09-26-2013, 09:14 PM
(09-23-2013, 09:39 AM)cannew Wrote: Both apply and it really depends upon your investing time frame. If you have many years of investing ahead of you than you should not overlook the lower yield stocks which provide higher growth. Those may well be your big winners in the end.
Well said, cannew. Since I wrote the original post in this thread, I've done a lot more thinking about current yield versus dividend growth. Especially as a result of some good exchanges in other threads. I don't think I've reached any hard and fast conclusions, but I am certainly thinking that the dividend growth rate deserves more weight than I've been giving it. Especially since I've still got a long way to go until retirement.
I'm still skeptical of being able to predict future dividend growth rates with much accuracy, though.
In another thread I landed on the idea of "yield diversity," which is making more and more sense to me as I consider it. Most would agree that you need at very least twenty individual stocks to be diversified, and even better more like 30 to 50. With that many companies in your portfolio, it should not be too difficult to diversify across not only sectors, geography, and market cap, but also yield. So you'd have plenty of stocks with lower current yields but excellent dividend growth rate prospects, plenty of higher-yielders that are perhaps not growing the dividend so quickly, and plenty in between that have medium or average yields and dividend growth rates.
What do you think?