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 36.04   10.6 3.40 1.84 5.11
CONSOLIDATED EDISON 56.50   15.7 3.61 2.52 4.46
WASTE MANAGEMENT 42.03   206.1 20.40 1.50 3.57
ELI LILLY 60.43   14.0 4.31 1.96 3.24
MCDONALDS 100.25   18.0 5.55 3.24 3.23
PROCTER & GAMBLE 81.76   22.1 3.70 2.57 3.14
JOHNSON & JOHNSON 98.96   18.9 5.23 2.64 2.67
EXXON MOBIL 100.42   13.6 7.41 2.52 2.51