Dividend Strategies starting from February 26, 2007

Updated: March 3, 2008.

Simple Path to 5%

Even in today’s market, it is simple and straightforward to obtain a 5% withdrawal rate that keeps up with inflation. Here are the requirements.

Simple Path to 5%

Why It Works

Smoothing the Income Stream increases today’s Safe Withdrawal Rate to 5%, well above the 4% that is claimed traditionally. We can do even better. It doesn’t stop there.

This is why it works.

Why It Works

A Special Kind of Investment

This looks at a special kind of investment: high income producers that return capital. As part of a blended strategy, it lifts the income stream to 5.8% of the original balance (plus inflation).

A Special Kind of Investment

Dividend Baseline: Expanded

Here are variations around my Dividend Baseline.

Dividend Baseline: Expanded

Fluctuating Dividends

I examined the income stream with wildly fluctuating dividends. It is higher than expected.

Fluctuating Dividends

Fluctuating Dividends with a Growth Kicker

I added a growth kicker to an investment with wildly fluctuating dividends. This increases the income stream.

Fluctuating Dividends with a Growth Kicker

Income Stream Insights

I have used the Income Stream Allocator to look at a variety of conditions. Here are the key insights.

Income Stream Insights

A Special Kind of Investment Sensitivity Study

This extends my investigations into a special kind of investment: high income producers that return capital.

In this sensitivity study, I introduce a lower yielding Investment B that has a stable or slowly growing dividend amount. I examine three variants for Stock A.

A Special Kind of Investment Sensitivity Study

A Special Kind of Investment Addendum

I collected more data with the higher dividend yield version of Investment B. I looked at the effect of slower dividend declines.

This confirms earlier observations.

A Special Kind of Investment Addendum

Subtle Observation about Dividend Capture

The probability distribution of the income stream from dividend capture is largely independent of price fluctuations.

Subtle Observation about Dividend Capture

Dividend Blend Rule of Thumb

Here is a rule of thumb for the dividend blend.

Dividend Blend Rule of Thumb

Dividend Growth and Bond Ladders

It is reasonable to withdraw 5% (plus inflation) if you use a bond ladder and reinvest in dividend stocks as the yields of high quality companies become attractive.

Dividend Growth and Bond Ladders
Dividend Growth and Bond Ladders Addendum

Dividend Growth Rule of Thumb

Here is a rule of thumb about dividend growth. It helps us select investments for the Dividend Blend.

Dividend Growth Rule of Thumb

Dividend Growth Story

This is why dividend growth is so attractive.

Dividend Growth Story

Sometimes Dividends Get Cut

Some people ascribe special significance to the recent dividend cuts among several Blue Chip financial institutions. They should not.

Sometimes Dividends Get Cut

Dividend Disaster

You rely on dividends in retirement. Everything goes wrong. How bad might it be?

Dividend Disaster

Dividend Quality

Dividend investors should pay attention to the quality of dividends. Here are several factors to consider.

Dividend Quality