Dividend Investing

[NZSilver]

Would be very interested if you could give me more details fungus, what kinds of companies or funds, experience, what you have learnt/would do differently, have you had to sell holdings it just hold. I'm in the process of building a portfolio, one where I don't have to worry/think about to much on a daily or weekly or even monthly basis. current bug portion in ARG, LIC (I own a herd of cows and can buy this one) and SKC, some KPG, NZX top 10 smart share, and USgrowth smart share, CSL on asx long term, ADA & SCL on asx more for small cap interest and these asx only small holdings. Also been in DMX capital for a while.

[kiora]

I am a fan for just stacking more income with every move. Never buying with the thought of selling - just adding more income. That should eliminate need to sell for a 'one off splurge', and if it doesn't at least the income is there to service a splurge loan. Make 'who am I going to leave all this to?' your biggest concern.
I don't claim to be an expert. In fact I'm quite the opposite. I know nothing at all about the sharemarket, but I have managed to build an income far in excess of my annual requirements without the requirement of 'work'. (Apologies to the sensitive - please forgive that four letter word.)

Along the same as my 41 yr investing journey FP. In the last decade I have stacked more into "high return" growth funds and share portfolio that I add to "winners" and cull out the cyclical dead wood . The share portfolio I have reassessed every year or so( early Feb 2020 & Jan this year ) when I have perceived markets are turning. This has left my share portfolio around 65% IFT & 30 % FPH with a small % dabbling in Co's that I am testing the waters on for future growth
This way any inheritance can be easily self managed even by someone with little knowledge on investing

[fungus pudding]

Would be very interested if you could give me more details fungus, what kinds of companies or funds, experience, what you have learnt/would do differently, have you had to sell holdings it just hold. I'm in the process of building a portfolio, one where I don't have to worry/think about to much on a daily or weekly or even monthly basis. current bug portion in ARG, LIC (I own a herd of cows and can buy this one) and SKC, some KPG, NZX top 10 smart share, and USgrowth smart share, CSL on asx long term, ADA & SCL on asx more for small cap interest and these asx only small holdings. Also been in DMX capital for a while.

My only direct share market investment is in various NZ LPTs. I also have a bit in Milford assets. Not sure why.
I have had a lifetime of owning flats, houses and the odd commercial and or industrial building. Generally avoiding selling. Accumulate is the motto. But now for an easier life in the last few years I have had a clear out, retaining one commercial building only which makes all additional income taxed at 33% and soon to be more. So lpts with their PIE tax make sense, especially now as we head to 39% top tax rate for income over 180k - from 1st April.
It's all horses for courses and if were younger I might revert to a more hands on approach.
Most experts preach diversification, and for good reasons. However I have unshakeable faith in commercial and industrial real estate. There are traps there of course, and LPTs provide diversification within that one asset class, as opposed to having a bundle tied up in one or two buildings (while I have great faith in buildings - it doesn't necessarily apply to tenants or their activities.)
Across the LPTs I hold there are well over100 tenants spread over dozens of quality well located buildings. That's sufficient diversification for me. Not a lot to keep me awake. My advice is always - keep building income.

[Beagle]

Approaching retirement with the objective of investing to secure a reliable dividend stream is it best to select stocks individually or invest in a Dividend Exchange Traded Fund? Any comments would be gratefully received

Okay to answer that question, (because there's a range of strategies) I think its best to reverse engineer this and ask what level of weekly income do you want in retirement ?

More than happy to weigh-in on this as I am in much the same position.
Questions that one might like to consider that I have been pondering.

1. What hobbies and interests do you want to pursue in retirement and what might that cost as a lump sum up front (e.g. nice new motorhome or boat) and to run on an annual basis ?
2. What other activities does one want to undertake in their retirement, e.g. annual, (or more frequent ?) holidays outside N.Z. or cruises (obviously once Covid risks have abated)
3. What level of support does one want to continue to provide for charitable or philanthropic purposes.

Once you have answers to the above one then needs to ponder what level of lifestyle generally one wants to have, luxury, comfortable or frugal.
If I recall correctly sorted had some good info on this. Basic super for a married couple ifs $652 per week net after tax https://sorted.org.nz/guides/retirem...z-super-rates/

Good page here with heaps of guides - time does not allow me to review today https://sorted.org.nz/guides/retirement/

Suppose you decide you want a comfortable lifestyle and suppose like me your 60 this year and am thinking of retiring before you turn 65 and wondering if you have enough and what is the best way to invest.

If I remember correctly sorted reckon you need around $1,200 - $1,300 per week to live comfortably, (regular trips away, lots of treats, meals out, participating in hobbies e.t.c.). Lets assume a comfortable retirement is something I assume everyone here wants as a minimum. This is about double the rate of N.Z. super for a married couple which is currently $652 per week.

