Dividend, growth investment strategy

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YellowJoe
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Dividend, growth investment strategy

Post by YellowJoe » Sat Sep 07, 2013 11:29 am

Hi Folks,

I been reading up and started studying a bit about a 'dividend - growth' portfolio strategy.

Stats show top dividend stocks historically (last 5, 10, 15, 25 yrs from what i been researching so far) has consistently BEAT the market and also went down LESS during market down-towns such as 2008 crash.

It takes some active personal management however the results seem promising.

I dont think the rules of the forum allow me to post any links..however just wanted to share with you something interesting...

thx1138
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Re: Dividend, growth investment strategy

Post by thx1138 » Sat Sep 07, 2013 11:47 am

I'd continue studying:

http://www.cbsnews.com/8301-505123_162-57384410/dont-rely-on-dividend-strategies-to-pick-stocks/

I don't think the strategy you describe has ever lived up to its promises but there are a lot of strategies with dividend and growth in their names so it is hard to say without some specifics.

YellowJoe
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Re: Dividend, growth investment strategy

Post by YellowJoe » Sat Sep 07, 2013 12:03 pm

im a bit worried about writing specifics in terms of violating rules on this site.

cbs is not a place i would even look at for advice on dividend growth strategy. its not where im researching :)

so, do some more google'ing on your own. thats what i'm doing.

the info i found, At the very least, its some pretty good reading and insight!

:)
Last edited by YellowJoe on Sat Sep 07, 2013 12:05 pm, edited 1 time in total.

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nisiprius
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Re: Dividend, growth investment strategy

Post by nisiprius » Sat Sep 07, 2013 12:05 pm

Those statistics are nowhere near as cut-and-dried or certain as advocates make it out to be. And statements like "went down LESS during market [downturns] such as 2008 crash" because when you actually check them out, if it is even true, it always turns out to mean something like "Yeah, then went down 44% when the Total Stock Market went down 48%." Not a very strong effect. Bond allocation is a much more effective lever for reducing drawdowns in a market crash than anything you can do by selecting stocks.

I suggest you try this for yourself: read the guide to How to use Morningstar growth charts and pick out a few examples of real-world dividend-oriented mutual funds, and see how they did (a) compared to Vanguard Total Stock Market Index in general, and (b) how they performed during 2008-2009 in particular. I think you will see that the claims for dividend stock superiority are tenuous and unimpressive.

Here is an example. Rather than pick a mutual fund myself, I am going to let MSN Money do it for me: Downside protection with dividend ETFs: Investors worried about a market decline should consider these exchange traded funds to weather the storm. I haven't peeked yet. I really don't know how it will turn out. Here is what I am going to do. I am going to go down their list until I find the first one that has existed for at least ten years. If I can't find one, I'll use the longest one. Then I will compare it to Vanguard Total Stock, using the total time period the ETF has existed.

SPDR S&P Dividend ETF, SDY: 2006, HDV.
Vanguard High Dividend Yield Index Fund VYM, 2006.
iShares high Dividend ETF, HDV, 2011.
WisdomTree LargeCap Dividend Fund DLN, 2006.

Phooey. Not one of them goes back ten years. I'm chucking out HDV because it doesn't even go back to 2008-2009 and thus shows us nothing about performance in a downturn, and I'm going to chart all the others. I'm using the trick of charting a mutual fund, Total Stock, first, which will force Morningstar to show us total return rather than price only on the chart, which, of course, is favorable to dividend stocks funds which get more of their total return from dividends.

Starting with the 11/30/2006, the earliest date for which all four funds existed: do you see any very big differences in general behavior or in total return? Notice that two of the three actually underperformed Total Stock, by minuscule amounts, during the happenstance of the period I looked at.

Image

Now, starting with 12/31/2007 and charting 2008 and 2009, do you see any very big differences in how far down they went during 2008-2009?

Image

Yes, indeed, SDY went down only 42% when Total Stock went down 48%, but, really, would it have felt all that much better?

And two of the three actually went down more than than Total Stock! :shock:

Remember, the title of the article is "Downside protection with dividend ETFs!"

These are supposed to be funds picked specifically for downside protection--yet during the last severe market decline, they did (very slightly) worse than a boring old total stock market mutual fund! Apparently whoever chose them didn't even look at the data--or chose to ignore it.

Check out everything you read. Look for yourself. Don't look at the numbers they give you, always spend the fifteen minutes it takes to dig out some numbers for yourself. Dividend stocks? I think it's possible that there might be something to it, but the claims of dividend stock enthusiasts are wildly exaggerated and don't stand up to even casual inspection.
Last edited by nisiprius on Sat Sep 07, 2013 12:08 pm, edited 1 time in total.
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John3754
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Re: Dividend, growth investment strategy

Post by John3754 » Sat Sep 07, 2013 12:08 pm

If the dividend growth strategy consistently beats the market with less volatility then why isn't everyone doing it?

YellowJoe
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Re: Dividend, growth investment strategy

Post by YellowJoe » Sat Sep 07, 2013 12:09 pm

hi nisiprus,

the info. im reading is not comparing dividend ETF's to total stock market ETFs. there is some research and active management involved in picking the 50 or so dividend growth stocks.

I'm going to definitely review your reply/info. more closely as well.

thank you...

YellowJoe
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Re: Dividend, growth investment strategy

Post by YellowJoe » Sat Sep 07, 2013 12:11 pm

John3754 wrote:If the dividend growth strategy consistently beats the market with less volatility then why isn't everyone doing it?


i dont know. this i cant answer.

if the non-active management bogle method is also consistently the BEST way, why isnt everyone doing it as well?

:)

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LAlearning
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Re: Dividend, growth investment strategy

Post by LAlearning » Sat Sep 07, 2013 1:17 pm

YellowJoe wrote:I been reading up and started studying a bit about a 'dividend - growth' portfolio strategy.

Stats show top dividend stocks historically (last 5, 10, 15, 25 yrs from what i been researching so far) has consistently BEAT the market and also went down LESS during market down-towns such as 2008 crash.
--Please post your "stats", and show the beating that has occurred.

It takes some active personal management however the results seem promising.
--I spend my time at work (job, family, out) not with the market.

