High Yield vs. Low Yield Dividend stocks

Hey guys, the following article will be the start of a couple of articles about my dividend investing experience I made so far on my dividend stock investing journey. Recently I looked at my watch list I had about 1.5 years ago and I saw some stocks I really missed investing in. The best examples are 3M, McDonalds, Allianz, Voestalpine, Siemens, Whirlpool, Apple, Kimberly Clark etc. just to name a few one. The reason I did not invest in that was not I was not convinced about that companies, it was more about let’s wait a little longer for a further drop. I also calculated the possible YOC I would currently have right now and yeah sometimes the biggest mistake in investing is not investing.  Not that you get me wrong I think I have some great companies in my portfolio and I am really happy about what I have reached so far but I also missed a couple of opportunities.

Well as I was looking at my misses the idea about this article came to my mind:

Which stocks are better high yield or low yield dividend stocks?

Therefore I analyzed the dividend growth of three companies a high yield dividend income like AT&T, a lower yield income stock like 3M but having a high dividend growth rate and I also looked a steady grower like PG is with medium dividend yield. My assumption is that I would have invested 3 000 USD at the 1st of January 2011. My aim is to see with which stock I would have created more dividend income in the last 5 years.

AT&T

Facst_T

In 2011 the share price was at 29.67 USD with a yearly dividend of 1.73 USD per share. The average increase was at 2.21% per year, so on the lower side. All in all the yearly dividend income in 2016 is at 195.15 USD before taxes. But at the same time the total dividend increase is only at around 20 USD.

PG

Facts_PG

In 2011 the share price was at 46.37 USD with a yearly dividend of 1.97 USD per share. The average increase was at 2.21% per year, so on the lower side. All in all the yearly dividend income in 2016 is at 123.21 USD before taxes. But at the same time the total dividend increase is at around 32 USD.

MMM

Facts_MMM

In 2011 the share price was at 86.67 USD with a yearly dividend of 2.20 USD per share. The average increase was at 2.21% per year, so on the lower side. All in all the yearly dividend income in 2016 is at 153.69 USD before taxes. But at the same time the total dividend increase is at around 77 USD.

Conclusion

All in all over a relatively short time frame of 5 years, the high yield stock delivers still the highest dividend income. Nevertheless the highest total increase comes from MMM. As dividend investing is long time game the winner in the end will be MMM. But why investing in higher yield stocks then? Well I think you should also generate a reasonable dividend income in short term there fore a mixture of higher yields like VZ,T steady growers like PG and high growth stock like CVS build a very good fundamental of your portfolio.

Personally one of my criteria of my investments is that I want to have a Yield on Costs of 3.8% after three years of the purchase.

In 2011 the share price was at 46.37 USD with a yearly dividend of 1.97 USD per share. The average increase was at 2.21% per year, so on the lower side. All in all the yearly dividend income in 2016 is at 123.21 USD before taxes. But at the same time the total dividend increase is at around 32 USD.

How do you balance your portfolio? Do you also have some high yield stocks?

Disclosure: Long T, PG

I do not recommend any decision to the reader or any user, please consult your own research. Thank you for your understanding.

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