Don''t rely on stock dividends for retirement

Dividends are the thing of the past, yields were dropping and a lot of them are simply gone.

>A frightening article in the trade newspaper Pensions & Investments on Monday estimated that BP employees and others in the company’s 401(k) plan have lost more than $1 billion from the stock’s decline in the wake of the spill. How can the loss be so high? Well, 29 percent of the plan’s assets were invested in BP stock as of last September.

And that's retarded.

I believe it was the April issue of Kipplinger's personal finance magazine that recommended BP stock for its yield. Okay, maybe that's not the most sophisticated source for financial advice. But any readers that acted on that recommendation got seriously burned.

All Barron's , Kipplinger's and other magazines do is run a value-line or similar and throw in some criteria. The writers are hardly Financial Analysts..

It just demonstrates the folly of private-sector non-defined-benefit approaches to retirement finance. But I guess that was your point.

I don't listen to silly financial analysts. I invest all of my retirement money on my own and have done pretty well. I invested in Lehamn, Bear, AIG, Fannie/Freddie, WaMu, Wachovia, IndyMac, and the rest with Madoff. I am all set for retirement.

I'm strictly a buy-and-hold guy myself. I don't bother checking my statements all the time -- why drive yourself crazy.

Long Drexel, Enron, Marc Rich, Barings Bank, etc.

A high divend yield is actually often a red-flag of a company under duress and who is about to cut their dividend. Sorry if I am stating the obvious to many.

That reminds me: I need to check the status of my Greek and Icelandic bonds.

all this proves is that you need to have a diversified stream of income for retirement, of which stock dividends are certainly a valuable one. BP has had very strong dividend growth. Dividends can provide a nice hedge against inflation - especially from a company in basic commodities like this. Clearly one shouldn't be overexposed to any asset class and especially one company, but BP absolutely had a place in a well diversified portfolio. No well constructed portfolio with some BP exposure would be experiencing anything more than a flesh wound.

BP had no debt. The company had the flexibility to do both. The dividend cut was political. If the company engaged in criminal negligence that should have come out first in a court. Jack Welch gave an interview today, he opined that CEO's look for solutions, politicians look to point blame(paraphrase).

The situation in the gulf is tragic. It should not have happened. But it concerns me if this is behing handled for political points and not to correct a tragic situation.

'he opined that CEO's look for solutions, politicians look to point blame(paraphrase)'

that's a laugh - how much finger pointing has there been among the big banks/financials? they're like everybody else - they want credit when things go well (our stock is up - pay me!), and pass the blame when things are bad (our stock is down - its the market/the shorts are out to get us/etc. - pay me anyway!)

"Jack Welch gave an interview today, he opined that CEO's look for solutions, politicians look to point blame(paraphrase)."

Really? Because a few weeks ago at a Congressional hearng, BP, Trans Ocean, and Halliburton could not stop blaming each other for a single second. But your just a corporate shill, so you take Jack Welch's word like the Bible.

As if Congress is the place for a fair hearing....
Of course the oil companies were blaming each other. They were covering their hiney. Look who the prosecutor was..politicians. I'd like to see any BP executive hung by the balls who was guilty of criminal negligence, but after hearing Congress decide to investigate Baseball on steroid abuse you have to wonder. Putting BP out of business is stupid. They employ directly or indirectly way too many. Add to that employees were not compensated in the same way as a managing director at a wall street trading desk..

I have to emphasize the environmental impact is terrible,, but I don't like seeing what the President and Congress are doing. One has to wonder the Obama and Congress are playing off the geenal hatred the population has toward Big Oil.

I must add I am incredibly uncomfortable defending an oil company with a terrible track record with regard to safety and the environment. But I don't see this the same as how Wall Street acted. It feel to me that Obama does not "want to waste a crisis"

Stupid. This is not about not relying on stock dividends. This is about not putting all your eggs in one basket and relying solely on one stock, or just on dividend paying stocks.

Where do you get this crap?

only constant streams of payments I know of fall under the categories of fixed income.

Bonds default too.

With the top bracket tax rate rising 4% to 39%, that makes NYC residents on the hook for 44%. Why anyone looking for yield would be in anything but munis is beyond me.

Yes, bonds could default, so buy a MTA bond. I don't care what happens to the economy, if they need money, they are going to raise the fare. Simple as that.