I dont think the rules of the forum allow me to post any links..however just wanted to share with you something interesting...im a bit worried about writing specifics in terms of violating rules on this site.
--You are not violating any rules posting facts. Generally if it pertains to your personal investment conundrum and is not politically charged,
it is free to be discussed.


cbs is not a place i would even look at for advice on dividend growth strategy. its not where im researching :)
--Really? Cause Larry Swedroe writes there and knows a lot more than both of us I think. Again, please post your research.

so, do some more google'ing on your own. thats what i'm doing.
--Ah yes, Google. A very trusted, scientific, and vetted source.

the info i found, At the very least, its some pretty good reading and insight!
--Entertaining sure. What is the insight exactly? Did you not know what dividends were before? Is this a secret others don't know about either?

the info. im reading is not comparing dividend ETF's to total stock market ETFs. there is some research and active management involved in picking the 50 or so dividend growth stocks.
--Which ones do you pick? For how long? When do you add or subtract other stocks? What do you use for research?

if the non-active management bogle method is also consistently the BEST way, why isnt everyone doing it as well?
--Being a Boglehead is theoretically not the best. Not even close. If you put a million into AAPL/TSLA/Tech bubble/Real Estate bubble at their low before their meteoric rise and got out at the top, you would be set every time! But this has shown to be impossible to do consistently.
--Therefore, by owning everything, and only needing a few minutes of my time a year, I can consistently outperform most active management and get my share of the market.
--People are greedy and think they can do better. Some can, some can't. I don't have the time.
I know nothing!

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nisiprius
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Re: Dividend, growth investment strategy

Post by nisiprius » Sat Sep 07, 2013 1:25 pm

YellowJoe wrote:I dont think the rules of the forum allow me to post any links..however just wanted to share with you something interesting...
Just to be clear. The forum software allows you to post links as soon as you've made several posts, I forget the exact number but I'm sure it's less than ten. Click on the "forum policy" link near the top of the page--at the right end of the second of the two light blue bands--to read the forum policy, or just click here. The relevant policy is probably
Please do not solicit business or website traffic on this forum. A discreet link to your personal website or blog in your profile is allowed. The moderators and administrators reserve the right to determine unilaterally what constitutes solicitation, to remove such material, and to ban a repeat offender if necessary.
You aren't trying to drive traffic to your personal website, are you? You are not an advisor trying to attract clients, are you?

As long as you're just an investor who is considering following a strategy posted somewhere, I think it would be completely appropriate to indicate the site describing that strategy--provided it isn't advocating anything illegal, or isn't essentially a political website, or anything like that.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

hafius500
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Re: Dividend, growth investment strategy

Post by hafius500 » Sat Sep 07, 2013 1:45 pm

YellowJoe wrote:Hi Folks,

I been reading up and started studying a bit about a 'dividend - growth' portfolio strategy.

Stats show top dividend stocks historically (last 5, 10, 15, 25 yrs from what i been researching so far) has consistently BEAT the market and also went down LESS during market down-towns such as 2008 crash.

It takes some active personal management however the results seem promising.

I dont think the rules of the forum allow me to post any links..however just wanted to share with you something interesting...


According to these articles the income from dividend strategies declined more than the income from the SP500 Index from 2008 through 2011. You need to be a smart stock-picker.
Seekingalpha - Dividend ETFs Under The Microscope, Apr 22 2012,
SPY: SPDR S&P 500
Total Performance:
1-year: 6.5%
3-year: 18.6%
5-year: 0.7%
10-year: 3.95%
Distribution Performance:
2008: 2.721
2009: 2.181 (-20%)
2010: 2.267 (+4%)
2011: 2.576 (+14%)
.......................
WisdomTree Total Dividend Fund

1-year: 9.3%
3-year: 22.0%
5-year: 0.52%

2008: 1.6411
2009: 1.1403 (-31%)
2010: 1.3382 (+17%)
2011: 1.3799 (+3%)
----------------------
WisdomTree Equity Income Fund

Total performance:
1-year: 12.3%
3-year: 24.4%
5-year: (-1.5%)
10-year: NA

Distribution performance:
2008: 2.1573
2009: 1.1804 (-45%)
2010: 1.5980 (+35%)
2011: 1.4171 (-11%)
--------------------
WisdomTree Dividend ex-Financials Fund

Total performance:
1-year: 9.7%
3-year: 27.0%
5-year: 1.4%
10-year: NA

Distribution performance:
2008: 2.133
2009: 1.549 (-27%)
2010: 1.611 (+4%)
2011: 1.647 (+2%)
-------------------------
SDY: SPDR S&P Dividend ETF
Total performance:

1-year: 6.1%
3-year: 17.7%
5-year: 1.6%
10-year: NA

Distribution performance:
2008: 2.206
2009: 1.733 (-21%)
2010: 1.638 (-5%)
2011: 1.738 (+6%)
-------------------------------
VYM: Vanguard High Dividend Yield ETF
Total performance:

1-year: 9.3%
3-year: 20.3%
5-year: 0.96%
10-year: NA

Distribution performance:
2008: 1.443
2009: 1.168 (-19%)
2010: 1.091 (-7%)
2011: 1.327 (+22%)
-----------------------
VIG: Vanguard Dividend Appreciation ETF
Total performance:

1-year: 6.5%
3-year: 17.6%
5-year: 2.99%
10-year: NA

Distribution performance:
2008: 1.026
2009: 0.979 (-5%)
2010: 1.048 (+7%)
2011: 1.172 (+12%)
.............................
DVY: iShares Dow Jones Select Dividend Index
Total performance:

1-year: 10.6%
3-year: 23.8%
5-year: (-1.58%)
10-year: NA

Distribution performance:
2008: 2.419
2009: 1.661 (-31%)
2010: 1.703 (+3%)
2011: 1.848 (+9%
prior username: hafis50

John3754
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Re: Dividend, growth investment strategy

Post by John3754 » Sat Sep 07, 2013 2:07 pm

YellowJoe wrote:
John3754 wrote:If the dividend growth strategy consistently beats the market with less volatility then why isn't everyone doing it?


i dont know. this i cant answer.

if the non-active management bogle method is also consistently the BEST way, why isnt everyone doing it as well?

:)


The Bogle method is not about being the best, it's about accepting the market returns. The reason so many people don't do it is because they believe they are above average investors and that they are smarter than the market. Do you believe that you know something the rest of the market doesn't?

YellowJoe
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Re: Dividend, growth investment strategy

Post by YellowJoe » Sat Sep 07, 2013 10:19 pm

hi LaLearning,

why the aggressive tone sir? Obviously bogle method is best for you since u want to 'set it and forget it' style of long term investing and it gives u time with your family.

I personally believe in lazy-bogle method. otherwise i wont be here. I'm 70% (US, International) 30% fixed income. However this dividend-growth strategy is interesting.

anyways, google "chowder rule dividend growth"
Also, look for a guy name "Bob wells" on seekingalpha site.

since this is a very lazy/bogle centric forum (obviously, since its called bogleheads) i wont be posting so much proof or even attempt to sway people who is better, wrong or right. i'll leave that to each person.

And yes, Google can be very analytical if you look for the right source of information. Google did help me find 'bogleheads forum"

good luck on your findings! :D



LAlearning wrote:
YellowJoe wrote:I been reading up and started studying a bit about a 'dividend - growth' portfolio strategy.

