"Elle" <honda.lioness[at]nospam.earthlink.net> wrote
- quote -

Oops. That div. growth is misleading. I bought a young
overseas electric utility stock recently that is arguable
somewhat on the risky side, and its dividend growth is out
of whack with the other three utility stocks I own.

Instead assume dividend growth of utilities that is
comparable to REITs' (around 3%).

"David Efflandt" <efflandt[at]xnet.com> wrote
- quote -

IMO, not the "reliable, qualified dividend-paying companies"
world. In my estimation, the S&P 500 is a pretty good
approximation to this world. It's something like 90% large
cap, and it's pretty diverse. Diversity is important when
investing for dividends, particularly if one is interested
in dividend growth.

- quote -

The several banks at which I've looked over the years do pay
on average a much higher qualified dividend yield than the
S&P 500. Indeed, Powershares fairly new exchange traded fund
specializing in high yield (non-REIT) stocks, PEY, is about
50% financials and 35% utilities. It's supposed to yield
around 3.4%, or so says the blurb I have on it dated several
months ago.

But I trust you see the obvious: One loses diversity,
including opportunities for dividend growth, when buying,
say, strictly banks and/or utilities. Utilities' dividends,
for one, simply do not grow the way other qual'd dividend
paying companies often do.

OTOH, I admit bank dividends can grow at a prodigious rate.
In fact, the several banking stocks I own have by far led
all my other stocks with regard to dividend growth in the
last eight years.

So why not buy all banking stocks?

Sound bite answer: It's too darn risky to hold only bank
stocks. Their lower P/Es compared to the S&P 500's may be
said to be evidence for this.

- quote -

If this isn't something traded on the New York Stock
Exchange, then I think we're comparing apples and oranges.
(Sorry, nor do I care what a "Canadian Royalty" is. If the
yield is too good to be true, it's either not true, or it's
higher risk.)

- quote -

Correct. It's very rare for any portion of REIT dividends to
be qualifed. Of the eight or so with which I have worked,
only one had a tiny fraction which was qualified.

Anecdotally, I have noticed most REITs do not have a good
record of dividend growth compared to the S&P 500. In my own
portfolio, of around 18 large value (non-REIT and non
utility) stocks, 4 utilities, and 5 REITs, the breakdown is
as follows:

Large value (non-REIT, non-utility)
ave. yield = 3.7%,
ave. dividend growth in last eight years = 13%

Utilities
ave. yield = 4.8%
ave. dividend growth in last eight years = 8.3%

REITs
ave. yield = 6.1%
ave. dividend growth in last eight years = 3.4%

I went looking for older companies with good yields and good
dividend growth, but in each of these categories. (Sure I
could easily find a basket of REITs with a higher yield, but
it's almost guaranteed that the dividend growth would be
worse. Etc.)

Note the simple correlation: Higher dividend yield = lower
dividend growth

So we have the proverbial tradeoffs (risk v.
reward-and-loss) with which to contend as we make our
investing decisions. You may be happier with more risk than
I.

On Wed, 26 Apr 2006, Elle <honda.lioness[at]nospam.earthlink.net> wrote:
- quote -

But the world is bigger than S&P. Increasing qualified div of my bank
stock (actually a thrift) is ~4.6%. Consistant qualified distribution of
my Canadian royalty is ~10.6% (9% net after Canada withholds 15%, which
would be match US foreign "tax credit" and "tax"). I also bought a REIT
that has a habit of increasing their dividend (currently 11%), but I heard
that REIT dividends are not qualified (mine is in an IRA). Of course net
gain or loss also depends upon stock price.

"W. Wells" <otf70[at]nc.rr.com> wrote
- quote -

What Richard said. But also, I wonder if your question is a
little loaded. It's not "a little more interest" that may be
had from CDs right now. I estimate CDs are yielding around
twice as much as the typical stock paying a qualified
dividend. For example, 3-month, low minimum CDs may be
easily had right now yielding over 4.25%. The average
6-month CD yield is over 4% right now. The S&P 500 dividend
yield is a little under 2% right now. Most-to-all of the
S&P's companies dividends should be qualified.

Will twice the yield from CDs make up for the extra taxes
paid compared to qualified dividends? Absolutely.

Posting what's behind your question would probably be very
helpful, though. The above speaks to short term advantages
of CDs. The long-term advantages of CDs as an investment
are, however, dubious compared to stocks.

"W. Wells" <otf70[at]nc.rr.com> writes:

- quote -

Qualified dividends are taxed at no higher than 15% (at 5% if you are
in the 15% bracket or lower). Interest is taxed at your bracket rate.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Tax wise which is the best? Am I better off on my taxes getting qualified
dividends from stocks or getting a little more interest from CD's?