from day 1 without reducing your principal to pre-payout levels making it very different then a dividend the way it fits into a portfilio for living on.
think about when your mutual fund pays a dividend. the next day the dividend is subtracted out and its price down by the same amount making that money at that point a zero sum game. interest is added to your principal and that payout is not zero sum. that makes the two work in different ways in a portfolio.
in my plan the dividends are reinvested to buy more shares, hopefully cheaper , allowing you to dollar cost average down during bad times , thats assuming the dividend isnt cut or eliminated.
Last edited by mathjak107; 04-04-2011 at 02:52 AM..
not that this is the only way but no plan should ever count on spending dividends directly to pay bills. its just bad planning as dividends are not the same as interest.
I agree 100%. There are companies out there (such as coca cola) where you can do this with minimal risk. I still don't advise it.
Honeslty, OP, if your husband hasn't found a job in two years (I'm assuming he's been looking, which I might be wrong about), then that $75,000 is better used in retraining him in a field where there are jobs.
It's not like there's a lack of jobs out there overall.
the other issue is someone who now is counting on that money to live on like the op who really isnt ready yet should not be dabbling in individual issues unless they have enough money to buy quite a few of them. this is no time to take individual company risk on for the op.
market risk is tough enough of a head wind but trying to get just the right company ,in just the right sector at just the right time without even knowing all about what the competitors doing is nuts. one missed earnings report can send the op's nest egg plunging.
I'd say its a good idea to invest at least 500k- 1 million of your first portfolio entirely into dividend paying stocks. Simply because most people work for a living. Lets face it, working these days is very risky. You could get fired or disabled.
If you have the dividend stocks, at least you still have cash coming in to pay your bills. Could literally mean the difference between losing your house and struggling to eat. Buying the dividend stocks is alot better than investing in a 401k or roth ira which makes it near impossible to get the money out in case of emergency. You practically have to be on your death bed to get it out.
The best dividend stocks are those which generate lots of cash and can afford to pay the dividend. Usually these stocks are utilities, telecom, pharmaceuticals, infrastructure (pipelines) and tobacco.
re-read what i wrote above about counting on using stock dividends to pay bills. it could be financial suicide. in my opinion dividends are strictly for re-investing .. they can be cut or vanish in a heartbeat as many
learned in 2008. those dividend paying stocks are no different than anything else .they are still stocks and will plunge along with everything else in a down market. im sure the holders of ge felt real good watching ge
plunge to 9 bucks with no real dividend to pay bills.
nothing will kill a porfolio like selling shares when they are down to make up the short fall in income that happens in down markets.
paying bills is what cash is for and what a well designed portfolio is able to do with absolute reliability.
a well designed portfolio has methods in place to sell shares of your stocks during up markets to provide more cash for paying those bills over years of down markets if need be.
the graveyard is full of failed retirements where folks thought they found a better way and then bet the ranch and lost
Last edited by mathjak107; 04-04-2011 at 04:34 PM..
Coca Cola (KO) - $1.88 Dividend (3%) - A safe company
I agree 100% with Coca Cola as a great choice. Incredibly strong company with a worldwide brand, they pay a decent 3% dividend at a very safe 35% payout ratio, and have a history of dividend increases, and at a current P/E of about 13, the stock in relatively inexpensive. This is one to add to your list. I would also look long and hard at JNJ, INTC and some utility stocks, such as EXC, D or NGG, all of which pretty much match most of the positives that Coka Cola offers.
re-read what i wrote above about counting on using stock dividends to pay bills. it could be financial suicide. in my opinion dividends are strictly for re-investing .. they can be cut or vanish in a heartbeat as many
learned in 2008. those dividend paying stocks are no different than anything else .they are still stocks and will plunge along with everything else in a down market. im sure the holders of ge felt real good watching ge
plunge to 9 bucks with no real dividend to pay bills.
nothing will kill a porfolio like selling shares when they are down to make up the short fall in income that happens in down markets.
paying bills is what cash is for and what a well designed portfolio is able to do with absolute reliability.
a well designed portfolio has methods in place to sell shares of your stocks during up markets to provide more cash for paying those bills over years of down markets if need be.
the graveyard is full of failed retirements where folks thought they found a better way and then bet the ranch and lost
Every investment has its risks, there are no guarantees. Then again, there are absolutely no guarantees in anything you do in life! All I am saying is that dividend stocks are good source of income when times are though. Some companies will cut dividend and others will increase dividend during hard years.
Quote:
I don't smoke but I like to profit on those who do. I own PM and MO.
Those are tempting stocks for sure. I've thought about buying them but from what I've read tobacco is on the decline. Less teens/young adults smoking. Likewise electronic cigarettes are being sold as a far safer option to smoking (no risk of cancer). Could be a good play for the next 10-20 years but could be hard years after. I've read that after 2050 smoking will have mostly faded away. I decided not to buy because I don't want to be investing in stocks whose product is slowly being phased out.
they are a poor bet in tough times for income, dont believe your own bull-sh*t. you cant pay bills when dividends are cut or eliminated. companies slashed or cut dividends in 2008-2009 at un-precedented levels.
dividends are really only usefull for re-investing not income to live on. anyone who tried that got squashed recently unless they counted on so little of that cash flow for bills ..
if you had a non dividend paying stock thats up 2 or 3% whats wrong with selling a piece each year to create your own dividend?
answer-except for a tiny commission , nothing is different.
whether they sell off 2-3% a year and give it to you or you sell off an equal amount of shares to equal that dividend its the same thing. both depend on making back the same payout so they can payout again
otherwise they both have a negative return for the year.
very few understand the pay out of a dividend so for those who dont ill explain.
all year the company hopefully makes money from profits on products, and income on investments. market action should bid that stock up and at some point a dividend is declared. that money is paid out, the share price automatically resets the next morning back to pre-payout prices by the exchanges and the process starts over. its no different than a mutual fund payout where next morning you are down by the exact same amount that was payed out.
thats why you cant just buy a stock the day before it goes ex-dividend and reap a benefit. they are merly paying out some of the share price to you on appreciation that already happened. .
no different than anyone taking a non dividend payer and selling off an equal amount to make the same dividend. only difference is next morning the pointer isnt reset back on the non dividend payer so that makes up for the reduction in shares by selling. they both net out to the same thing.
the dividend paying stock is reset downwared to the pre-payout price. the non dividend paying stock does not get the price reset but has slightly less shares at a higher price . it still nets out the same.
why do dividend paying stocks tend to outperform then? because companies that are having cash flow problems can not keep paying out year after year and a history of rising dividends is proudly proclaiming " look at me, im making so much money i can not only give it away but i can give more and more away every year"
it acts somewhat as a filter ,thats the reason they tend to outperform . the mechanics of getting the dividend itself payed out is a zero sum game just like a mutual fund distribution. .
you have to becareful though. as 2008-2009 showed us even failing companies still try to hide behind that dividend payout for fear that changing it would make things even worse for them.
gm,citi,aig were all the best of breed at one time. they all hid behind those dividends until the end.
nobody knew at first if the drops in share price were just market action or real internal issues that those stocks had. by the time it was apparant that these issues were going through more than just a market correction it was to late they were already down so much. but all the while that dividend was being payed blinding even the pros.
Last edited by mathjak107; 04-12-2011 at 03:57 AM..
Unless you can make at least $50,000 in income from the dividends, you shouldn't invest in stock just for dividends. It's a gamble.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
