Living Off Dividends in Retirement--Not so Fast
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- čas přidán 25. 07. 2021
- Living off dividends in retirement seems safe. Because you never have to sell shares of stocks, ETFs or mutual funds, you can never run out of money. Yet it's not quite that simple.
In this video we'll look at four major problems with living off dividends. Then will discuss why focusing on Total Return is a much sounder approach to investing in retirement.
Finally, we will look at some reasonably safe ways to increase your dividend yield if you must.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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Yes, those impers are getting out of hand. They have hit the Money Guy and Heritage Wealth too - an army of crooks. Most of them are Bitcoin scammers.
@@vinyl1Earthlink To the right of each comment are three horizontal dots.
Your portal to smacking spam.
I commend you for calling them out and booting them off. A lot of channel owners ignore them, perhaps to plump up their comment counts?
Living off the Dividends are great when you also have a state pension that your collecting from. So basically living off of the Dividends is great as a side pension but bot a main pension.
@@sonny12681
You're missing the point. Let's try a simplified example. Assume you have some money to invest.
Company A's stock sells for $100. Company A sees no route for growth, they are a 'mature' company, so they take their 5% annual profits and send them out as dividends. Company A's stock price stabilizes at $100.
Company B's stock also sells for $100. Company B sees a route to growth and rather than send out their dividends they invest in growth. The next year their stock is worth $105 ($100 + $5 reinvested) plus some earnings from growth. Each year Company B's stock gets worth more and more. And if you need to take out $5 by selling some shares your capital will still be growing.
4K shares of SCHD here! Just retired at 44.
NICE! I think you’re sitting in a great asset! Enjoy the increased cash flow in retirement (:
Thanks! Just a note for anyone interested. If you’re looking at dividend stocks, the last thing you should look at is the dividend yield. You should focus on the dividend growth. If the dividend isn’t growing don’t buy it.
Pretty impressive. SCHD is just over 20% of my portfolio and I’m very excited about the recent reallocation. I’m gonna let it roll!
Great! Yeah, nice one to chip away at buying more shares and just chillin. SCHD isn’t going to wow us in any market, but it just trucks along. It’s a nice stabilizer for a portfolio & it provides deceptively high cash flow over time. Mixing in some other great holdings is how to do it in reality.
@@henrymitchell9717 Is there an SCHD alternative that pays monthly? I’m 54 and just starting, I feel so behind.
I like to have SCHD. 20% of each ROTH IRA Portfolio. Yield: 3.75% 60% SPY. 20% Various Income Funds, PFF, ILTB, TLT.....What are more interesting buys for long term growth? I want to get in with about 100k in cash savings lying waste to inflation
you need a certified financial planner straight up! personally, I invest in ETF's and also love investing in individual stocks. yes it’s riskier but am comfortable in my financial environment
Agreed, After taking charge of my portfolio in early 2017, i stumbled into losses. Upon realizing that a change was necessary, I consulted a fiduciary advisor in 2019 and since then my 7-figure portfolio has gained 28% annually through restructuring and diversification using dividend equities, ETFs, mutual funds, and REITs.
I've been looking to get one, but have been kind of relaxed about it. Could you recommend your advis0r? I'll be happy to use some help.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Jennifer Leigh Hickman” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
I appreciate this. After curiously searching her name online and reviewing her credentials, I'm quite impressed. I've contacted her as I could use all the help I can get. A call has been scheduled.
I started investing in dividends with my taxable account. I used the buy and hold strategy in my Roth, adding some Berkshire B stock, SCHD, and an S&P 500 and total market exchange-traded fund.
When I started investing last year, I avoided significant mistakes. I've focused on investing modest sums in stable businesses for the long term. If stocks perform well, I hold onto them; otherwise, I reinvest losses into profits. Recently, I made $9.5k from a $4k investment in NVIDIA.
Exactly, a good number of people discredit the effectiveness of financial advisor, but over the past 10years, I’ve had a financial advisor consistently restructure and diversify my portfolio/expenses and I’ve made over $3million in gains… might not be a lot but i'm financially secure and that's fine by me.
Please who is the consultant that assist you with your investment and if you don't mind, how do I get in touch if you don't mind
Sonya lee Mitchell is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I searched her up, and I have sent her an email. I hope she gets back to me soon. Thank you
Like Warren Buffet said, dividends are only good if the business you’re investing into can’t make good use of that capital. So if you’re trying to invest into businesses with actual growth, looking at dividends is a waste of time. Why are you investing into a company if they’re returning capital to you because they think you can make better use if it than they can. It’s not much different from bond investing. The way I see it if you have a $1 million at some point, that’d be enough to create a portfolio that would pay you between 50k-70k in dividend income...
@bobfletch. 1. It's not like bond investing because the taxes are much better with dividends being taxed as capital gains.
2. Using Buffet to diss dividends is funny. He loves collecting dividends! Buffet makes hundreds of millions of dollars just from Coke and Amex.
A retiree has a better use for that capital! That dividend payment is their income without having to sell a share. And the dividend ETF also reduces the beta / volatility of their portfolio.
I still think you should have a healthy mix of both value and growth even during retirement. But dividends are an important piece of the puzzle for many.
Although Berkshire does not pay dividends, most of the companies he invests in do pay dividends
When young, aim for growth, once you’ve grown a few million, switch to collecting dividends, you’ll never have to sell, and have a money supply forever, vs if you only had growth stocks, you would have to sell shares, and eventually you’d run out of shares and your acct will be empty… meanwhile the guy with 3 mill invested into dividends will never have to work again, never have to sell stock, and can pass the whole portfolio to your children, which they can build onto and retire early. Generational wealth…. But for growth in general there are much better options than dividends, such as various “option strategies”, covered calls, etc.
I couldn't disagree with you more. There are a lot of companies that pay great dividends. For that sake Warren Buffet makes more than "3 billion dollars a year" in just dividends. My own dividend account will be paying me over a million dollars in the next 26 months. (that is $83,333 a month)
Funny with the fact that Buffet makes about 3 billion in dividends a year
Well, I have been retired for 7 years, and I've been living off dividends and SS. I have more income than I need, so I use a lot of my dividends to buy more stock. I think my portfolio is pretty conservative, and it yields 3.98% - I wouldn't touch high-yield with a ten-foot pole. Yes, it is a dividend portfolio - I have 41 different stocks. I am aiming to keep my financial assets and income growing by at least 5% a year. So far, so good!
If you have a portfolio giving off 4% on dividends, you definitely have some high yield stocks. Most stocks are paying less than 2%. Energy, utilities, telecom, REITS, BDCs are the sort of high yield sectors you would need to invest to get to 4%
@@donmountford797 - As I mentioned, I don't go for really high-yield , which is where you'll find BDCs and MLPs. Even worse are the the leveraged CEFs that some fellow in Forbes is always pushing - they'll crash when rates rise.
