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Originally Posted by SSLance
Wow!! That is WAY more elaborate than mine!! Thanks for sharing... I might have to sleep on that for a bit to see if I want that much detail or not. Very nice though...
So...I have a holding that has been beaten up a bit in share price (down 47.99%) but still pays a great dividend. I just ran the calcs and the net asset value of those shares in that particular holding now represent just 4% of my total holdings, but the dividend represents 15% of my total annual dividend.
This is where I struggle with this type of investing. If I decide I can't stomach this company any longer, I'm not sure I can replace the dividend dollars that this stock currently pays. One is going to have to hope the replacement stock I pick has enough growth in it to make some of that 48% loss back to supplement the lower dividend it'll most likely pay.
Is this a good metric to use (% of total dividend earned vs % of total net asset value)? Or should it be more about Growth and Dividend %s not necessarily about dividend dollars? This is all in my retirement accounts so no tax implications and I do not expect to be pulling money from these accounts any time soon.
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In my opinion if you are trying to grow your account and are not living off of the dividends, I think you should be looking for stocks that will produce the highest total return, not the highest current dividends. Once you are retired and living off of the dividends you would probably change your priorities to concentrate more on dividends.
I think the earlier referenced Klipinger article explains it pretty well that the highest dividend rate paying stocks tend to have the lowest dividend growth rates. They also tend to have the lowest stock price appreciation. In the stocks that I have looked at AT&T is a good example of a stock with a high dividend, low dividend growth rate and low stock price appreciation. You can find many examples of stocks with a 2.0% to 3.0% dividend that have much higher dividend growth rates, and stock price appreciation. Use a spreadsheet and you can figure out how long it will take the dividend for a stock with a 3.0% dividend rate and a 7.0% dividend growth rate to surpass the dividend of a stock with a 5.5% dividend and a 2.5% dividend growth rate. If your time in the market is long enough, the dividend paid on the stock with the current lower yield will be higher and stock price appreciation will also be higher. The combination of which produces the higher total return.