So the question then becomes what is the optimum investment strategy to generate another $650 per week plus whatever extra on top of that for high cost hobbies you want to engage in. $650.00 per week = $33,800 per annum in investment income. If one invested in say the Kingfish fund, Marlin or Barramundi or some combination thereof which pay out 2.0% net each quarter (assuming they are trading at NTA, which sadly they're not at present which makes life a bit more difficult) then one needs to simply invest 33,800 / 0.08 = $422,500 and they will achieve their outcome and if spread over Barramundi and Marlin as well will get a broadly diversified portfolio of Australian and International shares as well.

Australian ETF fund for yield is paying quite a bit more than the NZ ETF fund https://smartshares.co.nz/types-of-f...ian-shares/asd

I'd rather pick my own shares and yield on the NZX than accept a 3.4% return in the NZ yield ETF. Choose high dividend yield shares like HLG and HGH that can grow dividends over time. Watch a companies track record with dividends. Do they have an unblemished track record over the last 5 years with their dividend payments ?
Hope some of the above helps and other weigh in with some more tips for you.

[NZSilver]

My only direct share market investment is in various NZ LPTs. I also have a bit in Milford assets. Not sure why.
I have had a lifetime of owning flats, houses and the odd commercial and or industrial building. Generally avoiding selling. Accumulate is the motto. But now for an easier life in the last few years I have had a clear out, retaining one commercial building only which makes all additional income taxed at 33% and soon to be more. So lpts with their PIE tax make sense, especially now as we head to 39% top tax rate for income over 180k - from 1st April.
It's all horses for courses and if were younger I might revert to a more hands on approach.
Most experts preach diversification, and for good reasons. However I have unshakeable faith in commercial and industrial real estate. There are traps there of course, and LPTs provide diversification within that one asset class, as opposed to having a bundle tied up in one or two buildings (while I have great faith in buildings - it doesn't necessarily apply to tenants or their activities.)
Across the LPTs I hold there are well over100 tenants spread over dozens of quality well located buildings. That's sufficient diversification for me. Not a lot to keep me awake. My advice is always - keep building income.

Thanks, there's a few pearl's of wisdom in there

[nztx]

Thanks, there's a few pearl's of wisdom in there

Indeed .. indirect property interests with the job professionally managed seems far
more stress free in these crazy times of lunatic political targeting then finger pointing
when their crazy policies fail to fly ..

Even Mr Oar seems to be inflicted with lunatic policies coming off the hill - nothing
an oar being swung very fast back towards him will not fix however ..

Finger pointing at Investors using Interest only funding is bound to solve the bag
of foul tricks I'm sure -- trying to make the portion of the sector possibly most
capable of performing extinct .. can anyone identify which cereal packets the
joke cards with these idiot tendencies have escaped from ?

[Sgt Pepper]

Okay to answer that question, (because there's a range of strategies) I think its best to reverse engineer this and ask what level of weekly income do you want in retirement ?

More than happy to weigh-in on this as I am in much the same position.
Questions that one might like to consider that I have been pondering.

1. What hobbies and interests do you want to pursue in retirement and what might that cost as a lump sum up front (e.g. nice new motorhome or boat) and to run on an annual basis ?
2. What other activities does one want to undertake in their retirement, e.g. annual, (or more frequent ?) holidays outside N.Z. or cruises (obviously once Covid risks have abated)
3. What level of support does one want to continue to provide for charitable or philanthropic purposes.

Once you have answers to the above one then needs to ponder what level of lifestyle generally one wants to have, luxury, comfortable or frugal.
If I recall correctly sorted had some good info on this. Basic super for a married couple ifs $652 per week net after tax https://sorted.org.nz/guides/retirem...z-super-rates/

Good page here with heaps of guides - time does not allow me to review today https://sorted.org.nz/guides/retirement/

Suppose you decide you want a comfortable lifestyle and suppose like me your 60 this year and am thinking of retiring before you turn 65 and wondering if you have enough and what is the best way to invest.

If I remember correctly sorted reckon you need around $1,200 - $1,300 per week to live comfortably, (regular trips away, lots of treats, meals out, participating in hobbies e.t.c.). Lets assume a comfortable retirement is something I assume everyone here wants as a minimum. This is about double the rate of N.Z. super for a married couple which is currently $652 per week.

So the question then becomes what is the optimum investment strategy to generate another $650 per week plus whatever extra on top of that for high cost hobbies you want to engage in. $650.00 per week = $33,800 per annum in investment income. If one invested in say the Kingfish fund, Marlin or Barramundi or some combination thereof which pay out 2.0% net each quarter (assuming they are trading at NTA, which sadly they're not at present which makes life a bit more difficult) then one needs to simply invest 33,800 / 0.08 = $422,500 and they will achieve their outcome and if spread over Barramundi and Marlin as well will get a broadly diversified portfolio of Australian and International shares as well.