Energy, utilities, preferreds, tobacco, drugs, REITs, and old tech is what I own. They're large-cap, relatively safe companies.
One thing I didn't mention is a keep a large cash bucket, just in case.
@@vinyl1Earthlink I personally would classify those as high yield as well. They are definitely lower growth, lower risk stocks but the trade off of those sectors is they may have difficulty keeping up with inflation. A 4% yield that only grows it's dividend 1 or 2% when inflation in 4 or 5% like this year, effectively means you will lose purchasing power. I definitely own some of these sectors as well but I also own some growth stocks as well to hedge my bets against inflation.
@@donmountford797 Many growth stocks grow their dividends by 5% to 10% per year. I bought my Home Depot stock many years ago and now the annual dividend is nearly 10% of my original investment. Home Depot is just an example of non-high dividend stocks that can give you some decent yields if you invest in them ten years before you retire.
@@jamesdarnell8568 correct. I like dividend aristocrats but they don't pay 4% dividends. If you are looking at your cost basis, than sure but not if you are looking at today's valuation
So buy both funds, growth and dividend . When you retire and you need to withdraw, take from the growth fund when the market is high. Take from dividend fund when it's low.
I don’t think anyone intending to live off dividends is investing in VTI, VOO or any other broad market index. Sort of a silly thing to start your video with.
Thank you!
His argument was terrible as was using the stupid 60/40 S&P500 / Bonds investment.
Very easy, even today, to build a 4% dividend portfolio on high quality stocks that have increased their dividends each and every year.
He also seems to assume that inflation can go up faster than your dividend increases but ignores that you might also have price appreciation. Well, is it only non-dividend paying stocks that appreciate in higher inflation environments? Nope. Easy enough to have the best of both worlds.
This is a bad video.
I like the guy and his channel but this video is a turd built up of seemingly selected paper tigers to make some point.
@@TimmyMorinII for the next 20 years I would take a this mix VZ, JNJ, WBA, LMT, OHI, MPW, O , TAP, MO, BP, EPD, SWKS, INTC, PG, TU, CTRE, LAND, GD, KT. I didn't calculate but the yield is probably close to 4% . If a few disappear in the next 30 years I am sure a lot will be multi baggers. Besides if worried all this companies will go away it is likely the world is ending and who cares about your investments then. Of course you always adjust positions or add some undervalued once in the future.
@@paulgrecu2006 so basically a portfolio of 80% hope and 20% stocks.
What kind of idiotic comment is this?
@@mjs28s have you even watched the full video?
THINKING OF LIFE AFTER RETIREMENT is really a pain in the ass…. What’s the best advice for someone worried over Retirement
@Rob Lowe Fame spam
@Just Joe Or the balkans...
@Rob Lowe fake news !
Is this a serious question? Do you really think someone has an answer for you? This is going to sound overly aggressive, but grow the hell up! Take some responsibility. Use your brain to help yourself. No one else will. Especially strangers on youtube. For proof, just look at the previous answers. 😂😂😂😂
@@rolandostaelena Thank ill-mannered MF __ I got the help i wanted
My experience many ppl psychologically have a tough time selling shares, living off div can help solve that problem. This solution is not math based is SWAN based. Good div growth stocks are much more stable than SPY and div do not fluctuate nearly as much as the market.
I’m desperate to preserve and grow my portfolio of $800k, What retirement investment approach should I take to create a comprehensive portfolio allocation that balances the concerns of risk aversion and returns that meet yearly inflation
As you plan your retirement, be sure to talk with a financial advisor who can help you make the most of your retirement investing scheme.
Desperation will lead to mistakes. Stop, take a breath, and think things through. I am very simplistic in my approach. Do I think things are going to be better or worse one year, three years, and five years from now and invest, not gamble accordingly.
One thing important is as Rob says, play in the middle of the road. Some growth, some dividends. It doesn’t have to be either or.
If this mythical dividend investor is using 100% of their dividends to cover living expenses, then this implies that they are spending all of their social security income as well as all of their dividend income just to make ends meet. If someone is actually in that position in retirement and has no way of reducing their expenses, then the problem isn't their choice to do dividend investing, their problem is that they have zero safety margin and therefore have enormous risk. Ultimately, this really means that they don't have enough in their portfolio and it's too risky for them to be retired. It doesn't matter which investment method they chose, they simply lack the investment money to make it work over time. Either they make enough in dividends to pay the bills and risk dividend reductions, suspensions, or inflation, but don't have anything left over to reinvest, or they sell enough stock to pay their bills and don't have any means of replacing the shares they sold. Such a portfolio is very likely to decline in value over time unless some rare event gives it a big boost.
Since this video was made at or near the market peak in late 2021 or early 2022, and it's now the beginning of 2023, it's even more clear how dividend investing can offer better downside protection and risk management. From the vantage point of early 2023, your method requires the investor to sell shares that have fallen in value by 20% or more in an inflationary enviroment where their expenses have likely increased. On the other hand, the dividend investor is likely doing better since they may not need to sell any shares unless their dividends don't fully cover the increase in their expenses from inflation. It may well be that their dividends increased enough to cover the higher expenses.
I'm not saying that total return isn't the way to evaluate things, I'm saying that you've failed to account for risk in your analysis, and, as this last year has demonstrated, you can't ignore risk when making investment choices.
hi Rob, the flaw I see here is you are focusing on dividend funds instead of a basket of high quality dividend stocks that you can pick up when are under valued giving you a high yield
I think a lot of dividend investors will be using much higher yields respective to those first few examples. Plus, even in retirement you can reinvest what you dont need which will help out the portfolio through the years.
Great point, even in retirement, all the leftover (even $10, $30 or $50 a month) will help grow that next paycheque and compounds itself as you grow older.
i agree, my portfolio yield is around 6.5%. I reinvest my dividends and I also just used some dividends to by some stock in Apple. The dividends don’t only have to be used for dividend stocks
All his examples have dividend reinvestment on.
dividends yo
@@cdm1949 2% yield. id buy more high yield stocks i already own near retirement and increase my yield to 5-8%.(still safe due to diversity/sectors) im covid proof at this point.
all I know is that I wasn't really investing for dividends, and since I switched up, I am now earning $3,051.17 per month YTD. I still have another 10 years until retirement, so I keep reinvesting it for now.
Your gonna be set lol, even if they slow down a lot
Steven, what do you mean by "switched up"? Could you be more precise or give an example? Tnx!
Well done sir. Depending on where you live, you are pretty much there.
