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Targeting A Retirement Income Level From A Dividend Growth Portfolio - Part 3

Published Wed, 21 Dec 2011 13:13:08 -0500 on Seeking Alpha

I have on occasion seen the equation put forth here on Seeking Alpha that Dividend Yield plus Dividend Growth equals Return. This is a mathematical fallacy. To quote the ever wise David Van Knapp: it's like "adding the speed of a car to its acceleration--the result makes no sense." But why do some dividend investors continue to cite this as a metric? I considered my own previous article in this series. In this article, I analyzed something that I know dividend investors intuitively understand...there is an inverse mathematical relationship between dividend yield and dividend growth. In other words, to end up with an equal result over some time period, a stock with a lower current dividend yield must have a higher growth rate than a stock with a higher current yield. Unfortunately, I think a few investors (perhaps understandably) extrapolate this relationship to conclude that it is perfectly symmetric...i.e. at... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
AT&T 42.00   17.9 2.35 1.96 4.73
CONSOLIDATED EDISON 72.96   18.1 4.04 2.76 3.67
EXXON MOBIL 84.97   39.7 2.14 3.00 3.49
MCDONALDS 121.38   23.0 5.29 3.76 3.08
PROCTER & GAMBLE 86.96   15.8 5.50 2.68 3.06
JOHNSON & JOHNSON 113.91   20.2 5.65 3.20 2.80
ELI LILLY 76.32   33.2 2.30 2.08 2.66
WASTE MANAGEMENT 69.34   27.6 2.51 1.64 2.35

AT&T - T  

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