Yes and no. That dividend is important provided the company can continue to pay that dividend and grow the company so the dividend will be larger in the future. For example GE was on track to continue growing their business & dividend, but they ran into a pothole when the financial markets collapsed, so you also have to measure/predict a company’s ability to continue paying that dividend.

If I am not mistaken…If a person is looking to retire early by saving up a large percentage of their income they mostly care about the dividend they can receive once they are leaving the workforce to replace their job income?

So the dividend they can get as a percentage of stock price is the most important?

The other stuff is more relevant if you are going to trade regularly?

Maybe I misunderstand …so anyone chime in who can edg-a-macate me. Thanks

Can 70% be done? I’m at 65% living overseas — I was at 55% in the U.S. so if I used all of Jacob’s hints, I think I could get close. I’d rather live ‘luxuriously’ overseas though for the near future.

http://www.investopedia.com/terms/p/price-earningsratio.asp

The P/E ratio is a sort of “unit price” for corporate profits. A “cheap” or “value” company trades at a low P/E, for example boring old T is at 11.7. An “expensive” or “growth” company like GOOG trades at a higher P/E, currently 26.1.

Investors are usually willing to pay more for profits from a company with good growth prospects and a flashy name. Then again, dollars earned by AT&T buy just as much as dollars earned by Google.

I’m not sure I understand. You mean that during retirement they just eat their principal (as their return just covers taxes and inflation)?

In that case: no extremely early retirement for them!

From 2007 to 2009 GE lost more then half of its value? So I would have to subtract that from the dividend?

Can you give me an example on how to figure the big picture?

Jacob said somewhere in his older posts that the most important thing to invest in is an investment education. I have been working thru some of those books.I think I have digested like 20 or so books recom on this blog. Good reading..but I digress.

On my current book “Intelligent Investor” he says there are 4 rules to consider when buying a companies stock for dividend income. I think number four is “Price should be reasonable in relation to its ave earnings for the last 5 years. Price not to exceed 20X earnings.”

So I am looking at said GE:

Dividend Yield Summary
2009 2008 2007 2006 2005 2006
Dividends $0.4 $1.24 $1.15 $1.03 $0.91 $0
Price $14.49 $20.77 $37.07 $37.21 $35.05 $0
Yield 2.76 % 5.97 % 3.1 % 2.77 % 2.6 % 0 %

Am I understanding this right? GE ave earnings would be .94 per share. Multiply .94 x 20 =18.80

So the current price of GE is 15.97 is a good buy?

COnversely GE would have not beeen a good buy in 2007?

Kevin M said, in February 23rd, 2010 at 07:30 The more I learn about investing, the harder it seems to get.

My basic strategy is to look for a good dividend yield (4-5%) in a company that’s been around awhile. The stock price may not skyrocket, but at least I’m getting paid to own it. Some of my holdings now are T, MO, KFT, CINF.

So here is a stupid question:

Do companies tell you what they will be paying (like a bank does) or do you base that on the last year’s dividend?

If you throw out the bottom 1/3rd of investors the stock pickers beat the index funds. But, isn’t it impossible to determine who that bottom 1/3rd is? No, as most non-professional “stock pickers” select a stock with the old reliable, “I have a feeling Enron is going to take off”, “It has gone up 50%, so it must be good”, etc. They don’t use any type of real analysis at all.

Also, the environment is directly related to how well index funds do. The environment going forward (older population, massive debt, etc.) is not conducive to the entire market being positive.

The most intriguing investment strategy I’ve read about so far is Harry Browne’s Permanent Portfolio. It’s simple and seems to work. Unfortunately it doesn’t generate huge returns, so it’s probably more suitable for people who want capital preservation than for those who need to generate income.

(for those you don’t know it: It’s centered around diversifying into four asset types that each do well in specific economic circumstances and (separately) are very volatile. The public tends to overreact and overpay for the asset type that’s hot and PP investors profit by capturing gains through rebalancing.)

My basic strategy is to look for a good dividend yield (4-5%) in a company that’s been around awhile. The stock price may not skyrocket, but at least I’m getting paid to own it. Some of my holdings now are T, MO, KFT, CINF.