I’m thinking about this approach. Reinvest dividends now. Then when it’s time to retire, only use the dividends necessary to live on and reinvest the excess to keep up a little with cost of living increases.
@@kopper7509 precisely, and the actual growth you get should cover inflation. Keep it diversified as wide as possible to give yourself more opportunities of growth from someone outperforming their sector. Best of luck sir.
Just my 2 cents. if your retired and using the dividends as added income then your probable don't need to have the growth.
Anyone retiring in 2007 with a portfolio of growth stocks like this guy suggested... killed themselves. And not just a few, a lot did.
Most dividends increase dividend to keep up with inflation. You should have a 3 year emergency fund in case of the unforseen
Who uses such low bond funds as any kind of example for anything?..just saying..
A comment I've recently heard that resonated with me is that value *is* growth. What most people think of as growth is in reality speculation on overvalued assets, and while these assets can grow prodigiously over short periods of time, they aren't going to beat the growth of underpriced and fundamentally strong value companies over the long run.
As many others have pointed out there are quite a few blue chip stocks with dividends in the 4-6% range and many of those stocks consistently raise their dividends annually and have done so for many years. Furthermore qualified dividends are taxed at 0% until the income for a retired couple goes above about $119K in 2023. You do need to buy individual stocks though.
Not sure where you get the $119K. Married filing jointly for 2023 should be $89,250
@@stevenporter9114 I added in the standard deduction since the 89K is after you subtract the deduction.
I’ve been loving your videos! Solid information. Keep it up.
Enlightening, as always, thank you. Given the current situation, would you modify this advice, or does it still apply?
Not at all. I take the dividends the market gives me, but I don't seek more than that at the expense of total returns.
Great video! Actually convinced me that dividends will be an important PART of my retirement income strategy, with our social security and a 2 or 3% "spend down" withdrawal strategy, especially in go go years. I do have a mix of growth, value stock funds, international, bonds. One of my biggest motivators is hearing for years that a stock/bond mix and 4% drawdown is safe, and then 2022 happened!
Not living off them, but having them available for unexpected expenses if required.
I have dividend funds that provide monthly dividends per share that I reinvest at this point.
Yes, the dividend amount per share is low, but it can help.
Dividend income funds are low risk and the dividend yield is much higher than a CD.
Great Vid! What do you think about BLV? Pays a div of almost 3 compared to BND. Thanks Jeff in NY
Great content! Subscribed. I'm 31 learning about this now so I can start asap. Seems like I have more to learn as now I see there are multiple options/funds/etfs. I'm glad I waited until watching this because I was about to invest in a few high yield.. hope to learn more in the next video
Dividend investing isn't a one trick pony in my opinion. There's a lot of ways to adapt it to your personal situation.
EDIT: Not to mention the power of tax free income for qualified dividends. That's huge for someone like me that's happy living on far less than $40k a year.
Isn’t 0-40,000$ taxed at 0%? If you’ve held it for more than a year?
And then 41,000-450,000 is taxed at 15%, and then anythint above that is 20% tax?
I can't live on less than $40k here in No. Virginia, 11miles from DC. Our real estate tax are about 1.08% per assessment. Plus a 5.5% state tax on income. Slap on your 15% Federal tax and < $40k is going to go far. Where do you live?
@@redtops5160 5.5% tax for dividend income? Thought dividends were taxed differently than, earned income.
New subscriber
Really impressed with your content and your approach.
Have a small objection or possibly something to consider for a future video.
The scenarios you looked at where from the last 10+yrs (the markets have been fed by low inflation, high liquidity, low bond yields)
I am expecting this to stop and reverse and I would like your opinion in the same scenarios but in an environment simulating the above? I believe that was the 70 and 80s ? And how that would affect the returns...
Answer to all of these points.
1. Have an emergency fund to ride out a recession.
2. Your stocks will increase in value over time, sell the stock, immediately reinvest it, and boom, more dividend income.
3. Better to rely on dividends even in a recession than literally selling 4% in a recession. Again, emergency fund.
👍🏾👍🏾
I'm 5 minutes in...I feel like Joseph Carlson would have a field day with this
You are truely living off dividends when your dividend income passes the accumulation of all other retirement income (pensions, social security, ect), IMO. I am about 70 percent there. I have been getting some nice dividend raises lately, so hoping to cross over in 5 years.
It depends on how much you spend.
Hopefully it's a lot more than a measly 1.7%.
Just as a follow up, I will cross over this calendar year. It actually will only have taken two years. 2023 dividend income will be more than my pension income. Dividends do work, and I'm very glad to be a dividend investor.
The book get rich off dividends explains it perfectly. You buy high quality companies with 3% or more divy and raises it yearly at least 7%-10% and in 10 years or more your dividend will be 6% or more and if you then retire you have a basket of stocks like this paying you 6% or more and they still raise each year giving you raises each year from the dividends you are living on.
That's a lot of assumptions for 30-40 years down the line. Just picking the top 20 stocks from the Dividend Aristocrats list, will not give you 6% dividend yields. The yield on cost would still be the same, because you're reinvesting over the course of that time, until you retire.
Sorry if this is a dumb questions but regarding the first example portfolio, wondering what the effective yield would be if you substituted the Vanguard Balanced Index fund (VBIAX 60/40 mutual fund) and included not just dividends but capital gains distributions. What would that same starting $1M yield vs the ETFs in your example?
Not a dumb question but so far remains to be seen if *RB* is _smart_ enough to provide answer.
"Happy to respond to comments and questions." --- *RB*
Great video, glad a stumbled on your channel, another perspective for my portfolio
My dividend portfolio is more like 3%, not 1.7%, with some companies paying as much as 8% and most of them have a long history of profitability, FCF and dividend growth.
In my opinion, you should never truly retire and you should get to know a bit the stuff you're investing in and why.
Keep actively investing in dividend paying stocks (even if you trail the S&P500), for one thing, it keeps your mind occupied and almost always has better returns than bonds or those stupid cash deposits.
If you have kids, never sell your stocks, keep it in the family forever.
Some bond ETF’s have a pretty decent dividend payout. Like BLV, VCLT ticker symbol
Maybe SPYD? It tracks the S&P 500, except the top 82 dividend stocks. So it’s essentially an index.
I like index’s tbh.
Berger is all wrong this video is a mess. Also holding bonds is old school
Mine is 3.91
Mine is currently 6%, but that is because of the drop in the market. I do not expect the stocks in my portfolio to have a lot of growth but then I don’t have the time left to wait. I look for recession resistant companies that provide an essential product. If the dividend is cut then I will sell and look for a replacement. He focuses on averages. If dividends were lowered then you could always revert to his strategy.