Stats show top dividend stocks historically (last 5, 10, 15, 25 yrs from what i been researching so far) has consistently BEAT the market and also went down LESS during market down-towns such as 2008 crash.
--Please post your "stats", and show the beating that has occurred.

It takes some active personal management however the results seem promising.
--I spend my time at work (job, family, out) not with the market.

I dont think the rules of the forum allow me to post any links..however just wanted to share with you something interesting...im a bit worried about writing specifics in terms of violating rules on this site.
--You are not violating any rules posting facts. Generally if it pertains to your personal investment conundrum and is not politically charged,
it is free to be discussed.


cbs is not a place i would even look at for advice on dividend growth strategy. its not where im researching :)
--Really? Cause Larry Swedroe writes there and knows a lot more than both of us I think. Again, please post your research.

so, do some more google'ing on your own. thats what i'm doing.
--Ah yes, Google. A very trusted, scientific, and vetted source.

the info i found, At the very least, its some pretty good reading and insight!
--Entertaining sure. What is the insight exactly? Did you not know what dividends were before? Is this a secret others don't know about either?

the info. im reading is not comparing dividend ETF's to total stock market ETFs. there is some research and active management involved in picking the 50 or so dividend growth stocks.
--Which ones do you pick? For how long? When do you add or subtract other stocks? What do you use for research?

if the non-active management bogle method is also consistently the BEST way, why isnt everyone doing it as well?
--Being a Boglehead is theoretically not the best. Not even close. If you put a million into AAPL/TSLA/Tech bubble/Real Estate bubble at their low before their meteoric rise and got out at the top, you would be set every time! But this has shown to be impossible to do consistently.
--Therefore, by owning everything, and only needing a few minutes of my time a year, I can consistently outperform most active management and get my share of the market.
--People are greedy and think they can do better. Some can, some can't. I don't have the time.

pkcrafter
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Re: Dividend, growth investment strategy

Post by pkcrafter » Sun Sep 08, 2013 10:12 am

Joe, I looked up Chower's famous rule and this is what he said:
Since 8% is my total return number, I wanted to buy companies that when you combined the current yield with the 5 year compounded annual growth rate (CAGR), I wanted it to equal 12% or more, giving me a buffer or dividend moat against my total return objective.

Chowder mentions that he reinvested dividends, so I wonder about his calculations. CAGR would include dividends in the total return calculations, so can you confirm he's not adding in the dividend twice?

Here's another suspect claim:
High Quality + High Current Yield + High Growth Of Yield = High Total Return.

This is incorrect. High quality does not necessarily lead to high total return, and there is no mention of capital appreciation.

http://seekingalpha.com/instablog/728729-chowder/1468521-dividend-growth-the-stock-selection

Paul
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nedsaid
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Re: Dividend, growth investment strategy

Post by nedsaid » Sun Sep 08, 2013 10:27 am

Investing for dividend growth actually is an excellent strategy. Essentially a part of what you are doing is attempting to capture the "quality" premium that Larry Swedroe has talked about. Dividend growth is a good indicator of quality particularly if earnings are growing as well.

The problem is that stocks that pay high dividends have been bid up by the yield chasers and no longer represent value. The P/E's of the S&P Dividend ETF and a Vanguard High Dividend Fund are higher than the stock market as a whole. There are good threads that address this topic.

So this is a great strategy but now is a terrible time to jump in. As yields on bonds continue to rise, at some point the yield chasers will start putting their money back into bonds and taking it out of bond alternatives. This includes REITs, Utility Stocks, High Dividend Stocks, Emerging Market Bonds, etc.

I realize that dividend growth is a different strategy than high dividends. My suspicion is that yield chasers have gone for dividend growth as well. Dividends are still cool right now. Wait until dividends are perceived like geeky glasses, pocket protectors, and pants designed to avoid a flood. When dividends are considered only for the geeky and the nerdy and the "cool" people don't like them anymore, then start looking.

So my counsel is to wait. Better values are ahead. When you start seeing articles saying that dividends don't matter then you might start looking.
A fool and his money are good for business.

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Re: Dividend, growth investment strategy

Post by YDNAL » Sun Sep 08, 2013 10:39 am

YellowJoe wrote:cbs is not a place i would even look at for advice on dividend growth strategy. its not where im researching :)

YellowJoe,

You may not look to CBS for research, and since Google is the place for your research, do some on the AUTHOR in the piece linked for you by Thx1138.

While you research, check this also.
http://www.bogleheads.org/wiki/Main_Page
http://www.bogleheads.org/wiki/Books:_r ... nd_reviews
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

YellowJoe
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Re: Dividend, growth investment strategy

Post by YellowJoe » Sun Sep 08, 2013 11:01 am

YDNAL wrote:
YellowJoe wrote:cbs is not a place i would even look at for advice on dividend growth strategy. its not where im researching :)

YellowJoe,

You may not look to CBS for research, and since Google is the place for your research, do some on the AUTHOR in the piece linked for you by Thx1138.

While you research, check this also.
http://www.bogleheads.org/wiki/Main_Page
http://www.bogleheads.org/wiki/Books:_r ... nd_reviews


Great thanks YDNAL. i'll do that!

tibbitts
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Re: Dividend, growth investment strategy

Post by tibbitts » Sun Sep 08, 2013 11:16 am

YellowJoe wrote:Hi Folks,

I been reading up and started studying a bit about a 'dividend - growth' portfolio strategy.

Stats show top dividend stocks historically (last 5, 10, 15, 25 yrs from what i been researching so far) has consistently BEAT the market and also went down LESS during market down-towns such as 2008 crash.

It takes some active personal management however the results seem promising.

I dont think the rules of the forum allow me to post any links..however just wanted to share with you something interesting...

I think that for most people, you have to actually implement something that your research indicates will outperform.

Then, one of three things will happen:

1. you'll outperform, be convinced your approach is correct (not just due to luck), and continue with it - at least until it fails.

2. you'll underperform, give up, and just buy/hold broad index funds or other relatively passively managed investments.

3. you'll continually seek out a more optimal strategy, regardless of whether you succeed or fail.

Personal experience that includes actually gaining/losing substantial (to you) sums of money, counts a hundred times more than reading about theories in a textbook or on a forum.

Paul

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topper1296
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Re: Dividend, growth investment strategy

Post by topper1296 » Sun Sep 08, 2013 11:21 am

nedsaid wrote:Investing for dividend growth actually is an excellent strategy. Essentially a part of what you are doing is attempting to capture the "quality" premium that Larry Swedroe has talked about. Dividend growth is a good indicator of quality particularly if earnings are growing as well.

The problem is that stocks that pay high dividends have been bid up by the yield chasers and no longer represent value. The P/E's of the S&P Dividend ETF and a Vanguard High Dividend Fund are higher than the stock market as a whole. There are good threads that address this topic.

