Thinking "Differently" about Dividend Yield

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Jerry55
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Thinking "Differently" about Dividend Yield

Post by Jerry55 » Thu Aug 27, 2015 8:11 pm

We have a lot of conversation when I was at work (yrs ago) and I had 2 or 3 favorite folks that made good

conversation. Occasionally, maybe 6 times / year, I have lunch with my ex-coworkers, and of course Dividends

and such came up. In late 2008, I purchased Ford ($5-6/share, 1,400 shares) and GE ($12-16/600 shares) .

Back then, GE was paying about 0.10/share quarterly, now it's up to 0.23/share quarterly. My Friend had sold

his shares in F5 and recently purchased GE shares last week, because of their dividends. For him, he's getting

~3.91% in Dividends. I told him that I'm getting approx. 6.5% dividends because of my average cost of

$14/share. He said that's impossible, and I should be using the GE Website data, and I agree with the "DATA"

however, I believe that price paid per share for the dividend is more defining. Average price today for GE is

$25.00, so should I acquiesce to his logic, or should I just be happy in my own thoughts.

This is just one of those questions that really makes no sense, I just wanted to get others opinions on the

thought process... :happy

p.s. I sold Ford (F) when it got to ~$11.00 share, which paid about 1/3 of my Retirement car.

Ford Taurus Limited. :happy
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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JoMoney
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Re: Thinking "Differently" about Dividend Yield

Post by JoMoney » Thu Aug 27, 2015 8:22 pm

I prefer the 'total return' mentality. I think ignoring the capital growth in shares is leaving a big chunk of the returns on the table. It's money which could be spent when drawing down on a portfolio, or moved to less 'risky' income investments if I want higher sustainable assured income.
Looking at the yield at cost sounds impressive, but someone could have bought shares in a high-growth stock with no dividend, sold an equivalent amount to generate similar income, and still have a higher portfolio value.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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market timer
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Re: Thinking "Differently" about Dividend Yield

Post by market timer » Thu Aug 27, 2015 8:26 pm

Jerry55 wrote:This is just one of those questions that really makes no sense, I just wanted to get others opinions on the thought process
I agree with your friend--the GE dividend yield is 3.91% based on the current price. I don't see why purchase price is relevant for this calculation. That you continue to own GE means you think it is a good investment at today's price and dividend yield, not some earlier price and yield.

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JulianMatthew
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Re: Thinking "Differently" about Dividend Yield

Post by JulianMatthew » Thu Aug 27, 2015 8:28 pm

The concept you're referring to is called yield on cost. It's more of a feel-good metric than anything else, and isn't helpful for decision-making whereas looking at the current yield, as your friend is doing, is at least potentially helpful.

I say "potentially" because as a former dividend growth investor who now understands the beauty of looking at investing from a total return point of view, I would recommend that you 1) not invest in individual stocks, and 2) not become too focused on dividends. But that's a different discussion. :)

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Orion
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Re: Thinking "Differently" about Dividend Yield

Post by Orion » Thu Aug 27, 2015 8:30 pm

I have TIPS paying in the 3 to 4% (real) range if I base it on when I bought them. And I feel good about that, but I wouldn't use that to decide whether they're the best thing to have right now.

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Jerry55
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Re: Thinking "Differently" about Dividend Yield

Post by Jerry55 » Thu Aug 27, 2015 10:12 pm

Thanks for the input folks....I think JulianMatthew hit the nail on the head.

It IS a Feel Good thing. GE is about 1.6% of my total assets, and I take the $550.00 every year and spend it

on "Stuff". $138.00 quarterly lets me take out the family (3) to Longhorn Steakhouse or even Lawrys Prime Rib

a few times per year. I leave it as part of my will including Life Insurance to be left to the executor of my will.

Whoever that is, should be in line to receive about $50-75,000.00 for their efforts as a reward after expenses.

I understand the accumulation phase of life, however, I enjoy dividends and relish them immensely.

In the end, I guess it's all about ones' point of view. My Friend is still in the accumulation phase,so I get it.

Thanks for the input !!!
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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