Originally Posted by kaldaniels
I don't doubt that you have all good intentions and are trying to help all of us, so I am not trying to give you too hard of a time. But doesn't putting all of your IRA into one company (semantics aside you are investing in one company) involve hoping for some "luck". Why not go for a dividend stock based ETF?
I am a novice investor, but 2 things should be addressed by you if you ask me
1) Dividends are subject to change.
2) Dividends are "baked" into the stock price
Reading your posts you almost put off a "this can't go wrong" vibe. Perhaps I am reading into that too much?
I'm not anti-dividend, as I have a small amount in a dividend based ETF myself, but it just seems you poo-poo any other route of investing, no?
1. Dividends are subject to change. Just 4 years or so ago the best dividend stocks were hammered and most of the yields cut or take away. The financial sector had been a great dividend payer for decades but after the financial crisis their dividneds were pretty much done away with. The thing is I am a proponent of staying active. Not buying or selling on a whim but having a strict set of rules and abide by them. If you are looking at dividend growers and they don't grow then it may be time to unload the stock. If the stock cuts its dividend it may be time to cut bait.
2. This is a common concern/complaint about dividends. In theory I would have to agree with you. There is a theory out there about maximizing your tax implications by buying the day after the dividend ex-date. The theory is the day after the stock has its ex-date it decreases by the amont of the dividend. It sounds good but it doesn't always work that way. Dividend stocks are impacted by the overall market as well. I have seen stocks on their exdate nose dive with the general market as well as rising when it should be falling. What I have noticed is that in a sideways or down market dividends are a very powerful tool. Over the course of a year if you own a dividend payer your going to have that yield regardless of any other market factor. My first stock I ever bought was AEP, after one year the stock was flat but I had an extra 5% as well as a dividend increase over that year.