Early Retirement Extreme Forums

Can anyone shed some light on how you keep track of your Dividend stocks?
I'm conservative and I like traditional Dividend stocks like JNJ, MDT, and others, but what rules do you use for selling a Dividend stock?
Honestly, I just want a conservative 4-5% per year on my total investment portfolio...I'm not looking for anything more.
I just don't know sometimes if I should hold a dividend stock if the stock price is tanking, but dividends are still consistent?
As long as the dividends are consistent, why even pay much attention to stock price?
I'm looking for simple rules on when to dump a dividend yielding stock. I'd like to keep my investing strategy as simple as possible.
thanks for any advice....

If the price falls, and dividends are consistent (or growing), it may be an opportunity to buy more.

Here's a good site on dividend investing: http://www.dividendgrowthinvestor.com/

That author dumps dividend stocks if a company reduces its dividend.

ok, but where do you analyze info. to understand if dividends will be consistent/grow in the future?
Are there any tell tell signs that dividend yield will start dropping for a particular stock? Do they announce it will drop? etc.?
thanks

I believe I saw a post by Jacob a long time ago (or maybe it was in the book) but for some reason I remembered it. If the dividend is above 5% buy, when it drops below 3% sell. I believe REITS are different having a higher point of entry, something like 10%.

Are there any tell tell signs that dividend yield will start dropping for a particular stock? Do they announce it will drop?
Yes, a company will announce any changes to their dividend policy.
The most obvious hint to look for is a company's distributable cashflow per share. If that amount is creeping up to the dividend per share amount, chances are the dividend is not sustainable. As a basline, compare the company's ratios to that of its peers.

"I believe I saw a post by Jacob a long time ago (or maybe it was in the book) but for some reason I remembered it. If the dividend is above 5% buy, when it drops below 3% sell. I believe REITS are different having a higher point of entry, something like 10%. "
thanks....
anyone want to confirm this?

"Yes, a company will announce any changes to their dividend policy.
The most obvious hint to look for is a company's distributable cashflow per share. If that amount is creeping up to the dividend per share amount, chances are the dividend is not sustainable. As a basline, compare the company's ratios to that of its peers. "
which ratio? PE ratio?
thanks....

the dividend payout ratio. I like to look for companies with a high yield, consistent history, and payout around 50% or less of earnings. REITs are an exception, they have to payout 90% to get tax breaks so most do.

"the dividend payout ratio. I like to look for companies with a high yield, consistent history, and payout around 50% or less of earnings. REITs are an exception, they have to payout 90% to get tax breaks so most do. "
o.k. in the past I was usually looking at Dividend Yield, which is basically the percentage I could count on making off my investment; paid in dividends.

so looking at this link for JNJ:
http://www.advfn.com/p.php?pid=financials&symbol=NY^JNJ
what would you monitor closely to know when to sell it in the future?
As a reminder, our goal in this exercise is to keep healthy dividend payouts. I'm not so concerned about stock price. I'm mainly concerned about consistent dividend payouts.
I'm learning a lot on this thread. Thanks everyone.

You would look at "Dividend Payout Ratio," which doesn't have a value on your site. It's generally available at yahoo finance.
The important thing about the number is it represents the percentage of net income that is paid out as dividends. If the dividend payout ratio is 100%, that means you are getting every cent the company earns. Meaning, if they have a bad quarter, they will be heading towards bankruptcy and your cash cow will get killed. Or they will be forced to reduce their dividends, which will cause their market price to drop.
On the other hand, if the company is only paying out 50% of its net income as dividends, then there's a cushion - they could theoretically double their dividends and still survive. The other 50% will usually be reinvested in maintaining and growing the company.
I would consider a payout ratio over ~60% to be a warning sign, except for in certain industries.
There are plenty of other simple ratios to look at, including P/E and dividend yield. P/E, compared to other companies in the industry, is roughly a measure of 'hype'. Dividend yield is an indication of how much you'll start earning right away if you invest in the company. The final number that's worth paying attention to is the annual dividend increase. Most dividend companies can increase their dividend 5-10% annually. It can be tough to find this number though.

I saw this article on SmartMoney this morning and thought of this thread. Good reminder: dividend increases don't mean as much if they're being offset by the watering down of existing shares.
http://www.smartmoney.com/invest/stocks ... /?mod=1122

"You would look at "Dividend Payout Ratio," which doesn't have a value on your site. It's generally available at yahoo finance.
The important thing about the number is it represents the percentage of net income that is paid out as dividends. If the dividend payout ratio is 100%, that means you are getting every cent the company earns. Meaning, if they have a bad quarter, they will be heading towards bankruptcy and your cash cow will get killed. Or they will be forced to reduce their dividends, which will cause their market price to drop.
On the other hand, if the company is only paying out 50% of its net income as dividends, then there's a cushion - they could theoretically double their dividends and still survive. The other 50% will usually be reinvested in maintaining and growing the company.
I would consider a payout ratio over ~60% to be a warning sign, except for in certain industries.
There are plenty of other simple ratios to look at, including P/E and dividend yield. P/E, compared to other companies in the industry, is roughly a measure of 'hype'. Dividend yield is an indication of how much you'll start earning right away if you invest in the company. The final number that's worth paying attention to is the annual dividend increase. Most dividend companies can increase their dividend 5-10% annually. It can be tough to find this number though."
Thank you....great info. about the 60% payout warning sign. I understand.

"I saw this article on SmartMoney this morning and thought of this thread. Good reminder: dividend increases don't mean as much if they're being offset by the watering down of existing shares.
http://www.smartmoney.com/invest/stocks ... /?mod=1122 "
Wow....this is such an Evil tactic for a company to use creating a false illusion for its investors. Thank You.

Another nasty trick abused by funds that investors should be aware of: return of capital, which is quite different from return ON capital. What a difference a preposition makes!