Using Dividend Investing To Produce A 'Livable Wage'

I am a dividend-focused investor, managing money professionally at a time when “dividend stock investing” is growing in popularity. That’s why I think it’s important to point out the flaws in conventional wisdom regarding dividend stocks. This will certainly not be the last time I cover this subject, but for now here are a few headline items. They all relate to the same issue, which is that many investors take shortcuts to investing for dividend yield. Shortcuts work for a while…and then they blow up on you. Let’s see if we can spare you that calamity.

For many investors, dividend investing is a way to fund their lifestyle in retirement, or as a supplement to their working income. But I worry that my own profession, the investment advisory and management industry, is losing sight of that bottom-line goal. So many popular dividend ETFs don’t yield enough to support someone’s lifestyle unless they have an 8-figure net worth. For example, some of the largest dividend ETFs yield 2.50%-3.00%. If you plan to retire and live on $100,000 a year, you will need $3-4 Million in principal to produce that. If your goal is $150,000 a year in retirement income, you are talking $5-6 Million. This is a familiar problem to bond investors, who have seen income from Treasuries, Corporates and Munis fall to pathetically low levels.

Source: Forbes

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