So this is a great strategy but now is a terrible time to jump in. As yields on bonds continue to rise, at some point the yield chasers will start putting their money back into bonds and taking it out of bond alternatives. This includes REITs, Utility Stocks, High Dividend Stocks, Emerging Market Bonds, etc.

I realize that dividend growth is a different strategy than high dividends. My suspicion is that yield chasers have gone for dividend growth as well. Dividends are still cool right now. Wait until dividends are perceived like geeky glasses, pocket protectors, and pants designed to avoid a flood. When dividends are considered only for the geeky and the nerdy and the "cool" people don't like them anymore, then start looking.

So my counsel is to wait. Better values are ahead. When you start seeing articles saying that dividends don't matter then you might start looking.


Yes, a dividend growth strategy (which is what the title of the thread is about) is different from high divided yield strategy, so a chart and/or numbers using the Vanguard Dividend Growth fund (VDIGX) or the Vanguard Dividend Appreciation ETF (VIG) would be a better comparison to the total stock market or S&P 500 than using a high dividend yield fund/etf.

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Re: Dividend, growth investment strategy

Post by nedsaid » Sun Sep 08, 2013 11:48 am

Nisiprius used two of the ETF's that I mentioned in a previous post on this thread.

You are right that I should use better comparisons. So I am looking this up. The Vanguard Dividend Growth fund has a P/E of 14.94, a P/B of 2.87, and a P/S of 1.22. The S&P 500 Spiders has a P/E of 15.38, a P/B of 2.20, and a P/S of 1.47. So it looks like the value metics are a bit of a wash. Price to earnings and price to sales look a bit better for Dividend Growth but the S&P 500 is better on price to book value.

The Vanguard Dividend Appreciation ETF has a P/E of 15.76, P/B of 2.95, and a P/S of 1.29. The value metrics are not as good as the Dividend Growth Fund.

So this is telling me that the valuation metrics for Dividend Growth are better than for high dividend. But no screaming values here. My suspicion is that historically the Dividend Growth products might trade with a bit higher valuations than the market as a whole because investors like dividend growth. My suspicion is that the consistent dividend growers tend to have consistent earnings growth as well.

So If I had to pick right now between a high dividend strategy and the dividend growth strategy, I would pick dividend growth. If I had to pick between the fund and the ETF, I would pick the Vanguard Dividend Growth Fund. So if you wanted to buy in here, it looks okay. Not a screaming bargain but the valuation metrics look reasonable.
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nisiprius
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Re: Dividend, growth investment strategy

Post by nisiprius » Sun Sep 08, 2013 11:48 am

topper1296 wrote:Yes, a dividend growth strategy (which is what the title of the thread is about) is different from high divided yield strategy, so a chart and/or numbers using the Vanguard Dividend Growth fund (VDIGX) or the Vanguard Dividend Appreciation ETF (VIG) would be a better comparison to the total stock market or S&P 500 than using a high dividend yield fund/etf.
Well, the last time I did that, someone said it was The Wrong Fund, but, OK.

The chart shows less than no support at all for any claim of outperformance. Total Stock, blue; DIvidend Growth, orange.

Image

There is arguably some meaningful degree of downside protection, 36% drop instead of 48% in 2008-2009, but, remember, it is at the cost of significantly lower performance:

Image

But here's the big question. Is it better to get your downside protection by picking some selected subset of stocks, versus the obvious, easy, effective thing, which is to use a bond allocation? Here, we compare the "dividend growth" fund (orange) to three balanced funds: Wellington, Wellesley, and plain old Balanced Index (60% Total Stock, 40% Total Bond). For the starting point, I used the inception of the Dividend Growth fund.

Every one of the three balanced funds outperformed the Dividend Growth fund:

Image

And every one dropped less in 2008-2009, every one.

Image

What's the evidence that selecting for dividend stocks does anything that a bond allocation doesn't do better?

(And, incidentally... I don't buy into the extreme scare talk about rising rates, but I will point out that, to whatever extent they are bond-like stocks, rising rates will drag the performance of dividend stocks, too).
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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nedsaid
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Re: Dividend, growth investment strategy

Post by nedsaid » Sun Sep 08, 2013 11:55 am

As usual, Nisiprius comes armed with his excellent graphs.

For the record, I invest with stocks and bonds both. Right now, I have 69% stocks and 31% fixed income in my retirement portfolio. I also have dividend stocks and equity income funds in my portfolio. I believe in dividends but they are not the magic guarantee of market outperformance.

To me, dividend growth makes a lot of sense. What Nisiprius' charts show is that bonds performed pretty darned well during those time periods. But his point is excellent. Don't ignore the role of bonds in your porfolio. Dividend stocks after all are still stocks.
A fool and his money are good for business.

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Re: Dividend, growth investment strategy

Post by sdrone » Sun Sep 08, 2013 12:23 pm

I'm glad someone mentioned VIG. I've thought about using VIG instead of VTI a couple of times in the last several years; one of the main reasons is that it dropped LESS than VTI in 2008. 2008 is always in the back of my mind.

HOWEVER, a couple of things my research showed me:
1. It dropped less than 2008, but it does not necessarily keep pace with VTI in big up years.
2. When comparing VIG to VTI, you have to include a little bit of smallcap to do a real comparison. it's quite possible that the smallcap piece (something less than 2% in VIG, something like 6% in VTI) is what makes VTI go down more and up more than VIG.

Bottom line, I look at VIG+smallcap vs. VTI about every year now the data does not persuade me to change.

One other way of going about this might be to increase your international allocation. Last I checked, both VXUS and VEU had a yield greater than 4%.

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Re: Dividend, growth investment strategy

Post by YDNAL » Sun Sep 08, 2013 12:34 pm

nisiprius wrote:
topper1296 wrote:Yes, a dividend growth strategy (which is what the title of the thread is about) is different from high divided yield strategy, so a chart and/or numbers using the Vanguard Dividend Growth fund (VDIGX) or the Vanguard Dividend Appreciation ETF (VIG) would be a better comparison to the total stock market or S&P 500 than using a high dividend yield fund/etf.

Well, the last time I did that, someone said it was The Wrong Fund, but, OK.

The chart shows less than no support at all for any claim of outperformance. Total Stock, blue; DIvidend Growth, orange.....

It is never optimum to look at (invest in) ANY asset (sub-asset) class in isolation.

