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Originally Posted by Rain Man
I've been going back and forth on dividends. My account is with e-trade, and with a bit of work you can tell it to reinvest dividends, which seems like it would make total return tracking easier. Apparently you can get partial shares of stock by doing so.
I've held off because I'm not sure how rounding works when you only have $1,000 worth of a particular stock, but I'm tempted to do it. Right now I'm not tracking dividends at all other than just saying, "Hmm, 3 percent per year means I should add..."
It's a bit of a gap, because I have one stock that nominally has just been break even for the past five years or so. It's up perhaps one percent. But it's an REIT and it pays some ungodly dividend, around 8 or 9 percent. So it's actually been a good stock for me. If I reinvested, I'd eventually sell it even if it didn't appreciate, and I can't figure out if that's a success or not. I think it is, but I'm not sure.
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Right. The dividends paid ought to be part of the increase in value, I'm thinking. If the company announced a special, one-time dividend equal to 20% of the value of the stock, that's no different than appreciation (other than tax treatment I guess) of 20% really.
You could modify the target to 25% if you're including dividends, so you don't undercut appreciation by selling too quickly if you view the stock as having upside when you buy.
REITs and power companies and sin companies (tobacco) seem good on dividends, overall. I did some quick research online and had some weird results. Companies like Lukoil and some mobile telephone company in Brazil. Could be an interesting diversification approach too, since we're all so US-centric... Of course the risk is higher too. Everyone knows GE and AT&T, but Lukoil?!?