Would you like to have a stock with 80% dividend yield every year?
I know i would. I was browsing through Seeking alpha and came across this post by Roger Nusbaum talking about another post he read on how to structure your Dividend Investing portfolio for retirement.
They got a good discussion going on here, and what i find particularly interesting is this post by Hammachi Yakimono where talks about the virtues of dividend:
It can take decades to get a really good yield on an investment. I bought a utility stock more than 30 years ago and reinvested the dividends. It now pays about 80% dividends annually on my original investment and I have been receiving those dividends for almost 20 years.
I guess that stock was a keeper.
Bye for now; Hammachi
Wow. I would love to have a stock like that. Imagine putting 1000 into it and getting 800 as dividends every year.
How is that possible?
Well it all comes to your dividend stock selection:
- It has to be growing EPS year on year
- Its dividend distribution got to grow at a steady pace every year as well. Alot of the Dividend Aristocrats do that for like 25 years in a row. [Check out the 2010 list >>]
Although the initial yield is small when you grow it for 30 freaking years, imagine the yield on cost of your original investment.
Recommend me one if you guys have any.
Related posts:
- Telechoice 2007 Full Year Results: Does Dividend Yield Compensate Risks?
- Yield Watch: REITs added to Dividend Stock tracker
- Dividend Growth vs Dividend Yield in the long run
- Revised Projected Dividend [Dividend Stock Tracker]
- Free Cashflow Yield incorporated into Dividend Stock Tracker
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Comments
Let me throw some cold water.
1) What is the annual rate of return?
2) How many failures to get one success?
haha somehow i was expecting this backlash. i can’t verify the rate of return. if the cashflow or eps is expanding at a consistent pace its rate of return should fluctuate around the market return.
but i tend to agree with the second statement. in our search for those good stocks, it requires us to be truly appreciative of value and business. at times we falter but we hope that those successes will do much better than the failures that we identify.
>>if the cashflow or eps is expanding at a consistent pace its rate of return should fluctuate around the market return.<<
Then what is the point of searching for better(or good) stock except for the fun of it? Get a broadbase ETF, collect dividends at say 3% yield, 30 years down the road, one will be receiving dividend at 80% on the orginal cost.
It is not about backlash, it is about seeing thru the smoke especially when facts, data, claims, etc are throw out. It can easily be accepted it as the true if this is what the person want to see(See what it is not SEE WHAT YOU WANT TO SEE)
With some guessing, assumption and abit of field work, reverse engineering can be done to estimate his return.
Lastly, reinvestment of dividend is a good idea but it is a bad idea when there is no proper accounting in getting the rate of return.
hi dnhh, i still don’t get the accounting for rate of return thingy. could it be you are refering to that although the yield on cost is 80% the long term growth rate still is lesser than the market rate?
In order to know if he is getting an above or below rate of return, calculate his rate of return is required. Like I put done earlier, it still can be done even without full information. That’s all.
I think i am confusing people out there so it is a good time for me to stop.
I guess alot also depends on the entry price…cos that will determine your dividend yield based on amt invested…
I bought sembmarine when its relatively cheap…and if calculated using the amt i paid for it, its giving close to 10% dividends per annum
But yup i agree that companies that can grow their dividend payouts consistently deserve a second look.