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Thread: Anyone want to talk stocks and retirement?

  1. #1
    Member JaxRed's Avatar
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    Anyone want to talk stocks and retirement?

    I'm enthused about something new I've been doing recently. I'm closing in on retirement. I'm eligible for Social Security next summer. Retirement is happening with a whimper and not a bang.

    I went from full-time, to part time with consulting, to just part time to just consulting a bit. So it's been tapering off.

    I'd been following the axiom about making your stock investments more conservative the closer you are to retirement. In the last couple years we'd gone ultra-conservative. Much was even in money markets just to ensure no loss of principal.

    The theory being to amass as much money as possible because you will need to draw on it in retirement. There's a theory about drawing 4% of your money out yearly and that leads to discussion about whether you will outlive your money.

    I had kind of an "a-ha" moment recently listening to an financial adviser discussing that the goal shouldn't be how much you have, but how much of a yearly stream of income will it produce. For example if you had a million dollars, you could earn 5% and get $50,000 yearly and NEVER touch the principal.

    That led me into the world of "Dividend Growth Investing". There's a subset of investors out there who are not trying for growth of principal, but growth on the amount of dividends an investment creates.

    Example - Facebook will be coming out as an IPO soon. The stock will pay no dividends, but tons of people will be betting that an investment in Facebook will pay off like an investment in Google. A Dividend Growth Investor would have no interest in it.

    Instead they would be more interested in McDonald's. McDonald's has increased it's dividend for 36 straight years. So if you buy McDonalds, and let the dividends re-invest automatically, over time it will really add up.

    There are lists of companies that have paid (and increased) dividends for 50, 40, 30 etc years in a row.

    more.....
    Last edited by JaxRed; 04-24-2012 at 12:57 AM.

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    Member JaxRed's Avatar
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    Re: Anyone want to talk stocks and retirement?

    Part 2 -

    So that became my plan. To make my own Dividend Growth Portfolio out of our existing IRA's to supplement my pension and social security. I would do this in a Self-Directed IRA.

    As I started doing the research on the stocks, etc. It became evident that for someone getting ready to retire, the "McDonald's" of the world are a little too "safe". McDonalds is paying only about 2.9%. If you have a 20 or 30 year window that works, but if you want to generate current income with a little growth, you have to find stocks with a higher dividend.

    You have to be careful. Many time a high dividend rate means the company has fallen on hard time and they are about to cut the dividend. So it pays to do some DD (due diligence).

    I found a good site called Seeking Alpha where people share investment ideas. And there is a whole area about Dividend Investing. So that's what I've been doing for last 3 weeks or so. Researching and buying stocks for my Self-Directed IRA. Around May 15th the first dividends will start arriving.

    So if this area if of interest to anyone, feel free to discuss.

  4. #3
    Danger is my business! oneupper's Avatar
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    Re: Anyone want to talk stocks and retirement?

    This is an area where I have some experience, which I am glad to share here without the corresponding fees
    I know there are others in the field who are on the board.

    I work mainly with foreign investors in fixed income, so our focus is on bonds, since dividends do not have the tax advantages over interest income that they do for most US investors (the opposite is mostly true).

    However, if we are talking about IRAs, where whatever happens within the account is irrelevant for tax purposes, income from bonds and particularly high-yield bonds can be more advantageous than seeking income via dividends for a US person.

    There's a little more complexity in trading bonds than stocks, particularly online, but it could fit well into a fixed-income strategy for a self-directed IRA.
    "A person is smart. People are dumb, panicky, dangerous animals and you know it."

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    Member medford's Avatar
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    Re: Anyone want to talk stocks and retirement?

    I have a handful of higher yield dividend stocks in my roth IRA. There are a handful of real estate companies that have been beaten down due to the market (and perhaps they're own balance sheets during this downturn) that are now starting to bounce back. REITs by nature have to offer out a high % of their profits in dividends to remain classified as a REIT and the tax breaks that come with it. You should be able to find a package of companies here that offer solid dividends that are now poised to bounce back (if they haven't done so already) that can offer a little growth as well.

    There are also some areas outside of REITs, one of my favorite stocks has been a small company called Medallion Financial (TAXI) which specializes in medallion loans in NYC. They've regularly paid out an above 5% dividend thru all of the markets up & downs.

    I'm hardly a professional, most of my retirements is funded thru my 401(k), actually my IRA recieves mostly just maintance work for the time being, but I've used my dividend stocks to help fund further purchases of stock when the market tumbled to cost average down.

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    Score Early, Score Often gonelong's Avatar
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    Re: Anyone want to talk stocks and retirement?

