This article is for investors who are retirees or close to retirement.
Ultimately, most retirees want safe income – cash they can use every day to pay the bills and enjoy life. So, the goal of a retirement stock portfolio is to generate enough income for those uses.
How much income do you need to earn from your dividend portfolio?
You will earn income from your dividend portfolio and other sources. To figure out how much income you need to earn from your dividend portfolio, you first need to know how much income you’ll be earning from other sources such as pensions or perhaps a part-time job.
Dividend Income = Desired Income for Retirement – Income from Other Sources
For example, if you desire $50,000 of retirement income and you earn $10,000 from other sources, then, you’ll need to earn $40,000 of dividend income.
Here are three tips I use to maximize the returns of my dividend portfolio. You can adopt the tips to improve your returns.
The goal? To maximize returns while earning a growing dividend. Some investors think of dividends as a source of cash to pay their bills. That serves as a motivation for them to earn more dividends, until all bills are paid regularly. After which, they become financially independent.
That’s a fine way to think of dividend investing, but you can get to financial independence quicker. Here’s how. Read More
Why is the yield on cost a “feel good” metric? What does buying at the right valuation have to do with company quality and the yield on cost? What’s more important than tracking the yield on cost?
For periods of time, the yield on cost (“YOC”) has been used as one of the favorite metrics in the Dividend sections of Seeking Alpha. However, it can be misleading.
How do you use the yield on cost metric?
A common usage of yield on cost is to illustrate how a quality company has consistently increased its dividend over time. I acknowledge that the YOC is great for showcasing that.
If you invested in Amgen (NASDAQ:AMGN) five years ago, you would have started with a yield of almost 2% and would be sitting on a YOC of nearly 7%. Your total rate of return would be 203%, equating an annualized gain of 25%.
From the FY2011 to 2015, Amgen compounded its EPS by 18.1% per year and its dividend by 54.1% due to growing its earnings and expanding its payout ratio.