To me, for instance, Vanguard Div Growth (VDIGX) is nothing more than an extremely narrow (52 stocks) option with certain over/underweights to segments of broad US economy. I guess, put the money where dividend growth 'may (may not) come' with questionable diversification (or lack thereof).
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Code: Select all

Sector diversifition   VDIGX S&P 500
Consumer Discretionary 15.90% 12.20%
Consumer Staples       11.90% 10.40%
Energy                  9.20% 10.50%
Financials             10.40% 16.70%
Health Care            21.20% 13.00%
Industrials            14.80% 10.30%
Information Technology 11.00% 17.70%
Materials               4.30%  3.30%
Telecommunication Serv  0.00%  2.60%
Utilities               1.30%  3.30%
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Re: Dividend, growth investment strategy

Post by nisiprius » Sun Sep 08, 2013 1:20 pm

nedsaid wrote:As usual, Nisiprius comes armed with his excellent graphs....
It's so easy, and so instructive, I think everyone should be doing it in addition to anything else they are doing. What with the ability to compare up to six or seven funds, the ability to choose arbitrary endpoints, and the fact that Morningstar goes back to fund inception--which often gives an amazingly different picture from just looking at the last ten years--it is a very powerful tool. It takes about fifteen minutes to figure the basics. I am not shilling for Morningstar, honest, I have no connection with them other than a happy user of the information they make available at no cost.

How to use Morningstar growth charts
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Re: Dividend, growth investment strategy

Post by 3504PIR » Sun Sep 08, 2013 1:46 pm

A dividend growth strategy is an absolutely viable strategy for a retirement portfolio. Dividend growth stock tend to raise their dividends by 8-10% per year, which gives significant protection to stay ahead of inflation while maintaining principle.

Using mutual funds and/or ETFs to compare strategies or using total return comparison as a statistic of measure misses the point completely.

Why so many here are so defensive whenever this topic comes up is beyond me. Larry's one man campaign against dividends on CBS shows why he should stick to commenting on bonds and is doing all of you a disservice. How can I say this? Every one of his articles a) uses a fund or etf to make his point and b) always has a measure of return to make his case.

The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers, the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM. How has Apple been treating you? If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.

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Re: Dividend, growth investment strategy

Post by nisiprius » Sun Sep 08, 2013 2:07 pm

3504PIR wrote:A dividend growth strategy is an absolutely viable strategy for a retirement portfolio. Dividend growth stock tend to raise their dividends by 8-10% per year, which gives significant protection to stay ahead of inflation while maintaining principle.

Using mutual funds and/or ETFs to compare strategies or using total return comparison as a statistic of measure misses the point completely....
Why? If it's about dividend growth, it should be about dividend growth, and an index ought to be a perfectly viable way of capturing it. If it is really about intuitive stock-picking in which dividend growth is one of many factors that enter into expert judgement, then there it is not really an implementable strategy at all, just a slogan. Why would a "strategy" of "growth at at reasonable price" work for Peter Lynch but not Jeffrey Vinik? Because it isn't really a description of what Peter Lynch does, and it can't be used by anyone else.
Larry [Swedroe] always has a measure of return to make his case...
Well, I used two different measures: total return, and 2008-2009 drawdown, and dividend funds came up short by both measures.

But if neither of these is the right measure, what would you say is the appropriate measure?
The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers,
How is VDIGX anything other than "a diversified portfolio of dividend growers?"
the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM.
How do you figure that? Last time I looked, Apple was maybe like 1/50th of Total Stock. In a hypothetical "diversified portfolio of dividend growers" assembled in the days when Enron was a dividend grower, would there necessarily be more than fifty holdings? Why would Enron necessarily be <2% of the portfolio?

Do you follow a rule that says you will never let any single stock exceed some percentage of the portfolio, and, if so, what is that percentage number?
How has Apple been treating you?
Why would I care? I know how Total Stock has been treating me.
If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.
Well, educate me. If VDIGX is The Wrong Fund to look at, please tell me the name of a mutual fund that focusses on dividend growth and has a long enough history to be meaningful.

If there is no index that properly represents "diversified portfolio of dividend growers," please explain why this would be so. What is the problem with the NASDAQ US Dividend Achievers Select Index, for example?

If it is impossible to implement a dividend growth strategy in a mutual fund or ETF, please explain why this is so.
Last edited by nisiprius on Sun Sep 08, 2013 2:33 pm, edited 2 times in total.
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Re: Dividend, growth investment strategy

Post by tibbitts » Sun Sep 08, 2013 2:18 pm

If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.

Question: do you acknowledge that people who know as much or more than you do about dividend growth strategies can reasonably conclude that none of those strategies is worthwhile? Some people reading your post may have gotten the impression that you believe that knowledge of dividend growth strategies necessarily equates to enthusiasm for dividend growth strategies.

Paul

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Re: Dividend, growth investment strategy

Post by stevewolfe » Sun Sep 08, 2013 2:27 pm

3504PIR wrote:The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers, the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM. How has Apple been treating you?


I'm going to call BS on this frankly. Morningstar shows that presently Apple is 2.26% of TSM assets. Vanguard shows it as 2.1% at end of quarter.

Let's say it was 4% within the last year and it's caused a 1.8% or so drop in the fund in absolute terms. How many stocks are in your "diversified portfolio of dividend growers"? 10? Not enough - if one loses 20% you've lost more than Apple to a TSM investor in absolute terms (2% vs. 1.8%). If an Enron situation existed in one of your 10 you'd lose 10% - that's 5x the loss in absolute terms of Apple to TSM investors.

Maybe you can provide us your stock list of 8-10% growers that represents a diversified portfolio - that you actually hold...

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Re: Dividend, growth investment strategy

Post by 3504PIR » Sun Sep 08, 2013 3:11 pm

tibbitts wrote:
If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.

Question: do you acknowledge that people who know as much or more than you do about dividend growth strategies can reasonably conclude that none of those strategies is worthwhile? Some people reading your post may have gotten the impression that you believe that knowledge of dividend growth strategies necessarily equates to enthusiasm for dividend growth strategies.

Paul


Who would those people be? Like I assume indexing is a worthwhile strategy for you, who would best know what is best for me?

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Re: Dividend, growth investment strategy

Post by 3504PIR » Sun Sep 08, 2013 3:24 pm

stevewolfe wrote:
3504PIR wrote:The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers, the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM. How has Apple been treating you?


I'm going to call BS on this frankly. Morningstar shows that presently Apple is 2.26% of TSM assets. Vanguard shows it as 2.1% at end of quarter.

Let's say it was 4% within the last year and it's caused a 1.8% or so drop in the fund in absolute terms. How many stocks are in your "diversified portfolio of dividend growers"? 10? Not enough - if one loses 20% you've lost more than Apple to a TSM investor in absolute terms (2% vs. 1.8%). If an Enron situation existed in one of your 10 you'd lose 10% - that's 5x the loss in absolute terms of Apple to TSM investors.

Maybe you can provide us your stock list of 8-10% growers that represents a diversified portfolio - that you actually hold...


You're right, it used to be just under 5%.

10 is not enough for diversity in my book. Everyone is different. 3-5% per holding divvied up by sector would be fine for my purpose. I own bond funds and non LC indexes as well.

