Friday, June 01, 2012
Best Thing About Dividend Portfolios
In case my regular readers haven't noticed, the markets have been more than a little rocky of late. When the markets are rocky, the very worst enemy is yourself. It is so easy to start selling stocks wholesale, I know as I have done it before. Why do we sell? Why do we get depressed or scared when "the market" determines their stocks are worth less? I suppose we fear they will be worth even less tomorrow. That is why I would suggest that looking at the total value of your stocks isn't necessarily a good thing. I know, I know, mea culpae. I do it as much or more than most. That is why a dividend portfolio like I have can be very useful psychologically during these down times. I know I track how I am doing year to date (+2.4%), but there is another important metric that is better in so many ways... My expected dividends for the next 12 months! Makes sense right? If you know each year you are getting a larger income stream than the prior year, you should be happy! Does it matter that Mr. Market has arbitrarily said your stocks are worth less? Heck no! So while my dividend portfolio is up 2.4%, more importantly I have managed to raise my expected dividends for the next twelve months by 4.8% so far this year! That is in part due to compounding, as I reinvest my dividends, but it is also in part due to companies INCREASING their dividends! Just in 2012 the following stocks have increased their dividends: PVD,Ksw, Intc, Wbk, Xom, Kmf, Sbs, Csco, Fcx, Sto, Pre, Lnc and Csq. The average increase has been 20%! And we're only halfway through the year. So if you use divdends, rather than stock price and portfolio value as your key metric, you will be more at peace with the day-to-day volatility that rules our market. And then every year I will be a step closer to having a stream of income from the dividend portfolio that will supplement my retirement. I will wave to you from the cruise ship!