No 7%+ Yields for Us — Here’s Why
12/21/22 • 36 min
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If you spend much time managing your own money or researching companies, odds are you have been exposed to high-yielding opportunities. From stocks to bonds to real estate, there are plenty of investments out there that present themselves as quality investments while simultaneously generating large income streams.
7%+ yields seem hard to beat, but there is usually a reason why the yield is so high. In a way, the market is essentially showing the investor a blinking warning light, one that indicates that there is risk built into the price of the company. This is not to say that these opportunities don't work, just that dividend growth investors need to be wary of what they entail.
In the year's final episode, Greg answers a listener's question about prioritizing dividend growth or yield when nearing retirement age. That opens the door to examining the pitfalls of investing in high-yielding companies, where he provides a framework for analyzing the risk embedded within such investments. Later he compares Williams-Sonoma and Restoration Hardware in response to Berkshire Hathaway's recent addition of the company to its portfolio. Finally, Greg wraps up the episode with some food for thought.
Happy Holidays!
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If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at [email protected].
Notes & Resources:
DCM Investment Reports & Models
Visit our website to learn more about our investment strategy and wealth management services.
Follow us on:
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If you enjoy the show, we'd greatly appreciate it if you subscribe and leave a review
More on dividend growth investing -> Join our market newsletter!
If you spend much time managing your own money or researching companies, odds are you have been exposed to high-yielding opportunities. From stocks to bonds to real estate, there are plenty of investments out there that present themselves as quality investments while simultaneously generating large income streams.
7%+ yields seem hard to beat, but there is usually a reason why the yield is so high. In a way, the market is essentially showing the investor a blinking warning light, one that indicates that there is risk built into the price of the company. This is not to say that these opportunities don't work, just that dividend growth investors need to be wary of what they entail.
In the year's final episode, Greg answers a listener's question about prioritizing dividend growth or yield when nearing retirement age. That opens the door to examining the pitfalls of investing in high-yielding companies, where he provides a framework for analyzing the risk embedded within such investments. Later he compares Williams-Sonoma and Restoration Hardware in response to Berkshire Hathaway's recent addition of the company to its portfolio. Finally, Greg wraps up the episode with some food for thought.
Happy Holidays!
Book time on our calendar here
If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at [email protected].
Notes & Resources:
DCM Investment Reports & Models
Visit our website to learn more about our investment strategy and wealth management services.
Follow us on:
Instagram - Facebook - LinkedIn - Twitter
If you enjoy the show, we'd greatly appreciate it if you subscribe and leave a review
Previous Episode
The Dilemma With Slow Growth
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Constructing an attractive yet sustainable dividend growth portfolio is no easy feat, especially one that meets your expectations. As much as you try, you will eventually invest in a company whose dividend growth rate doesn't meet your expectations. For us, we want to attain a dividend growth rate of at least 6% a year on average, and ideally faster than that. Every investor needs a process for evaluating whether a company is a net positive on their portfolio, or if it’s weighing it down.
But it’s not black and white. If the dividend growth hasn’t been there, but the stock price has done well and you've owned it for a long time, reaching a decision can be complicated. The dilemma is: do you sell the company and move on, or can you see a clear path for the company to get back on track?
For our 17th episode, Greg looks at Emerson Electric (EMR), a company we have owned for over 10 years. While the stock has returned over 150%, the dividend growth rate has not met our expectations. Faced with the dilemma of selling the company, he takes you through our process of how we figure out what to expect going forward. Later he contrasts this story with Hanes Brands, a company that we eventually sold.
Within the show, we use a simple dividend growth model as a starting point. If you would like to follow along, it is linked below:
EMR Simple Dividend Growth Model
Book time on our calendar here
If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at [email protected].
Notes & Resources:
DCM Investment Reports & Models
Visit our website to learn more about our investment strategy and wealth management services.
Follow us on:
Instagram - Facebook - LinkedIn - Twitter
If you enjoy the show, we'd greatly appreciate it if you subscribe and leave a review
Next Episode
Do Dividends Care About Recessions?
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Heading into 2023, it seems as though the word recession is on the tip of everyone's tongue. At first thought, a recession might make you grimace, but what do they actually mean in real terms for an investor? Truth be told, you never know you're in a recession until after the fact, but it is essential to understand how they affect the economy. If you're a long-time investor, 2008 and 2001 were painful examples of just how fast your portfolio's value can change. So we know recessions are bad for the stock market... are they that bad for dividends?
Good news for the dividend growth investor — dividends are resilient through even the worst of downturns.
In this month's episode, Greg takes a page out of the market history book to dive into just how recessions affect GDP, earnings, the stock market, and especially dividends. He makes the case that dividends are a much more stable, if not the most predictable, factor to focus on when things get rough. Later he examines UPS as a potential dividend growth candidate.
Book time on our calendar here
If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at [email protected].
Notes & Resources:
DCM Investment Reports & Models
Visit our website to learn more about our investment strategy and wealth management services.
Follow us on:
Instagram - Facebook - LinkedIn - Twitter
If you enjoy the show, we'd greatly appreciate it if you subscribe and leave a review
The Dividend Mailbox - No 7%+ Yields for Us — Here’s Why
Transcript
Greg Denewiler: 00:22
This is Greg Denewiler, and you're listening to another episode of The Dividend Mailbox, a monthly podcast about dividend growth. Our goal is to stuff your mailbox full of dividend checks and make each year's check larger than the last.
Welcome to the 18th episode of The Dividend Mailbox. So first I want to address a question from a listener that came in a few episodes ago, and it was over the topic of dividend growth versus dividend yield, which will lead us
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