Did anyone using preferred shares? There is 6% the normal yield 🤷
A 2 million dollar portfolio with a 5% dividend yield (Aristocratic stocks) is 100 k a year. That’s fine with me. Especially being paired with multiple pensions and real estate-that my position and plan.
Hi Rob. Excellent video, but I hope you can clarify something for me. If I'm invested in a portfolio of high-yield ETFs like JEPI, DIVO and SCHD which will generate an average 4% in "dividends" as well as growth, then I should be able to live on 6% (4% dividends + 2% withdrawals), pretty much indefinitely, right? These funds have a great track record of growth and income and since my withdrawals are only 2%, I'm well within the 4% rule. Is there something I'm missing?
@Iterum Life, JEPI and DIVO hardly have a long proven track record, they are a disaster waiting to happen. They will blow up eventually, it is unavoidable, did you learn nothing about leveraged financial derivatives from 2008. SCHD and VYM are both solid selections however.
You do a really good job. Thank you.
He makes very valid points in regards to yield, and fluctuations, however the dividends are far more predictable than the general market.
I don’t care what anyone says, diversified blue chip dividend aristocrats & kings should DEFINITELY be a large portion of your retirement income stream.
I see people who are strictly in growth stocks and how nervous they are when they are approaching retirement. NOT ONE, I repeat NOT ONE has retired on time, they all work at least 2 years extra, some have to sell their homes as well, and most don’t have the lifestyle they imagined they would have.
What are kings?
@@miguelservetus9534
Dividend Aristocrats - Increased their dividends for at least 25 years
Dividend Kings - Increased their dividends for at least 50 years
@@lawrenceweston922 Past performance does not equal future results.
Investing in the S&P or Total Market and you skip all games, buy and hold.
Rob,
Great video. However, I am a bit confused about this part:
You say that living off of dividends is a bad idea, but WHAT IF I can live off of 1.7% ?
Social Security + Pension + 1.7% of the portfolio covers living expenses and even leaves some money for travel and emergencies:) Isn't this a good thing that I don't have to sell anything??
I think you're in good shape.
It is a great thing. I suppose this percentage (1,7%) is not enough if you have not accumulated a lot of money compared to your monthly expenses. For example, I invest a good amount of money every month that, if I keep investing this same amount of money throughout the years till my retirement, I could live off of the dividends (supposing a 1,7 DY)
He said that some ppl CAN live on that, especially combined with other accounts. And that's just common sense, as for those ppl it will be just a supplemental income.
Rob, I agree with you. Im currently living off my pension, my wife ss and 35k yearly dividends. I have no debt except utility bills. Im fine with 1.7% but averaging about 2.9%. Waiting until 70 to collect SS. 8% increase per year after full retirement age is not bad if inflation is at 7.5%.
He answered that question, go back and review
Hey Rob what is your opinion on being invested in sp500 ETF for the majority of my working life and then switching to a high dividend ETF when nearing retirement.
Thank you for this info 👍
Rob. I am 73 years old with an MBA and MS in engineering. And I do dividends just fine. ETFs might be diverse but that is not such a good thing. I would rather have ten great stocks than 500 average performers in SPY. Try these five in your calculator MO PCI ETW EPD and XOM. Your $1m portfolio jumps from $17k to around $70k offhand figure. Complement that with covered calls at 3 % OTM and maybe 10 delta naked puts to see a huge increase in monthly income on the three with options. In my view seeking 1.7% spy dividends is less than wise by any metric. It might be smart to grow your portfolio in you 40s but not during retirement. My minimum acceptable yield is inflation plus risk. Today that is 5% plus 2.5% for risk. Or 7.5% yield. This assumes most of my expenses are fixed such as mortgage. Mine is 2.25%apr. Your four models are fine for your set of assumptions and mine project inflated dollars due to government spending in the trillions.
R P - you realize there are, S&P 500 growth ETF’s, that outperform the regular S&P.
Like, VUG, outperforms VOO. Ticker symbols.
And or, there are S&P 500 dividend ETF’s like, SPYD, low growth, but a stable 3.7% dividend.
I hate to critique, but I would not invest in any of the dividend stocks you mentioned. XOM, for example, that stock is too volatile, and capital appreciation, is pretty bad, unlike SPYD, which consistently returns 4% on average.
And I feel like 5, or 6% dividend is too high. That’s just unsustainable imo. I think 4% is the sweet spot.
Or personally, if I ever did invest in energy stocks, I would invest in XLE, at least, it’s an index which has decent dividend.
R P - Jesus Christ I just looked at ETW. That fund is slowly bleeding to death. Look at the entire history, it’s losing its value over time. Sure you have an 8% dividend, but that’s just insane. It’s slowly losing value over time. How will you ever recoup your principle investment?
@@HateTheIRS ETW just does Covered Calls. Nothing more. Price appreciation is not the objective here. It is just a steady check a month. Like any premium the actual check will vary with the underlying and IV. By the way I do not own ETW today as I do not need those monthly checks. I do mostly futures and options. Thx for your sharing your opinion.
@@2023Red but why would you invest in something that’s losing value?
@@HateTheIRS Perhaps you think differently that I. One either milks a stock for income dividends or buy to sell later for a profit which seems to be your goal. Or uses neutral to bullish stocks for covered calls. All are okay. In my case I do them all as diversification plus I do short selling. It is a fine wY to make money by passive investing just for dividends but it takes a large account to make sufficient income to live on. Etw is flat but generates a fine monthly check. Better than inflation. Better than your cd. This is just one example. I hope I answered you.
.
Rob I just discovered your work and it’s resonates well with me. I’ve been retired for about 5 years and I created my retirement fund using dividend growth stocks ….long story but it worked well yet I’m well aware that a bull market did most of the work for me. My first month in retirement I realized that I did not have to live off of dividends but I could live off of trimmings of positions that had gotten to large…again the bull market helped make this work ….recently I woke and realized that a total return focus with an eye to dividend growth makes me very comfortable
One basic question I have as I am not in the market, which I would appreciate your opinion on. If you knew you were going to die in 10 years and had a lump sum of cash, would you still put it in a market portfolio or keep it in a savings account in a bank?
@@sanekabc Market Portfolio every time for me mate. Money in a savings account will not have the same value as each year passes due to inflation.
@@sanekabc market indeed and start education of heirs
@@sanekabc Market portfolio everytime. Invest, dont save.
@@JamesGraydon Nahhh u guys have it all wrong; start slabbin and stackin Garbage Pail Kids for generational wealth!
Great video where can I get those tools with the back testing?
Rob, have you ever shown your portfolio? Just asking. Is it the 6-fund Vanguard portfolio you have done a video on?
