Friday, January 28, 2011

Is Dividend Investing Dead?

I have been investing since the 1970’s and on a regular basis; some analyst/market observer will tell you dividend investing is dead. In fact, the way I heard about dividend investing was reading such an article. I did not know until that time that people invested that way. To me, it sounded like a good idea. In the 1970’s I was just feeling my way as far as investing went.

When I talked to people who invested, they all seemed to be going for the big score. None of these people seemed to have made any money at this, let alone really making a big score. Of course, some would make talk about making 500% or 1000% return on some investment, but they still had no real money. Either they blew what they earned on the next big investment score, or their investment was so small that they really didn’t earn much money. I figured that there must be a better way.

Dividend investing is simply when you buy stocks for their dividend payments. You hope that over time both the stock price and the dividend payments would increase. I must admit that this is how I made enough money to stop working. It is especially my investment in large dividend paying banks and utilities where I have made the most money.

Of course, the total value of my portfolio has varied greatly, but not so my dividend income. My dividend income has generally just gone up. Recessions are a problem when with investing. My dividend income increases overall slow down. Some companies cut their dividends, some leave them level and some increase them. Recession affect different companies differently. Also, different sorts of recession affect companies differently too.

There has been two recent recession with bear markets. The first affect tech and industrial companies the worse. The last one affected financial companies the worst. In both these recessions, my stock portfolio value has tanked, but my dividends have not. Since I live off my dividends, these recessions have not really affected me much. It is hard to see the value of my assets go down, but my dividend income has increased both times.

My total income has gone down a couple of times. The first time it went down some 15% in 2002, as I sold off my remaining bonds to buy dividend paying stock. Stocks generally have a lower yield than bonds. It took just over 2 years for my income to recover from this. The second time my total income went down it was in 2008 and the decline was 3.4%. I was earning less in interest on my MMFs. I have enough in MMFs plus ING Account and expected dividend income to fund my spending for the next 5 years. This is so I am never in a position where I have to sell an investment at an inopportune time. This second time it took just 6 months for my income to recover.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. "When I talked to people who invested, they all seemed to be going for the big score. None of these people seemed to have made any money at this, let alone really making a big score."

    My brother in-law used to make fun of my dividend investment strategy. He would brag about making 30% profits when he bought stocks and asked how my $40 dividends are doing mockingly.

    One day I get a phone call and a meek voice on the other line starts telling me he lost most of his investment capital on a tanking stock pick. Then he asks me to tell him more about dividend investing and which stocks he should buy. Imagine that!

  2. Hey Susan,

    Dividend investing is certainly NOT dead. Until ETFs like XDV hold no dividend payers and penny stocks or junior miners instead, I'm in this thing for the long-haul. I'm not saying I'm "all in", solely into dividend payers 100% but part of my retirement strategy is being an investor not a trader and getting paid to be so.

    Being an owner, while it would be nice if the stock price rises, I really couldn't care less. If anything, I want stock prices to bottom out. I want to buy quality, established companies, cheaply. Over time, I simply want those quality companies to reward me for being a partner in their business.

    I figure if you've been doing it since the 70's, and others have been doing it since the dawn of the industrialized world the market and it's sub-section of quality businesses are going to be around for many generations to come :)

    Until companies stop paying me, I'm not going to stop owning them.

    Mark from My Own Advisor

  3. Your blog is always so interesting. Myself, the main reason why I invest is to earn dividend. I think that dividend investment remain the safe way to invest for small investors. the rest (more fortunate investors) can go for a quick buy and sell because they have the cash it required.

    This post is interesting especially now because I have of my colleague that start talking about investment. I refer him to Derek Foster books because he was about to give his money to a broker firm. I don't know too much about this, but my guy wanted to give his money to a broker firm and a trader take care of his money for him. And also take 30% of his profit made on buy-sell, buy-sell... This might be so exhausting and mentally challenging! And at the end, you just have a couple of hundreds dollars left, but nothing for the long run.

    So yeah, dividend investment rock all the way :0)

  4. Well this is very interesting indeed.Would love to read a little more of this. Great post. Thanks for the heads-up...This blog was very informative and knowledgeable.