Dividend Growth vs. High Yield: Some Surprising Findings

Dividend investors can make hours of chummy chit-chat. We rhapsodize endlessly about rising yield-on-cost, low payout ratios, inflation-beating income and related marvels that somehow elude other investors.But trouble lurks beneath this pleasant facade. Two dividend camps, high-yield fans and dividend-growth lovers, sometimes seem to feud like Hatfields and McCoys. “How can you write about a 2% yield!?! I need 6%,” the high-yield fans protest. “But with dividend growth your dividends will climb even higher,” the other side counters. Ok, let’s settle this old fashioned way. With numbers. We’ll look at three different objectives: high current income, building a future income stream and investing for total return. It turns out, perhaps surprisingly, there’s a clear-cut winner for only one of these three. High Current Income There’s no need for suspense on this one, investors who want high current income from their stocks will want higher yields. Of course, if high-yield... Read more