Hi Rob, recently retired and have a sizable amount in IRA. I would like to start living off the income, most of the advisors I talk to in the past have been pushing annuities, I don't want that. What's the key to finding a reputable advisor, or can I simply do it myself? Thanks
Find a private one or two man/lady office who treats your savings with respect and has a capital allocation philosophy which makes sense to you. You should expect an explanation in great detail, why they deserve their fee for assets under management.
You know enough intuitively or otherwise to understand something is wrong with a salesman pushing annuities. These are manufactured financial products and when sold, provide a healthy commission check. Some are predatory. In other words, bullshit.
I say do it yourself sir. Congrats on retirement!
iPad
Ron freeman - ask them if they are a sworn fiduciary, if they say no, walk out immediately.
They should say yes.
Go to your local bank, or maybe prudential has some advisors? Idk man. Your bank might be a good start.
@@HateTheIRS What is the first thing a bank or an insurance company will sell him? Get the fuck out of here.
@@ThePhukst1k he should be smart enough to know if someone is trying to sell him something, “invest in our banks mutual fund” is pretty obvious.
He’d be asking them for advice, hence, if they are a sworn fiduciary, they’d help him, and not sell him products.
Or he can talk to an advisor, from his brokerage firm.
@ 3:11 Rob, you seem to make a big oversight... you did not _subtract_ the shares from Portfolio 1 you'd have to sell to match the dividend payouts for P2.
So you can't then compare the long-term growth of P1 and P2 and conclude that P1 was the better option, because the P1 you show is the balance _without_ having sold any shares. So you've not shown that P1 was the better option. You have to run the model of matching the dividend payouts of P2 with shares sold and _then_ compare P1 and P2.
Granted, you're probably right nevertheless, but it would be nice to prove it. The shares sold of course lower the balance by a larger % over time than the relatively small amount they are per year. So it would be nice to be sure.
It takes into account shares sold by taking a draw. Do you not understand this?
@@AK-ky3ou, sorry, I don't understand that. Seems to me, with Portfolio Visualizer, you'd have to be able to selectively sell shares for only one of two portfolios (the VOO portfolio) being tested side by side and also selectively not reinvest dividends for only the other portfolio (the dividend ETF). But that functionality does not exist, and Rob only did side-by-side tests.
However, you can run two separate tests, one on VOO with an annual withdrawal equal to the avg annual dividend yield, and a second test with a chosen dividend ETF with reinvest dividends turned off. I did that, btw, and Rob's thesis held up, VOO was a better choice over the past time frames available.
If price of the share goes down it doesn’t mean that you are going to have less dividends, the dividends go associated with the number of shares you have
Hi Rob, I have recently discovered your videos, and find them the best on-line advice, or any media, for that matter. Have you previously done a comparison of the advantages/disadvantages of mutual funds vs. ETF 's? Thanks.
Dividends are not necessarily a bumpy ride. Focus on companies that consistently grow their dividends. Watching the dividends grow makes it easy to ignore when your total return tanks. 20 years personal experience so far, great times. Looked back and also great times.
Selling shares is a one way street. It isn't the journey that is a problem it is the ending.
Any companies you recommend? I have a mainly dividend based portfolio actually get dividends every week with what I have, but wonder if I can maybe find some better stocks or might be on a good track
And there are index funds which do exactly that. Did you even watch the video?
@@cdm1949 there are dividend ETFs, this is not financial advise I’m simply making you aware of some examples, do your own research.
I’ve seen,
SPYD / HDV (dividend ETF)
VCLT / BLV (bonds ETF)
SCHD (lower dividend ETF)
dividend investing is not bumpy at all. I'm doing it for a long time and so far my dividend income never decreased on a year to year basis. never. not even in the "great financial crisis". pick quality companies with a long history of raising dividends and diversify. have a lot of them. in the unlikely case one of them does cut or just doesn't raise it you have 50 other companies that do raise. chances of having half your stocks cut the dividend is almost zero if you picked quality.
@@GunterD1337 or pick a dividend ETF
I like my money working for me even if the stock is boring.
My average dividend pay out is 4.5 % slow and steady wins the race.
4.5% payout? You mean yield?
I love the way you think. One basic question. If you knew you were going to die in 10 years and had a lump sum of cash, would you still put it in your 3 fund portfolio or keep it in a savings account in a bank?
Thank you Rob, I’m glad that I came across your channel. My future self thanks you
I have a basket of 60 dividend stocks all rated safe by simply safe dividends , also use Fastgraphs. My current yield is 4.6%. My portfolio dividend yield increased even during the Great Recession. It is very possible to live off of dividends which are far less volatile then price which as we know what easily change radically but with the right stocks one really does not really even need to worry about price much.
Same strategy I am using. My beta is .59 and yield 4.2% in 45 stocks. I sleep better than relying on Just VTI or VOO.
My current yield on invested funds is 8%. I more than fund my retirement lifestyle, and no, I’m not invested in “risky” assets. High-yield dividend investing is a wonderful way to fund a retirement.
My old saying still applies. It works until it doesnt. I knew somebody many yrs ago with similar maybe a little higher returns because he would sell above the money calls to collect the premium plus the stock div. Worked amazing for 5 yrs. Then the roof caved in. Remember many of the high div stocks are paying out everything they have. you are not getting anything for free. Its what they are making vs the appreciation of the stock that payout involves.
I agree and are invested in an Australian bank 1 million plus at 7% plus’s 30% franking total 102 thousand a year happy days for me and own my home 🙂👍💰
Rob -Question. What are your views of living off capital gains distributions in retirement? (in addition to living off dividends). This would be using your 3 fund strategy…. Thanks in advance
What if you were to only sell your last-in-first-out shares (to minimize cap gains tax) after each ex-dividend date to generate retirement income while reinvesting all dividends (to avoid paying qualified tax on the full cash distribution) to buy back the same number of shares that you just sold?
50% of my investments are blue chip that provide good dividend yields. The rest are growth stock ETF. Any big ticket leisurely expenditure are funded using dividends. What's not used I purchase more growth stock.
The whole thesis is based on the idea that the government keeps up massive stimulus plans, low rates, and QE that juice the SPY market. If we ever go to a normal economy that has to stand on it's own without government manipulation the good dividend companies that make cash on necessities will be the better bet.
What do you think about the tax advantages of qualified dividends vs liquidating the capital gains for income?
“Risk of underperformance” but not risk of becoming destitute and panhandling for lunch.
$1M in AT&T gets you around $70K a year in dividends. No reason to work.
AT&T will be cutting their dividend by half in 2022. They are spinning off WarnerMedia.