Australian ETF fund for yield is paying quite a bit more than the NZ ETF fund https://smartshares.co.nz/types-of-f...ian-shares/asd

I'd rather pick my own shares and yield on the NZX than accept a 3.4% return in the NZ yield ETF. Choose high dividend yield shares like HLG and HGH that can grow dividends over time. Watch a companies track record with dividends. Do they have an unblemished track record over the last 5 years with their dividend payments ?
Hope some of the above helps and other weigh in with some more tips for you.

Thank you so much for taking the time to offer advice on my inquiry. It is sincerely appreciated

[traineeinvestor]

Although this probably won't add to what Beagle and fungus pudding have already posted, I'll add a few comments on my retirement planning process.

1. get the wife on board with me retiring

2. make sure I have something to retire to - there is a strong correlation between people taking early retirement and increased risk of health issues (causation is debatable). Beagle's point about hobbies resonates very strongly with me

3. as Beagle suggested I started by asking myself what income did I need to maintain my desired standard of living in retirement. I kept a record of expenses for a few years before retiring and then made some adjustments for expected changes in spending patterns (e.g. more travel). Given that it becomes increasingly difficult to get a high paying job as one gets older, I arbitrarily added 20% to the projected number - I'd rather work and extra few years in my 40's than be scrambling for a job in my 60's or explaining to Mrs Traineeinvestor why our overseas holiday has been cancelled

4. Given that even low rates of inflation can compound to significantly erode the value of money given enough time, decided that I wanted most of our savings invested in assets which generated income which had at least the potential to at least match inflation - property and shares. Most economic cycles seems to show some form of disruption to dividends and rents, so I have a modest allocation to cash, bonds and precious metals so that I should never be forced to sell shares or property when the market is priced badly

5. the holy grail of equities for a retiree looking to live off the dividends is companies that can grow their dividends over time. One lesson I learned looking back over my portfolio is that the best performing companies are ones that started off with a relatively low yield but kept increasing it year after year (this is a generalisation of course). It's taken me a long time to get out of the mindset that I have to have a decent yield from day one

6. diversification matters. Putting all my money into a concentrated portfolio of (say) ten shares might make for easier management and might give me a better chance of beating the market - but I'd lose sleep if I did that. I've been around long enough to see too many market darlings crash and burn. To use a few examples: all the investment, insurance and property companies from the eighties boom come to mind. ATM is another recent example - it was great for a while ... until it wasn't. I have a mix of real estate, ETF's, individual equites, bonds an a sliver of precious metals. I'm overly diversified and probably should prune some of the smaller investments - and I've been telling myself that for several years now

7. pruning loss making investments is one of the hardest things to do. As Kahaneman, Zweig and others have pointed out admitting that I am wrong and taking a loss is not easy but it needs to be done (and I'll be killing at least one investment on Monday which I should have got rid of years ago).

8. do keep reading - both current and historical materials relevant to investing and the economy

9. last point: my focus on income for retirement means that I will miss out on many high performing investments (no crypto for me). It can be difficult reading posts from people who've made spectacular returns from highly speculative investments but I don't care - if I wanted more money I should have kept working for longer.

[iceman]

Thanks traineeinvestor. You have just detailed pretty much exactly what process I have been through in preparation for my "relatively" early retirement. No1 was a very important point and lead to an overseas holiday home becoming part of the equation aimed at both lifestyle and income.
Another thing to point out in response to some of the comments about dividends, we can not forget the very favourable NZ imputation credit systems which make NZ dividend much more attractive for NZ tax payers than for most dividend receivers in other countries.

[Beagle]

Excellent post traineeinvestor. Just wanted to add a little to my earlier post in regard to the desired weekly income in retirement and retiring before you get super.

Suppose one desires the $1,300 net income in retirement that I was previously talking about and you won't get superannuation for a few years time. One way to solve the riddle is to put aside a lump sum of capital into a separate account and pay your own super out of that until the point when you do get superannuation. For the Beagle's that would equate to $181,000 which if invested to generate a 5% net return would pay us the married super rate until we're both getting it.

One then simply has to invest another sum of capital (I used $422,000 above at 8% net invested in the Kingfish group) but if one is assuming a net 4% return they would need double that amount to generate the other $650 per week.

Whether $1,300 per week net is enough for a comfortable retirement wherein one has ample money to engage in interesting hobbies, activities and travel is a question people have to answer for themselves and adjust the assumed capital required and investment return to make the numbers fit.

Sadly I suspect a number of people currently retired and living mainly off term deposit interest + super have had to seriously adjust their expectations when it comes to discretionary spending.

When is the optimum time to retire is another whole big can of worms ? For me I still enjoy helping clients and friends that I have been looking after for decades and my fear is that without a purpose my zest for life will be diminished. Thankfully in my job its fairly easy to simply wind down gradually, let a few ratbag clients go and just work part time looking after people one enjoys being in relationship with.

I suspect I will remain in my fairly comfortable semi retired state for several more years.