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Panda you are right on point with your strategy and thinking. Unfortunately, you are not allowed to have that opinion here, and will be shouted down.
I'm also a believer in REITS to give you a "kicker" but you need to be careful what kind. They run the gamut from very safe to very unstable.
I did one thing starting last summer. We are on the cusp of retirement. I'm retired wife is not. I've switched 50% of my stuff over to preferred stocks. Gave me an income boost and are safer in my mind. Market was getting a little frothy in my mind. Right now I'm reinvesting my dividends into more preferreds (prices are starting to get low), but later on after I've met my income desires, I may start reinvesting back into dividend stocks.
The other thing I've been doing is converting IRA's into Roth IRA's. Been doing that for 4-5 years. Last week I "ripped the band-aid off" and converted everything in one fell swoop. There are all kinds of variables regarding the wisdom of how much to convert etc. So it depends on your situation.
A site that has a big Dividend Growth (DGI) community is Seeking Alpha. It's all user contributed so you have to get a feel for who knows what they are talking about and who doesn't, but there are some very good DGI articles and commenters.
The site has gone downhill in the last couple years as they are encouraging authors to start "pay" services, but there's still a lot of good free material.
Yes, i have looked at preferred stocks as well, but still need to do more research on them.
With respect to utility companies and REIT, how stable are their business models? I was not looking at REIT's during 2008/2009 time frame so not sure how the downturn impacted their dividend.
REIT dividends were severely impacted.
The potential risk in what you are proposing is that you end up with a poorly diversified portfolio that's more risky. High-income stock portfolios typically end up lopsided with heavy weights in certain individual sectors. You can see an example of this in DVY, which had a very high weight in financial stocks going into 2008. Both it's share price and dividends were cut more than the overall market.
With that warning out of the way, I think it can be okay to buy individual stocks as long as you have a well-diversified portfolio. You need to have enough stocks, and also representation across industry sectors. There used to be an expense advantage to doing this, but today there are some really low-cost ETF alternatives you may want to look at.
IMO, they are an inferior asset class. The issuer takes all of the advantages. They are an equity position, but unless they are convertible into common shares there is no upside if the company does well. The issuer can unilaterally suspend the dividend, even indefinitely. They are a perpetual instrument, so if inflation and interest rates head up, the owner can be stuck with a low-paying instrument forever. On the other hand, most are redeemable after five years, so if rates fall the holder will likely get their capital back.
It's possible to find interesting preferred positions, but these tend to be special cases. In general they are best avoided. This is the opinion that Ben Graham gives in The Intelligent Investor.
IMO, they are an inferior asset class. The issuer takes all of the advantages. They are an equity position, but unless they are convertible into common shares there is no upside if the company does well. The issuer can unilaterally suspend the dividend, even indefinitely. They are a perpetual instrument, so if inflation and interest rates head up, the owner can be stuck with a low-paying instrument forever. On the other hand, most are redeemable after five years, so if rates fall the holder will likely get their capital back.
It's possible to find interesting preferred positions, but these tend to be special cases. In general they are best avoided. This is the opinion that Ben Graham gives in The Intelligent Investor.
Thanks, Yes, dividend suspension is one area where i got concerned too.
I have been invested in stock markets for the past 10 and have had some good and other not so good years in terms of investment growth. I am a buy and hold type of person and invest primarily in individual stocks (very few mutual funds or ETF). My long term goal is to have have enough investment so that i can live off of dividends. When i leave this world, i would like to pass on my stock portfolio to next generation and let them reap the benefits.
Dividend investors out there, what is your strategy? Do you invest primarily in dividend aristocrats?
What about REIT's, they pay healthy dividends but i am not sure how sustainable they are
Thanks,
Wouldn't you be better off to live off long term capital gains, which are taxed less than dividends?
You know, sell a little each year.
My own observation is that stock portfolios are passed on to the next generation (singular, not plural). Then, it stops. Money is spent quickly unless the recipient is of retirement age when they receive it.
Thanks, Yes, dividend suspension is one area where i got concerned too.
The same is true for common stocks, of course. The difference is, there's upside potential in the common. Sales, profits, dividends, and share price can all increase if it's a good company and one holds the shares long enough.
With preferred shares, generally speaking the best case is you collect the dividend (special situations excepted).
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