I don't have the (WSJ) link, but look at the yield Carlos Slim is getting on the 5th ave building he just bought. After some boomtime rents drop off next year, his yield is in the 6's. For the richest man in the world to be getting that kind of return, it kinda tells you the shit show tha's out there re: yield.

Munis make a lot of sense, but with NYS is playing games with its budget. What does one do? Look for revenue bonds like Water & Sewer? Government claims to work for the people, but they don't treat the class that saves and lends very well.

alan really is clueless. Whether in a defined benefit plan or a defined contribution plan, overexposure to a company in trouble causes the same problems. But with a defined benefit plan, the ultimate responsibility can fall to taxpayers. Of course alan likes that- everyone else can give him a handout.

http://www.youtube.com/watch?v=IxAKFlpdcfc

Riversider,
If revenue is going down, you can buy water and sewer or whatever you feel comfortable with. At the current top tax rates for a nyc married couple, a 4% tax free yield equals 6.69% and a 5% tax free yield equals 8.35% taxable. If you can get a return between 7 and 8% with almost zero volatility and a maturity date, why take the volatility of stocks to earn 1 to 2% more on their long term average?

Again,

You buy bonds to stay rich, not get rich.

Positive, my point is that the credit risk of munis is higher than what they were. The fact that politicains jaw boned the rating agencies to employ the industrial ratings scale to munis means we now have rating inflation at the worst possible time. With regard to municipals, unlike structured debt one has little choice but to rely on ratings as part of the credit analysis. The average person does not have the means to analyzing the finanical statemetns of a municipality and deciding on the quality of a credit..

all other issues notwithstanding, who relies on undiversified dividend income to pay daily expenses? surely there can be no sympathy for morons of this caliber. what is it, the 1970's?

of course if you diversified by holding GE, BP, FRE , AIG...

And what if you're too old or simply uninterested in following the markets, etc. ... what (investment) should you rely on for daily expenses in retirement?

an annuity. then you only have to worry about living.

KO - 48 years straight of increasing dividends. That is all you need to know.

http://www.bestcashcow.com/stocks_-_options_-_mutual_funds/article/sean_riskowitz/cokes-ko-real-fizz-dividends

living, inflation, belly-up insurance co. or whatever

an annuity. then you only have to worry about living
unless the insurance company goes belly up. annuities do not make money out of thin air. you basically pay them to make more money and pay you less. but at the end of the day , you bear risk

if you can own some cds on ur bond then at least you know you can eliminate default risk. right riversider

What's the hedge ratio and correlation between BP & THE CDS?

all annuities are scams. wake up people

So how am I supposed to keep my personal-responsibility self-directed private-sector self in Ken-L-Ration when I retire? I'm so confused.

'all annuities are scams. wake up people'

oh so naive. and you can split it up amongst several insurers if you are that concerned, plus there are state protections. you can even buy your immediate annuity direct from Berkshire Hathaway.

FYI, Berkshire Hathaway is scam - JuiceMan told me so.

Riversider,

Don't get all straw man on me here. Use my earlier example. What's the chance of the NYC subway going out of business? F'ing ZERO. Small enough that I'd put millions upon millions of my clients money in it and sleep like a baby. Don't talk to me about credit risk.

As for the insurance company, since the great depression over 9000 banks have failed and ZERO major insurance firms have. Put your money with Metlife/NYLife/whatever and........wait for it........sleep like a baby.

i stand by my statement, all annuities are scams. would like to hear positivecarry's take on it..

>What's the chance of the NYC subway going out of business?

Going bankrupt isn't the same as going out of business.

Neither is going to happen to the subway. Look at our lowest rated state in the union, CA. Muni Bondholders get paid before policeman and fireman. The MTA borrows often. They couldn't exist with the debt market. Other than a nuclear winter, there is zero risk. 8 million (?) rides a day? Not happening. Ever.

As for annuities, if you need a guaranteed stream of income for life, they are an option. If you want to invest in a annuity and walk away with a lump sum, the fees are probably too high. The reason their stocks dove so much (HIG $60 to $4) late 2008, early 2009 was the income gurantees they made to clients. Some were giving 10% income for life, based on deposit or highest watermark snapshot. That's pretty sweet if you never want a lump sum.