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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 33.87   10.3 326.00 1.84 5.43
CONSOLIDATED EDISON 62.50   14.3 432.00 2.52 4.03
MCDONALDS 91.67   17.9 5.09 3.40 3.71
WASTE MANAGEMENT 47.96   183.4 26.11 1.50 3.13
PROCTER & GAMBLE 85.16   21.3 3.91 2.57 3.02
ELI LILLY 66.05   25.8 250.00 1.96 2.97
EXXON MOBIL 94.49   11.9 7.85 2.76 2.92
JOHNSON & JOHNSON 103.13   17.0 6.03 2.80 2.72