@Who Cares?Why? Even if you reinvest the dividends, you pay tax on them, right?(if in taxable)
Well this videos about retirement, unless you are completely decadent and over the top I don't see how you could run out of money with a million dollar stock account in retirement even ignoring dividends before ya know, you die!
Would be minus 23% of 70k in Kansas if held in a taxable account with long term capital gains. Short term capital gains tax here is 37%
@@fieldy409 Indeed. Why be bothered about growth when it is all is eventually to be given up anyways? A peaceful retirement with enough to meet reasonable needs I say.
It really depends on each person situation, let’s say you have a pension after retiring that covers all your monthly expenses and just need enough to complement your yearly fun expenses… during a recession it wouldn’t matter because is not money that you are needed to live. It’s all situational
When you compare VYM or VIG to the s and p 500 and compare them on total returns
Are you reinvesting dividends? Where is that money accounted for? Thanks
Could it be that the low dividend yield growth funds are outperforming higher dividend yields ones because the returns in the form of capital gains are compounded, but dividend yields are not. But if we start selling off some shares for cash flow, then this compounding effect would be lost and the former funds (low div yield) may end up performing similarly to the latter (high div yield) funds?
Dividends from the stock market encouraged me to begin investing. What matters, in my opinion, is that if you invest and make additional money in addition to dividends, you will be able to live off of dividends without selling. It implies that you can provide that benefit for your children, giving them a head start in life. I've invested more than $600K in dividend stocks throughout the years; I'm currently buying more today and will continue to do so until the price falls even further.
Hearing from an experienced investor who has survived the crisis and prospered is always comforting. It could be worrisome when your portfolio goes from green to red, but if you have invested in strong firms, you should just keep growing them and stick to your goal.
When a dividend investor looks at a source for dividends, index funds are the worst option and they don't balance them with bonds - its 100% in dividend producing stocks, ideally dividend aristocrats and kings - stocks with a history of consistent dividend payouts with annual increases. Typically you would be investing in boring stocks like utilities, banks, etc - industriies that will continue to produce income regardless of market conditions...
You realize, There are, Utility sector Index funds,
Real estate / Banking, index funds, that track those specific sectors?
So index funds aren’t always bad.
There is an. S&P 500, dividend ETF, which takes the top 82 dividend stocks in the S&P 500, and it’s an index, but has a dividend ratio of like 3.7%.
You can probably find the ticker yourself.
SCHD and SPY had almost Identical total returns. SCHD is not the highest yielding etf but good enough for a test. its dividend currently is 3.4%
would you still choose SPY?
1% is great. Never rule out dividend growth. Compounding power is very powerful if you know how to use it and understand it.
IMO “live off dividends” means your base expenses are covered by dividends, pension etc. Growth in your portfolio is fun money. New car, nice clothes, fancy vacations, second home etc.
I like that idea - combining a stable Retirement situation with fun money. And, if someone want to delay their own retirement by 2 years after they can retire, then that person has 2 years of fun money to allocate in their Growth portfolio for retirement above and beyond covering their base expenses. If someone wants to delay it by 5 years; then they could have that much more fun money down the road, etc. How much time is delaying retirement worth for fun money?
@@catsrule7751 depends how much you hate your job, no point having more fun money when your time is spent being miserable.
If you start young enough your yield on cost on many low yielders is large. My yield on cost of appl is 4.89% despite the current yield being under 1%. What you dont want to do is to have to sell stocks or bonds during a downturn and lose much if not all of your gains. Yes I have seen great companies like Citibank, Bank of America, PFE, MSA cut their dividends.If you have enough diviersification and a lot of aristocrats-rare to see cuts averaging more then 30% of a portfolio. I think it is great to have large dividend portfolio and never want to sell a stock because I have to.
Jay, many of the CZcamsrs who promote dividend investing really focus on 'yield on cost'. Indeed it can feel great to see that number climb over time! Don't be blinded into not seeing that 'total return' really is the more important statistic. With a growth portfolio I might indeed find I need to occasionally sell some shares to generate some cash flow but I'm effectively just cashing out some profits and not selling my original investments. With a 41% 12-month return on my growth portfolio, if I needed to, I could easily cash out a few percent and not feel guilty.
@@rossmacintosh5652 How important is total return when it will be cut in half before next year? Or might take 15 years to get back to 0? That's historical reality. If you are depending on total return you must have a backup plan.
@@Sylvan_dB Well if you invest in a nice dividend stock its value can also be cut in half by a market correction. If that happens then the company will likely cut or suspend the dividend. That too is reality. When the sh*t is flying dividend stocks catch their share. In the aftermath a growth stock can be seen as having potential while the stock that formerly paid a dividend is seen as a dying business. Sorry.
@@rossmacintosh5652 That is NOT reality. Cuts happen rarely even in 2008-9 and 2020 very few cuts happened and the increases exceeded the cuts. If you have a diversified portfolio there is nothing to worry about.
Even when I researched back to the great depression until 2000 the dividends stood out as the safe approach.
I've been doing this and monitoring closely since 2002, after doing extensive research into what actually happens. Your claim is from ignorance.
@@Sylvan_dB Two low-cost Vanguard ETFs are VIG (US dividend appreciation) and VUG (US growth). Since VIG's inception in 4.21/2006, every dollar invested in the ETF with dividends reinvested would have grown to $4.34. That's a 10.12% annual return. In comparison VUG for the same time frame would have seen each dollar invested grow to $6.51. That's a 13.08% annual return. According to Vanguard the risk profile for both ETFs is the same. You would have 50% more money in your investment account now had you bought VUG without any more risk.
Thank you for your insight on the other side of the coin.
Both opinions are necessary to decide what would work for a person.
Dividend investors typically don't buy whole market etf's to live off dividends. They buy stocks from dividend paying companies with good track records of increasing their dividend. I am getting 10% yield on cost from some of my earliest buys of over a decade ago.
You aren’t alone, I noticed this too. I found it interesting that he would show a portfolio with a mix of bonds and index funds yet only consider the dividend yield, it sounds like he has purposely diluted the yield of the bonds and actual dividends by lumping both together and not including price growth.
I am also getting about 10% yield on my ROTH in dividends and that does not include growth.
I’m looking at Dividends as supplemental income. I’ll hopefully have decent retirement savings and government pension and then dividends would be extra income.
When a dividend is distributed, the stock's price goes down. That's how dividends work. Don't get where you think dividends are "supplemental" income when you can just sell the amount of the stock you need for the same amount. The only difference between a $1mil dividend portfolio and a $1mil index fund growth portfolio in 30 years, is that the dividend portfolio will have more shares. Many dividend investors crack me up with their misguided thinking. I sell one share of my VTI fund = $206, you sell one share of your SCHD = $75.00. See? Math. I know. it's amazing. I can sell half my share, for $100, and even less to match the sale of your share. It's not magic. I think you gotta understand that at the very least.
