DonCamillo wrote:I like dividends on a (relatively small) portion of my investments.
I used to collect dividend paying stocks. I saw that as an alternative to collecting beer cans, corvettes, impressionist paintings, stamps, Matchbox cars or vacation homes. My preference was to buy stocks that I would see often in my daily life (such as Waste Management and Sysco trucks on the highway, or CSX trains) and to buy enough of each stock to pay me about $2,000 a year (roughly $5 a day) in dividends. It is fun to see a train go by and think that it is paying me $5 a day. For a while, I used the dividends to buy other dividend stocks, but now that I am retired, I just let the dividends stack up in my brokerage account, and then take a vacation with the money.
I retired on January 1st of this year. Since then I have been to Mexico, Costa Rica, Nicaragua, Panama, Columbia, Aruba, Portugal, Sweden, Norway, Netherlands, Poland, Lithuania, Latvia, Estonia, Finland, and Iceland, with upcoming trips back to Portugal, Morocco, the Canary Islands and St. Marten. Most of the money I remove from my portfolio is interest and dividends. Part of my reason is that money is going to be taxed anyway, so I can spend it without creating another taxable event. I do some tax-loss harvesting as well to offset capital gains plus $3,000 each year.
But I also monitor my portfolio to ensure that it continues to grow in retirement. If the market takes a turn for the worse, I will reinvest more of the dividends and interest. I live on pensions and social security. I play with dividends and interest. I think of only spending returns as a harmless game. But I also realize that I was very fortunate that I could work into my 70s and save most of my income until then. If I had retired at 62, I would be struggling to pay my bills. If I had retired at 66, I would be comfortable, but would be living on half my current income.
I am not saying you are, but I hear a lot of investors who view dividend as free income or guaranteed income or something more special than total return always highlight the financial successes they've had in terms of what they were able to do....it's so hard to argue against that....if only they knew total return would have done at least equally well, or probably better.
P.S: My office manager just met with a consultant and now have all of their Investement dollars in about 20 dividend paying stocks. Now, they hate mutual funds and ETFs as they don't return as much and moved all their funds. They need to reach their million before they retire and dividend income will guarantee that....there is a great divide...finance brings out interesting personalities....in a way it's very fascinating - to observe the human behavior around financing.