August Dividend Income Report - The Yield Isn't Important by The Dividend Guy

Summary

• The yield isn't important (to me).
• August was the month where banks were discussing their results. While some missed the mark, I was "lucky" enough to have shares of two banks showing great results.
• While there are still lot of uncertainties around the commercial trade war and the interest rate yield curve, the market seems to always find a way to go higher.
• At this point, I'm debating selling GTX and REZI as they are the results of spin-offs from Honeywell, which I sold last year to buy BlackRock.
• This idea was discussed in more depth with members of my private investing community, Dividend Growth Rocks

In September 2017, I received slightly over $100K as a result of the commuted value of my pension plan. I decided to invest 100% of this money into dividend growth stocks. Each month, I publish my results. I don't do this to brag; I do this to show you it's possible to build a portfolio during an all-time high market. The market will crash… eventually. In the meantime, I'd rather cash some juicy dividends!

The Yield Isn't Important (to me)

Funny story, I've been told a couple of times (on Seeking Alpha) that my moniker (The Dividend Guy) should be replaced by the "Total Return" Guy. I don't really get why since the whole purpose of investing is making money, right? My goal is to generate a positive total return (capital appreciation + dividend). If I wanted to see money deposited monthly, I would have simply bought an annuity and get my paycheck. Making sure my capital is growing (along with dividends) is only a rationale approach to investing. I want to make sure my wife and kids will have more money to manage if I ever pass away. Not just some rundown companies paying 8% yield and losing 105% in value year after year until the company finally cuts its dividend.

I'll go one step further just for fun with this column about dividend yield. I don't mind about the dividend yield. My portfolio generates roughly 2.5% yield now. I know, you can cough and tell me it's not a real yield. But that's mostly because my portfolio jumped in value over the past 2 years. My yield on cost (dividend payment today divided by my original investment) is probably around 3.5% now.

What really matters (TO ME) is the dividend growth. First, I don't need to withdraw money immediately. Therefore, I don't need my portfolio to generate lots of income. I just need my portfolio to generate a growing income stream for the future.

Tracking dividend growth ensures that most of my companies are doing well (if not, why would they increase their distributions?). This is my number one signal to make sure my investment thesis is still valid. An absence of dividend growth is definitely a red flag telling me I need to investigate further.

I understand that yield is important when you are retired and you expect your portfolio to generate enough income so you can enjoy a stress-free retirement. At that point, yield does matter, but not at all cost. In fact, you are probably better off with a portfolio yield of 3.5%-4% with a steady capital appreciation and withdraw a total of 4-5% of your portfolio (e.g. selling a few shares) each year. If you aim at an 8% withdrawal rate, no matter if you want to do it through dividend yield or by selling shares, you are going to bleed your portfolio out rapidly.

New! My Income Report in Video
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Original Post

Syndicator's Note:

I loved this update by The Dividend Guy. On the original post (linked above) he shows a bunch of charts and PDF reports that go into further details about his dividend income and holdings. I highly recommend checking out the link for his full portfolio and analysis.

Author Bio:

This article was written by The Dividend Guy. A well-known investment author on Seeking Alpha.

Steem Account: @thedividendguy
Twitter: thedividendguy

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