Dividend Portfolio

Creating Wealth With Dividend Growth

Blue-Clip Stocks That Raise Dividend

Dividend portfolio investment philosophy to hold "forever".

So, if a recession comes, the portfolio will be undervalued due to the fall in prices, and the right thing to do, is to hold, collect the dividends, and pick-up the undervalued shares to move it back to fairly valued or fully-valued levels. Conversely, during surging markets, and the portfolio is over-valued due to the rise in prices, the right thing to do is buy more dividend and/or undervalued stocks using the dividends you have been collecting, and bring back the portfolio to fairly/fully-valued levels.

Dividend-paying stocks act as "bear-market protectors" and "return accelerators" during down markets. When stock prices fall, yields rise as long as companies don't cut their dividends at a greater rate than the price drop. When those dividends are reinvested, they purchase more shares at lower prices and these extra shares act as a bear-market protector. When share prices reverse, the extra shares act as a return accelerator and rocket total returns higher.

The traditional retirement strategy for stocks is to live off dividends alone. This is an excellent approach. Typically, dividend payments continue far into the future and keep up with inflation. By living off dividends alone, a retiree avoids the most serious danger to portfolio survival: being forced to sell stocks at low prices.

What happens if you live only on dividends during the first decade of your retirement? Answer: you extend your portfolio's lifetime by ten years. Withdrawing all of the dividends for a decade did not impair portfolio survival. If you have concerns about long-term portfolio survival, consider living off dividends alone.