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                                 ISIN Last trade   P/E Earnings/Share Dividend/Share Dividend yield
AT&T
US00206R1023 38.99   16.7 2.34 1.92 4.96
CONSOLIDATED EDISON
US2091151041 75.58   0.0 0.00 0.00 3.52
EXXON MOBIL
US30231G1022 88.51   28.5 3.11 2.92 3.32
PROCTER & GAMBLE
US7427181091 82.13   25.8 3.18 2.68 3.29
MCDONALDS
US5801351017 130.58   25.1 5.20 3.56 2.75
WASTE MANAGEMENT
US94106L1098 60.69   0.0 0.00 0.00 2.72
ELI LILLY
US5324571083 74.60   34.4 2.17 2.04 2.71
JOHNSON & JOHNSON
US4781601046 112.74   20.5 5.50 3.00 2.66