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Retirees Beware: Dividend Investing Is Overrated

Published Tue, 17 Nov 2020 13:11:28 -0500 on Seeking Alpha

Seeking AlphaPortfolio StrategyRetirees Beware: Dividend Investing Is OverratedNov. 17, 2020 1:11 PM ET|| Includes: AMLP, AMZN, ARKG, ARKK, ARKQ, AVGO, COP, ENB, GBTC, GOOG, GOOGL, GXC, IBM, IGV, NEE, NEM, NOBL, PSX, QCOM, QQQ, SPY, T, TBB, TBC, TXN, XLF, XOMby: Michael FitzsimmonsMichael Fitzsimmons Technology, ETFs, Renewable Energy, Oil & gas, GoldSummaryAll things being equal, the current super-low interest rate environment should be great for high-dividend paying stocks. Yet in many cases, that simply is not the case.
From Exxon to AT&T, the fact is many dividend paying stocks have so badly underperformed the market it calls into question the "high yield" investing thesis.
Meantime, companies paying no dividend but delivering strong top-line growth have led the bull market and left the "Dividend Aristocrats" in the dust.
For retired investors managing their retirement accounts, the message is clear: don't go overweight into high dividend paying stocks or you will fall behind and your income will actually suffer.
I've noticed a plethora of Seeking Alpha articles lately with respect to dividend paying companies and dividend strategies. It seems like there is a new article (or sometimes two) on AT&T (T) or Exxon (XOM) every day that tout the dividend. Yet regardless of what some investors might consider a "great yield", both of these stocks have been unmitigated disasters for investors over the past decade. Meantime, many stocks that pay no dividend at all but are delivering huge top-line growth and disrupting industries (many of these industries being led by high dividend paying companies...) have trounced the market and are "delivering alpha". For investors self-managing their retirement accounts, the market is sending a clear message: don't overweight high dividend paying stocks or you will fall behind. Since the required minimum distribution ("RMD") rule means most retirees will be taking yearly distributions (and paying... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ENBRIDGE 34.70   19.7 1.76 2.21 6.38
AT&T 38.38   16.1 2.38 2.04 5.43
EXXON MOBIL 71.98   17.3 4.15 3.48 4.83
IBM 143.62   14.8 9.68 6.48 4.47
AVAGO TECHNOLOGIES 300.58   37.1 8.11 10.60 3.60
PHILLIPS 66 102.19   8.8 11.56 3.60 3.50
QUALCOMM 79.08   28.0 2.82 2.48 3.15
TEXAS INSTRUMENTS 130.22   23.8 5.47 3.08 2.42
NEXTERA ENERGY 220.74   31.7 6.96 5.00 2.29
CONOCOPHILLIPS 56.35   9.1 6.20 1.22 2.17
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
NEWMONT MINING 38.66   0.0 -0.14 0.56 1.47
POWERSHARES QQQ TRUST SERIES 1 193.23   0.0 0.00 1.49 0.78
AMAZON.COM 1843.55   76.5 24.10 0.00 0.00
GOOGLE 1234.25   24.9 49.54 0.00 0.00


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