Daily dividend news for investors in dividend stocks

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 34.50   10.1 3.40 1.84 5.33
CONSOLIDATED EDISON 56.69   13.3 4.32 2.52 4.45
MCDONALDS 94.11   17.1 5.52 3.24 3.44
WASTE MANAGEMENT 46.57   178.1 0.26 1.50 3.22
ELI LILLY 62.81   20.0 314.00 1.96 3.12
PROCTER & GAMBLE 83.38   21.4 3.91 2.57 3.08
EXXON MOBIL 99.64   12.6 7.85 2.76 2.77
JOHNSON & JOHNSON 103.44   19.1 5.41 2.80 2.71