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.