Originally Posted by JaxRed
forfreelin04 posted (in actual results thread)
"I don't want to steal JaxRed's thunder at all since he sounds highly educated in dividend paying investments, but dividends are never guaranteed.
If you have a stock that's in the red, and the only reason you have it is for the dividend yield I would caution you against holding it much longer. If NLY chooses to stop paying dividends, your not going to get your yield and subsequently you'll fade even deeper into the red since they'll be a mass exodus at that point.
There's nothing wrong with dividend stock investments. In fact, I would encourage it to the right investor. However, 95% of the country doesn't truly understand the risk involved. Many times retirees get their investment tips from the golf course instead of someone trained and licensed in the field. Certainly, dividend paying stocks are a nice diversification strategy to a balanced portfolio. The problem is many folks get in way too deep with money their actually planning on using in retirement.
It seems like JAXRED here is using the ROTH for his daughter. I don't know how old she is and if he's planning on using the funds for college for her, but in most scenario's people haven't saved enough for retirement to warrant the holding of individual stock's that pay beyond the norm in dividends."
1. First.... I am EXACTLY like taking advice from the guy at the golf course. (except I no longer play golf). Not certified in any way shape or form. Just a guy sharing advice based on years of life experience. I certainly differ from your advice on Dividends.
2. No.... dividends are not guaranteed. But except for federal bonds almost nothing is. It's a question of risk/reward. My advice (following the lead of the Dividend Growth investment community) is to invest in the stocks that make the list of the Dividend Champions, Challengers and Contenders. In the Champions list these are stocks that have raised Dividends for 25 consecutive years like Coke, McDonald's, Johnson and Johnson, etc. Buy the stocks, reinvest the dividends, don't worry about whether they are up or down. Monitor the income stream they are producing.
3. My daughter is 29. I am trying to get her educated/interested in Dividend Growth Investing for retirement purposes.
I am a proponent of Dividend Growth Investing. Forfreel prefers other investing techniques. Plenty of smart ways to invest. I do want to thank forfreel for posting and hopes he continues because the goal here is to make more people aware.
I agree and for the most part follow your strategy.
The counter argument against dividend investment follows the mantra that no dividend is safe. If you look back 5 years you can recognize that, some of the best dividend paying stocks, big banks, were annihilated and saw their dividend slashed or eliminated all together. You also have a stock like GE, who was one of the most respected American company, have their dividend slashed for a number of years only to see it being increased again. If your time frame is decades then it will only look like a blimp on the radar. If your time frame is short then it could be devastating.
I have a couple of different thoughts on the Dividend Growth Investing. Buying companies like Coke, McDonalds, and JNJ are good ideas. But if you look at some of the well managed dividend growth EFT's or Funds, you will find some holdings that have either small or no dividend. Getting in on the ground level of a stock that is going to increase their dividend for 25+ years can be very rewarding. Many of the fund managers look to stocks they think will begin a policy of dividend growth.