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In years past, we’ve discussed stock dividends as a potentially reliable source for retirement income. I wrote a story for Marketwatch, and Dr. Howard has published several papers on the same subject.
Many companies pay dividends to their shareholders, out of the earnings (profits) of their company. Usually these dividends are a smaller portion of the company’s earnings. Usually, they grow. The statistics in the various essays will show that by the word “usually,” I mean with greater than 90% likelihood of success.
In the meantime, the price of equities over short periods of time moves upward and downward, sometimes to a dizzying degree. This short-term price movement is largely unpredictable, and inexplicable, although it doesn’t stop people from rationalizing after-the-fact or making predictions with a roughly 50% chance of success. I believe this short-term movement is nearly irrelevant to your retirement success.
Retirement income is under persistent attack from inflation. Protecting only today’s retirement income does not help. Instead, our goal is to create a reliable retirement lifestyle.
Equity dividends may help provide a reliable retirement lifestyle that can potentially outpace the rate of inflation. Indeed, you may want to stop paying attention to the price of your investments–ignore the current value–if you are feeling stressed.
Instead, look at the income. You may find it provides a more steady peace of mind.
For our clients, an easy way to see this is to visit our website and click the link in the top right-hand corner, called “View My Accounts.” From here, click the link called “Consolidated account statements.” After you login, choose the report “Yield by Portfolio.” Change the date to last month. Change the date to the month before that.
Run an experiment and try looking at the investment portfolio income rather than the daily price movements. You may discover that your income is steady. You may discover that it is growing. You may discover that you are OK after all.
