Dividend investing simply does not work! With the historical rate of inflation hovering around 3% per year (looking at 1913 - 2013), inflation simply eats away at one's dividend income (since many stocks I buy pay a starting yield of around 3%). Just kidding! Of course this is not the case. However, I receive this comment all the time, and many people believe this myth. Today's video looks at dividend growth investing versus inflation and shows why dividend investing works despite inflation. Today's investing video gets a bit technical with some specific models. In an effort to make things simple (and based on long-time subscriber request), I'm thrilled to share with you my dividend investing Excel model today. You can download the model and follow along here: I start out today with a discussion of historical inflation. Personally, I think inflation is more in the 2% range. That said, I am willing to take 3% for the purposes of this video to be conservative. Next, I dive into several models that show why starting yield doesn't really matter. It's all about dividend growth investing (not just dividend investing). The key term here is growth. Yes, starting yields can get cancelled out by inflation (at least partially), but I'm in it for the dividend growth. Most of the companies I own have a track record of raising their dividends each year. And, when one compounds many years of dividend increases, inflation is left in the dust! I'm personally experiencing dividend growth that far outpaces inflation. Since my modeling is a little conservative, I next transition into some real world examples form my personal portfolio. I show some examples of recent dividend increases that are out of this world. With these types of dividend increases over time, inflation becomes a distant memory in the rear view mirror. Stocks covered include: Starbucks (SBUX), Johnson & Johnson (JNJ), PepsiCo (PEP), Clorox (CLX), and McDonalds (MCD). Last, I dive into a topic that I think most investors miss. In my opinion, dividend investors (more so than anyone) face the opportunity to decrease expenses. They have the opportunity to experience budget deflation, making the concept of inflation even less significant. As humans, we tend to place roadblocks. We tend to get scared. In my humble opinion, it’s important to recognize inflation, but I certainly don't let it stand in the way of my dividend investing strategy. In terms of earning income to pay the bills, it really doesn't get much better than dividends, in my opinion. Want to learn more about yield on cost? Here’s my original video on yield on cost that started it all: Disclosure: I am long Starbucks (SBUX), Johnson & Johnson (JNJ), PepsiCo (PEP), Clorox (CLX), and McDonald (MCD). I own all of these stocks in my stock portfolio. Disclaimer: I'm not a licensed investment advisor, and PPC Ian videos, Excel files, and content are just for entertainment and fun. PPC Ian videos, Excel files, and content are NOT investment advice. Also, I'm not a tax advisor and PPC Ian videos, Excel files, and content are NOT tax advice. Please talk to your licensed investment advisor before making any financial decisions. Please talk to your licensed tax advisor before making any tax decisions. All PPC Ian videos, Excel files, and other content are (c) Copyright IJL Productions LLC....(read more)
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