The dividend yield citied is rather small. By tracking the broader market your yield is going to be small. But concentrating on blue chip dividend kings you can double the citied dividend yield. Second is you can ignore short term gyrations of the market swings because dividends are far more stable. Yes dividends can decline or disappear, But I managed through 2020 and dividends did not decline all that much.
Exactly. I love to let my dividends build up in my account rather than immediately reinvest so I always have some cash on hand to go bargain hunting. During the covid crash I watched my portfolio shrink and just shrugged it off, toss what I had on the sidelines into the market, and watched my dividend income rise. I've seen some down years while working on my dividend portfolio but I've yet to see a year where my total dividend payout shrinks.
Thank you so much for showing us portfolio visualizer! so much value in this video it's crazy.
Rob. I sometimes confuse myself on the fundamen6 reasons we do dividends. I tend to think total returns. Suppose I buy SPY with 20 delta LEAP short call as my covered call. Then wait and do nothing until expiration. And cash out the total increase as my payday using its dividend plus the theta gained. It would thus be long term capital gains so tax is not an issue. Would that approach be not only simpler but safer and with higher profit?
....and where do you get your numbers from ? (Aristocrats cutting their dividends during the great recession). Wikipedia has a much different story from yours. Same with my due diligence, each time I research a new stock, I have a look at the dividend during the great recession, and apart from financials, almost none cut their dividend in 2008 - 2010.
I personally didn't suffer any dividend cut during the COVID crisis and my dividend income increased close to double digits.
Problem, when the market is down 50%, how do you sell shares then??
That's why during retirement you have significant bond allocation to reduce drawdown and rebalance. Remember you are withdrawing money from a portfolio. In what proportion from individual holding is up to you.
Good budgeting during those times and keep 1-5 years in cash to draw from. I don’t own bonds and don’t want to with the current rates.
What if I were to only sell my last-in-first-out shares (minimize cap gains tax) in my tax deferred account after each ex-dividend date to generate retirement income while reinvesting all dividends (avoid paying qualified tax on the full cash distribution) to buy back the same number of shares that I just sold?
Hi Rob.... thanks for continous good content. I was wonder how do you track your portfolio? Do you think its better to use a basic excel or an app?
**its better to use a basic excel spreadsheet
I'm 29 now I started investing into ETF last year, I have been investing into retirement for the last 5 years from a deferred comp and retirement plan from my job. I'm curious to see who much money I will have when I retire in 16 to 20 years. But if you can afford it small investments can be good for generational wealth.
I feel kinda stupid asking this but:
1- if you are a retired person aren’t growth stock riskier? You don’t have the luxury wait until the stock recovers if it falls
2- don’t you pay more taxes selling more stocks as opposed to the keeping some of the dividends?
I’m a young person, so most of my portfolio is on growth, but me approaching retirement age I want to see the money stable and steady
1- Yes. 2- Yes.
Growth stocks can be more volatile, but if you look at the data, the standard deviation (which measures volatility) is not that different between say a Vanguard Value fund and Vanguard Growth fund. As for dividends, you actually pay more on dividends than sales of shares. Assuming dividends qualify for long term capital gains, 100% of the dividend in a taxable account is taxable. With the sale of shares, only the gain is taxable.
Pending your tax bracket and where you live taxes can be a killer no discussion on that point. Makes this video not very helpful
@@jamesdarnell8568
1.NO
2.NO
1.Due to what i learned from the Video : because people live longer nowadays , there is enough time (in fact decades) left for portfolios to recover from downturns. Since you withdraw only little amounts of your stocks per year, the "rest" (bigger portion) can grow again meanwhile. If you don't live longer then former generations money will last anyway ;-)
2. read RB comments about taxation
He's also not considering yield on cost. I have some stocks from the 90's yielding 30-40%. If you buy a stock today that yields 3%, in 20 years the yield on cost could easily be well over 10%. Most people don't understand dividends. A portfolio that grows to $1mil after 20 -30 years, let's say, can easily provide $50k-$80k+ a year.
The point of dividend investing is to do it over the longterm so you are earning more than 1.7%. Over 20 years, you could earn around 3%+ My goal is to live on dividends early in retirement before touching the principle later in retirement.
Yea but you pay tax on the dividend in the US.
@@muffemod not if it’s a Roth account.
And even if it’s a taxable account, it’s taxed at a favorable rate of 15%. So what’s your point?
Reminder, you would also pay (capital gains) tax on the sell of stocks from your taxable account too?
@@waterdd1 That's right! Roth is tax exempt. Captial gains is 0% for the first ~$52,000 of gains (~$105,000 if married). You can gain harvest every year to lower your cost basis in retirement.
@@muffemod ah, good point!
But I want to point out (to others) that it only holds true if the capital gains were your only source of income.
Because if you have any other income, including IRA/401k distributions (which most Americans do!), then you can expect to pay capital gains tax on those stock sells from the brokerage account.
@@waterdd1 in a taxable ira you don’t get the dividend rate, withdrawals are taxed as ordinary income
My wife and I retired about 2 1/2 years ago, and we are primarily invested with Vanguard. We especially like passive investing in low cost funds, such as the total stock market index fund. Recently, we converted our mutual funds account to the brokerage account.
We have set up our funds to transfer dividends and capital gains to our money market settlement fund, and we plan to draw down this settlement fund before we sell any other shares - the thinking being that we are already paying taxes on dividends and capital gains. Is my reasoning flawed? Thoughts?
I wish you ran specific numbers on: During a crash, what is the dividend yield difference and overall impact for that period and which portfolio is better off during those years IF you are retired and withdrawing money every year? So if the market crashes by 30-40% and the portfolio sits there less 35% or so, for 5-7 years like in the great recession. Is a retiree better off in the Div portfolio getting 17k$ from dividends and selling a 13k$ off the depreciated Div portfolio or is the Appreciation portfolio getting how much in dividends? 10k$ then selling off 20k$ in their depreciated Appreciation portfolio? And doing that for like 7 years straight? I'd be curious to see how that 20k$ or so eats away at the appreciation portfolio that was originally 1m$ but is now 600k$ because of a crash. So when the market rebounds, you go from 460k$ rebounding (assuming you withdrew 20k$ for that 7 years) to 644k$ or so when the market rebounds that 40%. Correct? I mean that's basically the doomsday retirement scenario every retiree fears, which actually happened in 2007. I think in this doomsday scenario the Div portfolio would rebound to around 742k$ vs the 644k$ in the Appreciation portfolio. As the market recovers yes the Appreciation portfolio would overtake the Div portfolio but what if, you keep having to drain that 20k$ vs the 10k$? what is the difference in dividends between a div portfolio and apprec per year i can't remember haha. How steep is it or if at all?
