It has been suggested that TIPS-Treasury Inflation-Protected Securities-are a better choice for dividend growth investors than dividend stocks themselves. The reasoning is that in periods of high interest rates, the income from TIPS will keep up with inflation, while the annual growth in dividends of dividend growth stocks will not. The income advantage of dividend growth stocks over the past few years is dismissed as "recency bias."
At the current time, TIPS cannot touch dividend growth stocks in initial yield. It would take a sizable increase in interest rates for TIPS to become competitive with dividend growth stocks in yield. Since my focus in dividend growth investing is on the income stream, this is pretty much a knockout factor for me. It is realistic for me to put together a dividend growth portfolio with an initial yield of around 4% and a likely annual dividend growth rate that places a goal such as 10 by 10-10% yield on cost within 10 years-in reach. You simply can't do that with TIPS. As we saw in the example above, even a TIPS that began with a decent interest rate of 3% 10 years ago has a yield on cost now of less than 4%. While that cash flow has been protected from inflation, it has also been constrained by inflation.
Source: Seeking Alpha
Related Articles:
- How To Build A Sustainable High Yield Portfolio
- 10 Stocks That Have Paid Dividends Since The 1800s
- 7 Exceptional Dividend Growth Stocks With Quality Financials
- Are You Patient Enough To Be Wealthy? These 12 Dividend Stocks Will Help You Wait
- 10 Dividend Stocks For Healthy and Wealthy Retirement
Tips For Dividend Growth Investors
Posted by D4L | Wednesday, February 29, 2012 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
Dividend Growth Stocks News
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
We screened our 24/7 Wall St. dividend equity research database and found 5 stocks that combined can generate over $3,000 of annual passive ...
-
The stock market has been on an upward path of late, with some of the most prominent stocks hitting astronomical highs. The dividend yield o...
-
Dividend growth stocks can be incredibly attractive investments if you crave recurring income. As these types of stocks raise their dividend...
-
Dividends can be a tremendously powerful part of your investing strategy. Not only can they give you a continuing source of cash to reinvest...
-
The most dependable dividend stocks typically have a long track record of sustaining payouts through different market cycles. Companies with...
-
In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio. The first is histo...
-
As the broader stock rally broadens to some of the more “boring” corners of the market, it’s the higher-yielding dividend plays that could s...
-
Double your money in a short time. Few investors would walk away from such an opportunity. Of course, there's no guarantee that any inve...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.