Dividend-News

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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 34.84   10.6 3.26 1.84 5.28
CONSOLIDATED EDISON 63.36   14.7 4.32 2.52 3.98
MCDONALDS 93.73   18.4 5.09 3.40 3.63
WASTE MANAGEMENT 48.89   186.0 0.26 1.50 3.07
ELI LILLY 66.33   26.7 2.50 1.96 2.95
PROCTER & GAMBLE 87.27   24.6 3.54 2.57 2.94
EXXON MOBIL 96.71   12.0 785.00 2.76 2.85
JOHNSON & JOHNSON 107.78   0.0 0.00 2.80 2.60