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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 36.30   7.6 4.76 2.00 5.34
EXXON MOBIL 75.74   16.4 4.63 3.08 3.91
CONSOLIDATED EDISON 74.89   15.2 4.94 2.86 3.72
PROCTER & GAMBLE 78.52   21.0 3.74 2.76 3.38
ELI LILLY 77.02   0.0 -0.20 2.25 2.81
JOHNSON & JOHNSON 129.88   333.0 0.39 3.36 2.54
MCDONALDS 157.74   24.8 6.36 4.04 2.47
WASTE MANAGEMENT 86.32   19.6 4.41 1.86 1.96

AT&T - T
AT&T - T  

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While Most Dividend Growth Stocks Remain Too Expensive, Here Are 50 That Are Not - Part 1 Of 5
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