Why dividends in retirement and not sell stock?
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I pay almost no attention to dividends at the moment and can't imagine that will change during retirement. I have other plans to deal with equity downturns and crashes0
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If you are at the accumulating and growing the pot that makes sense, but if you were retired and taking income it might be seen as a nice bonus to have invested just before ex-div date and get an early dividend.
And to be fair if and when I'm in a position to need the income I may change my view.
But I'm really struggling to see how it's anything other than paying myself.0 -
I'm retired and have about 6 years until my state pension kicks in so all my income is now from my dividends and some savings. Between my SIPP and a GIA I generate about £18k pa which covers all my bills and usual discretionary spending. The payments are steady and reliable and require no effort on my part. I can largely ignore the share or unit price as it will only matter when I come to sell which I have no plans to do for a decade or two. I have separate growth pots which I can use for larger capital expenditure or perhaps turning up the income wick in future years at a time that suits me. It works for my circumstances and is robust and flexible, but the idea of swapping my income portfolios for total return and periodic sales, perhaps at a lower value than I paid, does not appeal and I can't see that my situation would be improved by it. Perhaps if I had a comfortable DB pension and my investments were for extra discretionary spending or fun I'd feel different about it but I don't0
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Should be possible to set up a global equity fund paying a 3% dividend to aid a retirement income. The UK has been consistent in this area for decades although it has underperformed in recent years. Europe has also been a decent region for dividends.
https://www.schroders.com/en/sysglobalassets/digital/insights/2018/charts/2019-outlook-uk-equities/uk_dividend_yield_versus_its_history_and_other_regions.jpg
https://www.schroders.com/en/insights/economics/outlook-2019-uk-equities/
The UK gets negative reviews of late but if you set the chart to 10 years or more it has held its own until the last few years.
https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100,NASX
There's also concerns about inflation and market downturns.
https://seekingalpha.com/article/439171-has-dividend-growth-kept-up-with-inflation
There wasn't that much damage during the financial crash.
https://www.linkassetservices.com/images/uk-div-1.png0 -
Should be possible to set up a global equity fund paying a 3% dividend to aid a retirement income. The UK has been consistent in this area for decades although it has underperformed in recent years. Europe has also been a decent region for dividends.
https://www.schroders.com/en/sysglobalassets/digital/insights/2018/charts/2019-outlook-uk-equities/uk_dividend_yield_versus_its_history_and_other_regions.jpg
https://www.schroders.com/en/insights/economics/outlook-2019-uk-equities/
The UK gets negative reviews of late but if you set the chart to 10 years or more it has held its own until the last few years.
https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100,NASX
There's also concerns about inflation and market downturns.
https://seekingalpha.com/article/439171-has-dividend-growth-kept-up-with-inflation
There wasn't that much damage during the financial crash.
https://www.linkassetservices.com/images/uk-div-1.png
Personally, I’m a big fan of this one.
https://evenlodeinvestment.com/funds/evenlode-global-income-fund0 -
... but if you were retired and taking income it might be seen as a nice bonus to have invested just before ex-div date and get an early dividend.0
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I have trouble seeing how that view makes sense. Getting some of your money returned to you in short order as a dividend is not a bonus. In fact, it's worse than a bonus if that return of capital is now miraculously transformed into taxable income.
Yes, but both income and capital gains are taxable...
The simplicity of buy-once, hold-forever and get a quarterly cheque is quite appealing to me. I know you can achieve the same by selling portions of your holdings, but for me, it makes the investment goals really simple - I want the underlying value to broadly keep pace with inflation over time and to get dividends of 3% per annum against the initial price uprated for inflation. I have stocks that have a headline yield of less than 3%, but because the price has grown strongly, they still meet my goal of 3% yield on historic cost. In most cases it also means I can be quite relaxed about actual share prices, which helps avoid any feeling of angst when the market dips.0 -
I have trouble seeing how that view makes sense. Getting some of your money returned to you in short order as a dividend is not a bonus. In fact, it's worse than a bonus if that return of capital is now miraculously transformed into taxable income.
One time it can make sense is if you are participating in a new issue of an existing venture capital trust, whereby you would get income tax relief on the full amount of the gross contributions and then relatively quickly receive a tax free dividend. Granted, a niche situation and such products are higher risk than mainstream and liquid equity income funds.0 -
Personally, I’m a big fan of this one.
https://evenlodeinvestment.com/funds/evenlode-global-income-fund
Or Finsbury Growth & Income IT? Some similar holdings.0 -
If you sell shares down and take divis, you can get two tax free allowances £12,000 pa for CGT and £12,500 for income tax. £24,500pa tax free - kerrching :money:0
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