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Evening with AK and friends 2017. Happening on 6 October 2017.

To retire by age 45, start with a plan.

"Is early retirement the right financial choice?" Jim Ellis discusses long-term financial growth strategies. I have blogged a...

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Investing for income and dividend yields.

Friday, March 3, 2017

Reader:
wonder how aggressive you are at aiming dividend % yield when you were younger. Because I realized that recently you are pretty content with 5% yield or lower.



When we invest for income, a higher yield is naturally attractive but we want to exercise caution. We should avoid the instant gratification of yield. (See related post at the end of blog post.)

Be aware of our motivations and know what we are investing in. Then, we will know if our motivations and the investments match up.

Remember the pyramid:

There are investments for income and investments which are for a mix of income and growth.

Investments for income should be steady cash generators for us. The emphasis here is more on stability. They are bond like in nature. As they are less likely to deliver any significant growth, demanding a more meaningful dividend yield makes sense. However, greater emphasis should be on stability for whatever timeline we are looking at.


Investments for a mix of income and growth should also be steady cash generators. They could deliver significant growth over time and it makes sense to pay out less to shareholders as they need more financial resources to grow. So, if we are investing in such businesses, we might have to accept a lower dividend yield. This could change in future as the business matures and starts paying out a lot more in dividend.

Most of my investments are for income but I also have investments for income and growth such as Hock Lian Seng, Old Chang Kee, Wilmar and QAF. More recent examples would be Centurion and Kingsmen.

What is an acceptable level of dividend yield? The answer will depend on what we are looking for from an investment.

Related post:
Instant gratification of yield.

6 comments:

AK71 said...

From FB.

Raymond Ng:
But you have not answer his question ... "div yield when you're younger"

AK:
Because it doesn't matter younger or older, philosophy stays the same.

AK71 said...

From FB.

Aik Keong Koh:
I got asked the same question when I'm starting my income investing at 25 and my mates ask me "why you invest like you 55? You should do a lot of trading and get the trading profits!" I replied, I old already... I plan to retire at 35 that's why I start passive investing at 25.

See:
To retire by 45, start with a plan.

STE said...

May be one can adjust according to their age and risk appetite,,, younger and agreesive ,, having more growth stocks in their portfolio,, old and retire like us,, may opts for more income stocks than growth,, LOL :-) Tilt towards your requirements when necessary!!✌️✌️
Cheers !

AK71 said...

From FB:

Augustine Lim:
Shi fu AK. I hv this question n hope you can answer. I see many people love trading than income investing. They argue that you still can retire if you trade full time. No need to do income investing. Also trading consistently also gives you a consistent income stream rather than the slow way of income investing. So shi fu AK, what's your answer to this that trading is better than income investing?

See:
Trading to put food on the table.

AK71 said...

Hi STE,

I think it would depend on a person's temperament too.

I like to think that I am not the only old person trapped in a young person's body. ;p

AK71 said...

From FB:

AK:
You were a trader before you became an investor for income. Why har?

Augustine Lim:
Becos to me trading requires you to be liu qing bu ren. As I m an emotional person, trading is not suitable for me. Income, I just need to do research then just wait to collect the dividend

AK:
The most important knowledge is self knowledge. ;)

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