Here you go:

JNJ
Pg
Pep
KO
MMM
XOM
CVY
MCD
GIS
CL
CLX
O
WMT
Ups
KMB
SO
K
KMI
Cb
Ed
Tgt

There are 20 or so, not sure what your point is.
Last edited by 3504PIR on Sun Sep 08, 2013 3:41 pm, edited 2 times in total.

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Re: Dividend, growth investment strategy

Post by 3504PIR » Sun Sep 08, 2013 3:36 pm

nisiprius wrote:
3504PIR wrote:A dividend growth strategy is an absolutely viable strategy for a retirement portfolio. Dividend growth stock tend to raise their dividends by 8-10% per year, which gives significant protection to stay ahead of inflation while maintaining principle.

Using mutual funds and/or ETFs to compare strategies or using total return comparison as a statistic of measure misses the point completely....
Why? If it's about dividend growth, it should be about dividend growth, and an index ought to be a perfectly viable way of capturing it. If it is really about intuitive stock-picking in which dividend growth is one of many factors that enter into expert judgement, then there it is not really an implementable strategy at all, just a slogan. Why would a "strategy" of "growth at at reasonable price" work for Peter Lynch but not Jeffrey Vinik? Because it isn't really a description of what Peter Lynch does, and it can't be used by anyone else.
Larry [Swedroe] always has a measure of return to make his case...
Well, I used two different measures: total return, and 2008-2009 drawdown, and dividend funds came up short by both measures.

But if neither of these is the right measure, what would you say is the appropriate measure?
The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers,
How is VDIGX anything other than "a diversified portfolio of dividend growers?"
the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM.
How do you figure that? Last time I looked, Apple was maybe like 1/50th of Total Stock. In a hypothetical "diversified portfolio of dividend growers" assembled in the days when Enron was a dividend grower, would there necessarily be more than fifty holdings? Why would Enron necessarily be <2% of the portfolio?

Do you follow a rule that says you will never let any single stock exceed some percentage of the portfolio, and, if so, what is that percentage number?
How has Apple been treating you?
Why would I care? I know how Total Stock has been treating me.
If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.
Well, educate me. If VDIGX is The Wrong Fund to look at, please tell me the name of a mutual fund that focusses on dividend growth and has a long enough history to be meaningful.

If there is no index that properly represents "diversified portfolio of dividend growers," please explain why this would be so. What is the problem with the NASDAQ US Dividend Achievers Select Index, for example?

If it is impossible to implement a dividend growth strategy in a mutual fund or ETF, please explain why this is so.


You want to use funds to compare, I have no reason too. Take VIG as an example, it owns a lot of stock I own, and a lot I never would. To begin, it's yield is below what I would consider acceptable for me, others might be ok with it. I have no need or interest in a stock that yields less than 1%.

Better measures would include dividend safety, reliability and future growth potential.

You want to "measure" something based upon an index. My point is that you're missing the point. Which is a reliable, growing income. The fact is that what I hold will largely track whatever index you're interested in, and thats irrelevant. Let's say my portfolio exactly track VIG on your chart, what does that matter? TSM has a slightly better return? Why does that matter?

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Re: Dividend, growth investment strategy

Post by tibbitts » Sun Sep 08, 2013 3:53 pm

3504PIR wrote:
tibbitts wrote:
If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.

Question: do you acknowledge that people who know as much or more than you do about dividend growth strategies can reasonably conclude that none of those strategies is worthwhile? Some people reading your post may have gotten the impression that you believe that knowledge of dividend growth strategies necessarily equates to enthusiasm for dividend growth strategies.

Paul


Who would those people be? Like I assume indexing is a worthwhile strategy for you, who would best know what is best for me?

It wasnt' obvious to everyone from your previous post that you were acknowledging that equally knowledgeable investors would choose anything except a dividend growth strategy. It's certainly possible that some dividend growth strategies will outperform going forward, just as it's possible that a dividend strategy, or pure-growth strategy, or momentum strategy, or value strategy, will outperform, over any given timeframe. Determining ahead of time which will outperform is the problem, of course.

Paul

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Re: Dividend, growth investment strategy

Post by stevewolfe » Sun Sep 08, 2013 3:54 pm

3504PIR wrote:Here you go:

JNJ
Pg
Pep
KO
MMM
XOM
CVY
MCD
GIS
CL
CLX
O
WMT
Ups
KMB
SO
K
KMI
Cb
Ed
Tgt

There are 20 or so, not sure what your point is.


The point is that with 20 stocks, each representing approximately 5%, that one of which going to 0, e.g., the Enron scenario is no different than a 5% holding in TSM going to 0. However, you stated above (emphasis added):

3504PIR wrote:The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers, the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM. How has Apple been treating you?


You've not yet proven that point.

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Re: Dividend, growth investment strategy

Post by stevewolfe » Sun Sep 08, 2013 4:06 pm

Not to mention, I wouldn't be so sure the past looks like the future...

Take the first stock in the list, Johnson and Johnson. They have 10 year dividend growth rate of 11.6%, very impressive. To go along with that, a 10 year EPS growth rate of 6%. That's not a sustainable trend. Going forward, unless they grow EPS faster, I would not expect a repeat of the 11.6% dividend growth rate over the next 10 years.

JNJ's current payout ratio is 62% or so as of the end of 2012, above the 5 and 10 year averages for JNJ. So it's not quite so easy to pick stocks that will have 8-10% dividend growth going forward. (BTW, JNJ was the only stock I took a look at). According to this analysis it seems a reasonable dividend growth rate for JNJ would be about 6-6.5% a year over the next 10 not 8-10%.

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Re: Dividend, growth investment strategy

Post by stevewolfe » Sun Sep 08, 2013 4:10 pm

tibbitts wrote:[It wasnt' obvious to everyone from your previous post that you were acknowledging that equally knowledgeable investors would choose anything except a dividend growth strategy. It's certainly possible that some dividend growth strategies will outperform going forward, just as it's possible that a dividend strategy, or pure-growth strategy, or momentum strategy, or value strategy, will outperform, over any given timeframe. Determining ahead of time which will outperform is the problem, of course.

Paul


I agree with Paul - it wasn't obvious (to me anyway) that the above was the case. :beer

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Re: Dividend, growth investment strategy

Post by SGM » Sun Sep 08, 2013 4:17 pm

I just received a mailing from AAII offering a dividend growth newsletter. I was surprised to see the stats they presented showing total return 1972-2013. I dug it out of the recycling after seeing this topic.

Dividend cutters -5%
No dividends +107%
Fixed dividends +1,707%
Rising dividends + 4,312%
They recommend stocks that increased their dividends on average for 23 consecutive years.