    I'm 42 ... about 5 years ago I began purchasing dividend paying stocks in my Roth IRA. At 37 or so I thought I had about 25-30 years to retirement and it was time to begin thinking about dividends and the income they might provide. At this point my portfolio has mostly larger companies that have paid regular dividends (and increased them) over time. I currently have MCD, BIP, BGS, VZ, MMM, & RIG. I am hoping to hold some of these stocks for life so all dividends on these stocks are reinvested. I also have VZ and RAI, but I suspect I will sell them at some point in the future.

    I maintain more of a growth stratedgy with my 401K investing in individual stocks, sometimes swing trading, a little gold/silver, etc. At some point I will probably begin purchasing more and more dividend paying stocks, likely soon. One of the things I'd like to start looking at in this account is small caps that initiate dividends or are already paying dividends.

    GL

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    Waitin til next year bucksfan2's Avatar
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    Re: Anyone want to talk stocks and retirement?

    I am quite a bit younger than you are but I look towards dividends in all my investments. If you like the dividend increasers check out VIG or SDY. Both are ETF's, VIG is a dividend appreciating ETF and SDY is the dividend aristocrats.

    For yield I like utilities, telecom, and consumer staples. I know there isn't huge upside growth but I also like the "monopoly" aspects of Utilities. Looking close to home PG, CINF, DUK, and AEP all have attractive yeilds, have paid dividends for a long long time, and increase them regurarly.

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    Member JaxRed's Avatar
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    Re: Anyone want to talk stocks and retirement?

    Mentioning REITS.... one of my favorite's right now is OHI - Omega Healthcare Investors Inc. Going Ex-Dividend in the next couple days. Paying 7.9% right now. Been increasing dividends yearly since 2003

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    Member JaxRed's Avatar
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    Re: Anyone want to talk stocks and retirement?

    Have had 2 increased dividends since April 13th when I started. Linn Energy (Yield 7%) increased today.

  10. #9
    Danger is my business! oneupper's Avatar
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    Re: Anyone want to talk stocks and retirement?

    HAS (Hasbro), also with a div hike. (4% yield).
    "A person is smart. People are dumb, panicky, dangerous animals and you know it."

    http://dalmady.blogspot.com

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    Member JaxRed's Avatar
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    Re: Anyone want to talk stocks and retirement?

    Wow, three straight years of 20% hikes in dividend for Hasbro

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    Re: Anyone want to talk stocks and retirement?

    I'm not a fan of dividends as a primary income strategy. Too much risk and too little guarantee. I also feel high dividend stocks are a bit overvalued and will continue to be so. Too many investors are looking for yield and eventually there will be an exit from these stocks when they can get yield elsewhere.

  13. #12
    Member JaxRed's Avatar
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    Re: Anyone want to talk stocks and retirement?

    Most people feel the opposite, that dividend investing is about the safest.

    Had an interesting day. Two of my stocks go ex-dividend tomorrow so they went up pretty good today. It'll be interesting to see how much they come down ex-dividend.
    Last edited by JaxRed; 04-25-2012 at 08:52 PM.

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    Plan to be spontaneous Jefferson24's Avatar
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    Re: Anyone want to talk stocks and retirement?

    I am going to work till I drop, my family will be sad but well covered.

    Between college funds and bills I find it hard to put aside extra for retirement. My company puts away 6% of my annual salary in a profit sharing plan, which is nice, no match required.
    We only live in patches. - H. G. Wells

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    Re: Anyone want to talk stocks and retirement?

    Quote Originally Posted by JaxRed View Post
    Most people feel the opposite, that dividend investing is about the safest.

    Had an interesting day. Two of my stocks go ex-dividend tomorrow so they went up pretty good today. It'll be interesting to see how much they come down ex-dividend.
    Dividend paying stocks tend to be "safer" in terms of stocks, but are still risky as an asset class. I've seen way to many people get lulled into a sense of security because of dividends. People tend to over do it from a diversification stand point as well.

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    Waitin til next year bucksfan2's Avatar
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    Re: Anyone want to talk stocks and retirement?

    Quote Originally Posted by BuckeyeRed27 View Post
    Dividend paying stocks tend to be "safer" in terms of stocks, but are still risky as an asset class. I've seen way to many people get lulled into a sense of security because of dividends. People tend to over do it from a diversification stand point as well.
    Nothing is "safe" in terms of investing. My first two stocks that I bought were UPS and Bank of America. At the time BAC paid a 5-6% dividend and was a nice stock. Then the financial crisis hit and the dividend went from $.60 per quarter to $.01 and it went from $60 to $4. The banking sector used to be a great place for yield, not its a great place for pretty much nothing.

    Barring a bubble pop, which catches pretty much everyone with their pants down, I still think quality dividend stocks are a "safer" investment, especially with bonds in a bubble and interest rates savings accounts near 0. The two things that I like about dividends is it makes a stock difficult to short. You don't want to be shorting the stock but also paying a dividend. Also if the market goes down, you are still getting paid as long as you hold the stock. They aren't guaranteed but there are many companies out there who hold a dividend and increasing dividend important.


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