Whole Life Insurance is yielding 5 5% dividend.....the base dividend in guaranteed 4% in writting
Stock dividends are around 4 to 5%
Muni bonds are around 4 to 5% tax free
1 to 2% ? lol - your losing money basically
Dear Rob, I'm 10 minutes into your video and you haven't mentioned REIT stocks yet. I think people who are serious about investing, with the goal of living off of dividends, are often invested in REITs and other stocks specifically chosen for their safe yet growing dividends. Having said that, I do agree with your sentiment that many dividend stocks and ETFs get outperformed by the simple SP500 or NASDAQ 100 ETFs.
That's why I just buy index funds and these index funds pay dividends too. Dividend stocks and Reits are overrated. If I want investment income I'd just lend stablecoins and get paid monthly. Dividend investments are obsolete if you ask me. You could even stake tokens for very high yields.
@@Hboogie182 bro everything you said makes no sense, “stake tokens”???
Amino, that’s the whole point of a dividend ETF, it’s for dividends, it’s not supposed to outperform. You can’t have both.
@@HateTheIRS he is referring to cryptocurrency. You can buy crypto pegged to the value to the US dollar and then lend it out for 8% APY
@@AF-mq4pw ok tell me how that works out for ya
Michael Kitches says that taxes on dividends in a taxable account are a drag on returns. How do you suggest a portfolio deal with this drag?
Hi Rob, Does this also apply to CEF? since CEF actually tades among investors and actually buying the stock itself??? Any one knows?? Thanks!
Living in dividend doesn’t have to be a hard fast rule. On years when you’d like to splurge, one can always sell off some shares. But I think you make a good point in that if one wants to live a higher life style day in and day out (e.g. buying and living and maintaining a luxury vacation home), one needs a regular stream of income, and applying the 4% (dividends + stocks sold) could maybe generate a more steady income stream…maybe. But I’m not entirely convinced given that cash dividends vary far less than price and can always bank away some of the yearly gains in cash dividends and use the banked money to cover years when cash dividends dip.
My preference is to live on cash dividends only during retirement so that all my shares can continue to double in value every 7-8 years, and so that I continue to generate more cash dividends with the growth in share values. After some time after retirement, the portfolio value will have grown at such an exponential rate and to such a size that I can sell shares for cash without ever ever worrying about drawing down and burning through my entire portfolio to eventually leave me with zero shares to generate zero dividends.
Exactly what I was thinking.
Why sell shares? Just take out a margin loan and let your dividends repay it? that u keep your shares so they can continue compounding, and u don't create a taxable event.
@@chriswoodard8497 Highest IQ statement yet. People do it all the time with rental properties with cash out refinance, but no one thinks to do it with their equities.
@@chriswoodard8497 And what kind of margin rate can you get today? 6-7% if you negotiate? Margin and retirement don't go together. And margin rates will vary as the Fed makes moves. Live off dividends and sell occasionally to support yourself if needed. Chris you are in retirement, living off the dividends. No more compounding.
@@redtops5160 not true, some brokers margin rates are very low. Much lower than the dividend rates received. You need to get out more.
A safer bet for retirement would probably be just go all in on AMC and wait for it to squeeze :)
Have I missed something or did he compare without payouts?
Would you consider addressing using dividend investments to supplement a retirement income? In my case, I have a pension, social security and require additional to balance out my income. Can dividend investments help with this?
Here's my take on dividends in retirement: czcams.com/video/fhAu61STtcY/video.html
Thank you for your time. Not a fan of the 4% rule. Not selling equities to fund retirement.
Dividend income will work just fine here, in combination with a pension and social security.
Agreed. I have ETFs that give me 8%. I pull what I need and allow the difference to help increase and buy more shares
100% agree.
My dividends are roughly in the 4-5% range. I am far from retirement. I am heavy in growth stocks. Yield is important, but you want to start with value stocks that are low.
Any thoughts on ishares EM dividends or ishares MSCI world quality dividend UCITS?
I think they are interesting, but would love to know if I am wrong and why.
Would your portfolio balance not be lower on your S&P example since you would be selling stock throughout? I feel like these comparisons are misleading.
Yeah great discussion! I'm super into dividends, ands it's addicting to watch the my total dividend income grow each time I buy new shares. But I am in my 30s, and although I track my dividend income very closely, I'm primarily interested in overall portfolio growth. Most of my high performing positions in terms of overall gains, have dividends below 4%. I do like knowing that incase something goes sideways in my life in the future, I will have predictable cash flow that I can draw from if needed, but so far I always reinvest the dividends. My overall portfolio yield is usually around 3.5-4%, but when I retire I think I will actually switch many of my positions to higher yield stocks, perhaps around 5-6% that still grow slightly in dividend, and share price. At that point Ideally I think I could live off 5-6% without selling shares. I'm suspicious of those yielding 10%+ so I generally avoid them. But yeah, dividends are cool, and I still have like 30 years to reconsider my strategy 🤔
Your yield-on-cost (price you paid for the share equal to the dividend yield) could most likely be higher... For example, you buy Apple shares that are currently yielding .57% yield. If you buy a share of Apple today, hold it for several years, your future yield-on-cost will be higher because they do dividend raises. their future dividend raises will be based off of the price you paid today (or your cost basis, which is the average cost of all Apple shares you own, with purchases made over time).
I only use Apple as an example because it is a solid growth play that also pays a dividend and does big share buybacks. You can expect an even bigger yield-on-cost by purchasing large blue chip companies with a long dividend history, growth and dividend growth addition.
Buy an dividend ETC like SCHD, VYM or VIG, and hold them for years. Or buy single stocks like Duke Energy, Microsoft, Home Depot, Proctor & Gamble, who pay decent yields today that will most likely grow in the future, giving you a higher yield...
You don’t mention what your income bracket is, make sure your dividends don’t get taxed too much. In your 30s I would just go with a low dividend index fund or Berkshire Hathaway (no dividends ) and shift into dividends maybe for retirement. You loose in growth when focusing on dividends at your age. You will have a higher portfolio value.
VUG had unprecedented growth during a time of historically low interest rates. The next decade won’t look so rosy for those giant “growth” companies.
are u from the future?? how can u be so sure if not, u dont know what will happen in 10 mins and u think u can forecast 10 years from now?? LOL
Great video
Why would I mimic the market. Utilities, telecom, oil companies, pipeline companies pay much higher dividends. Even some of the tech like IBM and XEROX pay much higher. (heck even TXN pay 2.5%)