Any comments on how you would ascertain the accuracy of their claim and any validity going forward? I don't have a dog in this fight.
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Re: Dividend, growth investment strategy

Post by maj » Sun Sep 08, 2013 4:22 pm

Maybe I missed it in this long and fruitful discussion, so let me pose a question.

If I am unconcerned about cap gains and am interested only in long-term growth of dividends, am I better off invested in
Vanguatd Total Stock Market Index
or
Vanguard Dividend Appreciation Index?

I do not know how to access information which shows which fund provides the best consistent growth of dividends.

Thanks you.

maj

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Re: Dividend, growth investment strategy

Post by nisiprius » Sun Sep 08, 2013 4:38 pm

maj wrote:Maybe I missed it in this long and fruitful discussion, so let me pose a question.

If I am unconcerned about cap gains and am interested only in long-term growth of dividends, am I better off invested in
Vanguatd Total Stock Market Index
or
Vanguard Dividend Appreciation Index?

I do not know how to access information which shows which fund provides the best consistent growth of dividends.

Thanks you.

maj
Well, Vanguard Dividend Appreciation Index Fund is NOT oriented toward dividend income, it's oriented toward dividend appreciation as a selection criterion. But, almost certainly, the answer would be Vanguard Dividend Appreciation Index. Or, probably better yet, Vanguard Equity-Income Fund.

As far as I know, nobody challenges the idea that dividend-oriented mutual funds actually do select high-dividend stocks which really do have higher dividends than the total market. They do what they are advertised to do.

The question you need to answer, though, is why you care about dividends rather than total return. In a mutual fund, it is just as easy to draw on return regardless of where it comes from. That wasn't true forty years ago, when brokerage fixed commissions were in effect, and it was unfeasible to buy or sell anything in small quantities, so the art of portfolio construction involved selecting "growth" or "income" stocks to match whether you were accumulating or drawing income.

You probably can get a rough answer from Yahoo! Finance historical data, picking "dividends only," downloading to Excel, and charting. Nope, it takes more massaging than I want to do because you can't get dividends and prices on the same line. And the Yahoo! data is weird because they don't distinguish between dividend distributions and capital gain distributions.
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Re: Dividend, growth investment strategy

Post by ogd » Sun Sep 08, 2013 5:09 pm

From what I've seen of dividend growth strategies (there is an article on seekingalpha every second), the main ingredients are:

1) Pick stocks that have increased their dividends steadily and/or rapidly.
2) Extrapolate that they'll continue doing so in the future.
3) Conclude that you'll beat the market hands down.

In reality, this is investing by looking in the rear view mirror. Of course that if you pick companies that have done well (by any measure), you get a strategy that looks to be ("have been", really) a winner. It's the same thing as looking at recent winners wrt stock price, except that the relative stability of dividends disguises the uncertainty of the growth continuing in the future. I.e. while it's obvious to anyone that Apple stock cannot grow another 50x in 10 years, the slower growth of Chevron dividends makes it a more reasonable proposition that this can continue -- with a bit more room to run before the company gets bigger than the US economy.

The boglehead view on things is that it's really really hard to pick stocks that will do better than the market, because the market keeps a watchful eye on all the data that matters. There may or may not be ("have been") little bonuses in small and value stocks, usually at the cost of extra risk, but certainly nothing as simple as taking the integral of a dividend chart will escape the price setting machine.

What's really really easy is to pick stocks that have done well and tell everyone that they should have been invested in those.

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Re: Dividend, growth investment strategy

Post by tibbitts » Sun Sep 08, 2013 5:11 pm

maj wrote:Maybe I missed it in this long and fruitful discussion, so let me pose a question.

If I am unconcerned about cap gains and am interested only in long-term growth of dividends, am I better off invested in
Vanguatd Total Stock Market Index
or
Vanguard Dividend Appreciation Index?

I do not know how to access information which shows which fund provides the best consistent growth of dividends.

Thanks you.

maj

Well, if you want long-term growth of dividends, it would be disappointing and surprising if the Dividend Appreciation Index didn't provide more than total stock market, since that's explicitly what Dividend Appreciation is designed to do.

Of course that assumes you don't care about total return, which is the important issue for most of us.

Paul

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Re: Dividend, growth investment strategy

Post by 3504PIR » Mon Sep 09, 2013 3:46 am

stevewolfe wrote:Not to mention, I wouldn't be so sure the past looks like the future...

Take the first stock in the list, Johnson and Johnson. They have 10 year dividend growth rate of 11.6%, very impressive. To go along with that, a 10 year EPS growth rate of 6%. That's not a sustainable trend. Going forward, unless they grow EPS faster, I would not expect a repeat of the 11.6% dividend growth rate over the next 10 years.

JNJ's current payout ratio is 62% or so as of the end of 2012, above the 5 and 10 year averages for JNJ. So it's not quite so easy to pick stocks that will have 8-10% dividend growth going forward. (BTW, JNJ was the only stock I took a look at). According to this analysis it seems a reasonable dividend growth rate for JNJ would be about 6-6.5% a year over the next 10 not 8-10%.


Lets be clear on a couple of points. First of all, I'm not the one posting graphs of previous performance to make my point. So twisting around the "future may not represent the past" argument on me is a little over the top, don't you think? So is it ok for some posters to use the past as an agrument and then take another to task using the same point? My own forecast for JNJ is more inline with 7-8% dividend growth so I guess we'll see. As you've pointed out, it will not likely be 11.6% going forward in the near term. But at the same time, I'm sure the company will make adjustments to try to improve growth. We'll see how that works out.

Using the information you've learned about JNJ, would you think that the dividend is safe? Do yo think it will continue to grow? Do you think it will continue to grow at a rate faster than inflation?

On your other post regarding my portfolio, it is what it is at this point. I am an accumulator so I continue to add to it. 20 is fine, but I'll end up with more like 30. What level of diversity you're comfortable with isn't the same as mine. Those ultimately 30 stocks will not be the only stocks I own, as I've previously pointed out.

Your final point about me not proving my point regarding Apple and TSM I'm a little confused about. Either you're not very gracious or you're not reading my responses.

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Re: Dividend, growth investment strategy

Post by 3504PIR » Mon Sep 09, 2013 3:59 am

tibbitts wrote:
3504PIR wrote:
tibbitts wrote:
If you don't know a lot about dividend growth, just say you don't know, or better yet, don't post as if you do with a lot of charts and total return statistics that are meaningless.

Question: do you acknowledge that people who know as much or more than you do about dividend growth strategies can reasonably conclude that none of those strategies is worthwhile? Some people reading your post may have gotten the impression that you believe that knowledge of dividend growth strategies necessarily equates to enthusiasm for dividend growth strategies.

Paul


Who would those people be? Like I assume indexing is a worthwhile strategy for you, who would best know what is best for me?

