Dividend Stocks in VP
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Dividend Stocks in VP
I am curious how many of us populate our VP with Dividend Growth Stocks? My VP consists of 25 stocks that are all Dividend Achievers or Aristocrats that I screen as low Beta. I use a total market index fund for the stock component of my PP, but find having the ability to do some stock picking in the VP stops me from messing with the PP too much. How many folks like me are on this board?
Re: Dividend Stocks in VP
TK3 --
I also own about a dozen "dividend growth" stocks (e.g., XOM, MCD, JNJ, KO, ABT) in my VP.
It does help me avoid messing with the (mostly) total market index funds in my PP, but the main reason I hold them is that I consider them good long-term return vehicles.
I also own about a dozen "dividend growth" stocks (e.g., XOM, MCD, JNJ, KO, ABT) in my VP.
It does help me avoid messing with the (mostly) total market index funds in my PP, but the main reason I hold them is that I consider them good long-term return vehicles.
Re: Dividend Stocks in VP
HB Reader--HB Reader wrote: TK3 --
I also own about a dozen "dividend growth" stocks (e.g., XOM, MCD, JNJ, KO, ABT) in my VP.
It does help me avoid messing with the (mostly) total market index funds in my PP, but the main reason I hold them is that I consider them good long-term return vehicles.
By how much do you expect that these will outperform your PP?
I'm just asking b/c I am constantly thinking about doing the same kind of thing, but I never do it, just b/c I don't see this (or really any other strategy) returning much more than my PP in the long run.
"All men's miseries derive from not being able to sit in a quiet room alone."
Pascal
Pascal
Re: Dividend Stocks in VP
I do it for the following reasons:
I want to create an income stream from the Dividends in 15-20 years that will yield 10% of my investment costs
I select only companies with more than 10 years of higher dividends per share with attractive valuations, the bluest of the blue
I only select low beta companies that don't move as much as the regular market.
It satisfies my need for stock picking while leaving my PP alone
Who knows if it will beat the PP but gives me a little more growth opportunity with 40% in Stocks
I want to create an income stream from the Dividends in 15-20 years that will yield 10% of my investment costs
I select only companies with more than 10 years of higher dividends per share with attractive valuations, the bluest of the blue
I only select low beta companies that don't move as much as the regular market.
It satisfies my need for stock picking while leaving my PP alone
Who knows if it will beat the PP but gives me a little more growth opportunity with 40% in Stocks
Re: Dividend Stocks in VP
Adam1226 --
To answer about the dividend stocks I need to provide a little context.
The dividend stocks currently represent about 55% of our VP and they are all in an IRA. The rest is in a 5-year Treasury/CD ladder and some slightly longer term TIPs (~25%), small mining and energy stocks (~18%) and PRPFX & cash (~7%). In short, it is a fairly conservative "mainstream" portfolio with a 20% or so speculative component.
My wife and I are retired and we withdraw about 5-8% of this portfolio when it does well, and considerably less or none in bad years (like 2008). We draw a straight 2% a year from our PP (about 2/3 of our assets) every year. We consider the PP our long-term, slowly growing "safety net" since we have no children and decided not to purchase long-term care insurance or choose survivorship provisions for each other with our respective pensions. With the small but growing PP withdrawals and our pensions we can stand some variability in our VP income.
To answer your question, I think the dividend stocks have a chance to provide a somewhat (maybe 2% or 3%) higher return than the PP if we can reinvest the dividends and withstand the forgone income while the stock market is in a real funk (like in 2002, late 2008 and early 2009, and last month) and simply bank (in the short term ladder & PRPFX) or withdraw the dividends when the market appears more "normal." Recognizing those stock market periods and picking the right dividend stocks are skills I feel like I've developed to some degree over the years, but time will tell. Obviously, the outcome of the speculative component will be the real kicker in the overall VP return. I'm willing to take some risks here.
How well all of this will work out (particularly if we have a prolonged deflationary environment and I don't respond quickly enough with the speculative component) remains to be seen, but I think the approach represents a reasonable risk/reward for our situation. It also provides a style alternative/diversifer from the PP strategy.
In any case, the money we feel we really can't place at risk is in our PP. I'm fortunate to have a wife that doesn't second guess my money management and accepts some risk and variability in our income. Sorry for the length of the reply.
To answer about the dividend stocks I need to provide a little context.
The dividend stocks currently represent about 55% of our VP and they are all in an IRA. The rest is in a 5-year Treasury/CD ladder and some slightly longer term TIPs (~25%), small mining and energy stocks (~18%) and PRPFX & cash (~7%). In short, it is a fairly conservative "mainstream" portfolio with a 20% or so speculative component.
My wife and I are retired and we withdraw about 5-8% of this portfolio when it does well, and considerably less or none in bad years (like 2008). We draw a straight 2% a year from our PP (about 2/3 of our assets) every year. We consider the PP our long-term, slowly growing "safety net" since we have no children and decided not to purchase long-term care insurance or choose survivorship provisions for each other with our respective pensions. With the small but growing PP withdrawals and our pensions we can stand some variability in our VP income.
To answer your question, I think the dividend stocks have a chance to provide a somewhat (maybe 2% or 3%) higher return than the PP if we can reinvest the dividends and withstand the forgone income while the stock market is in a real funk (like in 2002, late 2008 and early 2009, and last month) and simply bank (in the short term ladder & PRPFX) or withdraw the dividends when the market appears more "normal." Recognizing those stock market periods and picking the right dividend stocks are skills I feel like I've developed to some degree over the years, but time will tell. Obviously, the outcome of the speculative component will be the real kicker in the overall VP return. I'm willing to take some risks here.
How well all of this will work out (particularly if we have a prolonged deflationary environment and I don't respond quickly enough with the speculative component) remains to be seen, but I think the approach represents a reasonable risk/reward for our situation. It also provides a style alternative/diversifer from the PP strategy.
In any case, the money we feel we really can't place at risk is in our PP. I'm fortunate to have a wife that doesn't second guess my money management and accepts some risk and variability in our income. Sorry for the length of the reply.