RetireJapan

A question not only for Ben, but I recently read 'Income And Wealth From Self-Directed Investing' by Ian Duncan MacDonald - obviously self-published, with an atrocious lack of editing, but it's a good nuts 'n' bolts intro to selecting healthy dividend stocks. I was rereading the last dividend blog post by Ben in November 2018, and checking on a few random stocks I noticed they were low yield.. In dripinvesting.org's list of dividend champions (companies that have increased their dividends every year for at least 25 years) there are many higher dividend stocks to pick. I was wondering why you chose lower yields. I know you expect your stock's dividends will grow over time, but starting from 5% is surely a better starting point. Or am I missing something?

This is the most recent portfolio post: https://www.retirejapan.com/blog/share-your-portfolio/

The thinking there is to balance yield with future dividend growth. I am trying to put this portfolio together so I can live off it in 10, 20, 30 years time. Stocks with higher current yields may not grow their dividends as much as stocks with lower starting yields but higher growth over time.

Depends a lot on where you are in life and what you want the portfolio to do.

Also bear in mind this is very much not an ideal portfolio, so much as an example of something that someone might end up cobbling together

Anyone else?

RetireJapan wrote: ↑Wed Jul 21, 2021 1:16 pm This is the most recent portfolio post: https://www.retirejapan.com/blog/share-your-portfolio/

The thinking there is to balance yield with future dividend growth. I am trying to put this portfolio together so I can live off it in 10, 20, 30 years time. Stocks with higher current yields may not grow their dividends as much as stocks with lower starting yields but higher growth over time.

Depends a lot on where you are in life and what you want the portfolio to do.

Yeah, Ben’s plan is different from mine regarding dividend plays. Ben’s building something to generate income for later while I’m experimenting with dividend stocks to grow my overal value of the portfolio. So I’m looking for dividend + growth. Mixed results for me.

T for example. Pays 7.45% dividend but is down 8% since I bought it. CVS, up 10% but only paying a dividend of 2%. I’m still learning about how/when dividends get cut from these high paying dividend stocks. The fear of a cut has made me feel more a bit more comfortable with dividend ETFs vs individual stocks (and thank you to whoever it was that has been flogging SCHD forever. Very happy with this investment)

There seem to be a variety of dividend strategies. Take a look and these ETFs: (And before going too far, if you mention to someone that you bought a dividend stock/EFT, a common reaction is something like "oh, you're just going for yield, aren't you..." Well, that may be, but it may also not be that simple.)

VIG -- Offers exposure to dividend paying large-cap companies that exhibit growth characteristics within the U.S. equity market.

VYM -- High Dividend Yield Index ETF. VYM is linked to an index consisting of roughly 440 holdings and exposure is tilted most heavily towards consumer, energy, and industrials. Securities are chosen for inclusion in the fund based on their current yield; only the highest yielding companies are chosen. ...offers exposure to dividend paying large-cap companies that exhibit value characteristics within the U.S. equity market.

SCHD -- US Dividend Equity ETF. The underlying index methodology requires a long track record of distributions, meaning that this product is unlikely to include small, speculative firms that are offering an attractive distribution yield because their stock price has been depressed. The methodology also considers multiple metrics, including dividend growth and dividend yield, resulting in a portfolio that should offer a substantial upgrade in payout compared to the broader market.

SPHD -- S&P 500® High Dividend Low Volatility. The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) tracks an index that tries to pick those S&P 500 stocks that deliver the highest dividends with the least turbulence.

Next, use https://www.etfrc.com/funds/overlap.php to see how these might overlap. Sure, that must be the case, since they're all dividend funds, right...?

VIG & SPHD: 1% overlap (looking only at the venn diagrams, also note the other data)

VIG & SCHD: 18% overlap

VIG & VYM: 49% overlap

SCHD & VYM: 29% overlap

SCHD & SPHD: 18% overlap

VYM & SPHD: 23% overlap

That's quite a spread of overlap percentages, and to me, it is striking how the two vanguard funds--one supposedly oriented toward growth, the other value--overlap so much. I would have expected/guessed less.

OTOH, 1% overlap is almost nothing, esp. when the two are both pursuing some kind of dividend strategy.

My point is (tho I doubt there are 31 flavors) that there are a variety of dividend strategies (reasons to include/exclude certain stocks, or categories of stocks). There are actually some choices for the investor to make, and if you pursued each fund description, there is more about how each one determines its holdings. While someone might say, "oh, that's just a dividend fund," VIG and SPHD are actually pretty different things. (and VIG/VYM does puzzle me!)

I recently bought a dividend stock, BBL. Or that's what someone thought when I mentioned it. But it's also a materials/metals/(non-oil) commodities bet, one of the largest mining companies in the world. Sure, 5% yield, so that was part of the consideration (its yield is inconsistent, so far from 'comfortable'). But there were other reasons, too--its biz is unlike anything else I hold (diversifying), it may be "time" for materials to shine (economic cycle/trends), and so on.