It wasnt' obvious to everyone from your previous post that you were acknowledging that equally knowledgeable investors would choose anything except a dividend growth strategy. It's certainly possible that some dividend growth strategies will outperform going forward, just as it's possible that a dividend strategy, or pure-growth strategy, or momentum strategy, or value strategy, will outperform, over any given timeframe. Determining ahead of time which will outperform is the problem, of course.

Paul


Indexing is a viable retirement strategy without a doubt. Sorry I wasn't clear, but this thread isn't about indexing (or wasn't) :happy . I appreciate that most here equate success with total return, but what you define as outperform, either in the past or the future, isn't something I worry about, as strange as that may sound. I'll add, since other posts of mine have been disected by others that I expect my LC holdings (my dividend growth portfolio) will largley track the major indexes perhaps lag a little and that my MC and SC indexes will track pretty closely with their indexes.

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Re: Dividend, growth investment strategy

Post by nisiprius » Mon Sep 09, 2013 5:40 am

3504PIR wrote:Your final point about me not proving my point regarding Apple and TSM I'm a little confused about. Either you're not very gracious or you're not reading my responses.
Or you're not being as clear as you might be. You said:
3504PIR wrote:The other argument often posted here is the Enron argument. If one holds a diversified portfolio of dividend growers, the impact of an Enron is much less than the impact of having Apple as YOUR primary holding in TSM.
Well, Apple is my largest single holding in TSM but it's hardly my primary holding.

It sure seems to me that:

1) Apple is 2.26% of Total Stock, as has been noted.

2) In order to guarantee that the "impact of an Enron [would be] much less than the impact [a collapse of Apple in TSM], you would need to be holding a minimum of 45 stocks in your portfolio, each constituting 2.22% of the total.

3) You've stated that your portfolio only contains 21 stocks.

4) If your portfolio were equally divided, every holding would be 4.76% of your portfolio. If any holdings were less, then your largest holding would be greater than 4.76%. (You've confirmed this by saying that "3-5% per holding divvied up by sector would be fine for my purpose.")

5) Therefore, the impact of the sudden total collapse of the largest stock holding would be:
4.76% or more in in your portfolio of 21 stocks
2.26% in my portfolio of 3,514 stocks.

How do you justify your statement that the impact of an Enron in your portfolio of twenty-odd stocks would be less than the impact of having Apple as the single greatest holding in my portfolio of 3,514 stocks?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

3504PIR
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Re: Dividend, growth investment strategy

Post by 3504PIR » Mon Sep 09, 2013 6:15 am

Nisiprius,

This is what I was referring too:

"You're right, it used to be just under 5%."

See above.

I never said my portfolio only held 21 stocks.
Last edited by 3504PIR on Mon Sep 09, 2013 6:26 am, edited 1 time in total.

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Bustoff
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Re: Dividend, growth investment strategy

Post by Bustoff » Mon Sep 09, 2013 6:24 am

Sorry to interrupt this discussion, but I was wondering if there's a chart that compares the long-term performance of TSM vs. TSM with a dollop of Fama-French small-cap and value stocks ?

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nisiprius
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Re: Dividend, growth investment strategy

Post by nisiprius » Mon Sep 09, 2013 7:28 am

3504PIR wrote:Nisiprius,

This is what I was referring too:

"You're right, it used to be just under 5%."
So, the impact of an Enron within the sort of portfolio you hold would indeed be greater than the impact of Apple collapsing within the portfolio that I hold.
I never said my portfolio only held 21 stocks.
Well, I guess I am not clear on what you DID say. In any case, you did recommend portfolios in which individual stock holdings were "3-5%" of total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

3504PIR
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Re: Dividend, growth investment strategy

Post by 3504PIR » Mon Sep 09, 2013 8:17 am

nisiprius wrote:
3504PIR wrote:Nisiprius,

This is what I was referring too:

"You're right, it used to be just under 5%."
So, the impact of an Enron within the sort of portfolio you hold would indeed be greater than the impact of Apple collapsing within the portfolio that I hold.
I never said my portfolio only held 21 stocks.
Well, I guess I am not clear on what you DID say. In any case, you did recommend portfolios in which individual stock holdings were "3-5%" of total.


Its interesting that you split hairs so close on the edges and yet never really get to the heart of the matter. Does it matter that my dividend holdings are 3-5% of my total portfolio or 3-5% of my dividend portfolio? I admitted my mistake on the total % Apple was of TSM, and you and several others continue to hammer at it while avoiding commenting on the main parts of my post; that dividend growth is a viable retirement strategy and that measuring other funds or etfs against from a total return basis is irrelevant.

You're proving my point...

YDNAL
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Re: Dividend, growth investment strategy

Post by YDNAL » Mon Sep 09, 2013 9:02 am

3504PIR wrote:Here you go:

JNJ
Pg
Pep
KO
MMM
XOM
CVY
MCD
GIS
CL
CLX
O
WMT
Ups
KMB
SO
K
KMI
Cb
Ed
Tgt

There are 20 or so,...

That is an impressive list of major US companies - short of 50 companies in the list owned by Vanguard Div Growth VDIGX.
https://personal.vanguard.com/us/FundsA ... Order=desc

Total returns over 15 calendar years.

Code: Select all

Year    VDGIX   S&P 500 Index   
2012    10.39%    16.00%   
2011     9.43%     2.11%   
2010    11.42%    15.06%   
2009    21.74%    26.46%   
2008   -25.57%   -37.00%   
2007     7.00%     5.49%   
2006    19.58%    15.79%   
2005     4.23%     4.91%   
2004    11.02%    10.88%   
2003    29.20%    28.68%   
2002   -23.16%   -22.10%   
2001   -19.45%   -11.89%   
2000    18.77%    -9.10%   
1999    -2.96%    21.04%   
1998    21.83%    28.58%

3504PIR wrote:The fact is that what I hold will largely track whatever index you're interested in, and thats irrelevant.

Not knowing what 3504PIR's holdings "largely track", perhaps it is close to VDIGX (?), I still struggle to find "relevancy" in holding 20 companies (or 50) while looking at total return for 1.5 decades against the S&P 500.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

Dulocracy
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Re: Dividend, growth investment strategy

Post by Dulocracy » Mon Sep 09, 2013 10:07 am

As an observer, I do not plan on putting an opinion in at this point. I do have a question for those looking to convince others:

Do the Morningstar charts include dividend re-investment as a part of the growth, or is this just the value of the initial shares bought with the imaginary $10,000 they use as a starting point?
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

ab80
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Re: Dividend, growth investment strategy

Post by ab80 » Mon Sep 09, 2013 10:32 am

I think they include reinvestment. Morningstar shows PRNHX more than tripling over the past 10 years, but the price has only jumped from $22.95 to $42.76. They pay a fair amount in dividends each year. If you click on their charts, there's an option for growth and another option for price. (I'm not tying this particular fund to this discussion in any way.)

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