Let's use ALTRIA (MO) as a perfect example for what we've been discussing.... i.e., when do you trim gains and reinvest in something else so your dividend PERCENTAGE stays up with your "needs"....
On December 21st, 2012 -- MO traded at 33.16 per share - it paid .44 cents per quarter a share then. So it paid 5.3% dividend
.44 X 4 = $1.76 ANNUALLY ---- divide the 1.76 by the price per share (33.16) and you'll see .053075995 Move the decimal point and you have 5.3%
Today MO trades at $65.26 a share -- BUT -- it's now paying .66 cents per quarter.
.66 X 4 = 2.64 ANNUALLY --- but your cost stayed at 33.16 per share! So what's it paying YOU? 7.96% on your cost basis not today's quoted rate of 4.05% which is based on today's price per share.
Now -- let's say this has been a pretty good investment -- you have almost a double in 5 years (2012 to 2017) and you're getting almost 8% dividend on YOUR cost basis. Not a bad "ho hummer huh?" LOL
But you now have twice the money you invested to begin with.... so if you sold HALF - you'd still be making the 8% on those shares remaining --- and you could reinvest in something else and, say, you found something that's paying 5%. You're net cash income would go up and that is what DHUTTON was asking about.
Hope that makes sense to everyone.
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