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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...

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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
AT&T 40.38   17.2 2.35 1.96 4.75
CONSOLIDATED EDISON 71.44   17.7 4.04 2.68 3.81
EXXON MOBIL 89.00   41.6 2.14 3.00 3.41
PROCTER & GAMBLE 84.37   22.6 3.74 2.68 3.18
MCDONALDS 121.26   22.9 5.29 3.76 3.14
ELI LILLY 67.85   29.5 2.30 2.04 3.03
JOHNSON & JOHNSON 112.26   19.9 5.65 3.20 2.88
WASTE MANAGEMENT 70.02   27.9 2.51 1.64 2.34

AT&T - T  

Older articles featuring At&t (T):
Lanny's October Dividend Income Summary
Dividend Raises And Cuts For October 2016
Asian Dividend Plays For Growth And Income
5%+ Dividend Yield Portfolio: Nearly Doubling The S&P 500 Return In 2016 (October 2016 Review)
October Update: Dividend Growth Portfolio Is Up Almost 8% For The Year
Sconnie's Dividend Portfolio Review No. 2
Predictions For 17 Dividend Growth Companies Announcing Increases In November
My Dividend Growth Portfolio - Q3 2016 Summary
Dividend Growth Investing To Fill-The-Gap
Fredrik Follower Fave Dividend Dogs: 55 Safe Out Of 130 In October