There are several places where you will face volatility if you decide to have your income from dividend stocks. First and probably the most volatility you will face is in the value of the stock. Secondly, your overall dividend growth will change from year to year. Thirdly, an individual stock can vary in how much they will pay in dividend. In any year one company can increase dividends and another company can cut them. Different companies are affected differently by any current economic situation.
The value of your dividend stock portfolio can be calm sometimes and swing wildly other times. This can also be true of individual stocks. I do not worry about bear markets because I know all stocks are going to go down no matter how good (or bad) that they are. Generally, dividend stocks do not go down as much as the markets do, but they do go down. In bull markets, your dividend stocks will probably not gain as much as the market. My dividend stocks are volatile, but tend not to be as volatile as the market
In the last 2 bear markets my portfolio went down 30%. This happens in bear markets. It is not a time to panic. If your stocks go down in a bear market, I would not worry. I worry if my stock takes a dive when there is no bear market. My first stop to try to get a sense of what is going on if a stock of mine takes a dive is Stock Chase.
The growth in dividends will change from year to year depending on the economic climate and what is happening in the sector your stock is in. I have found in bear markets is that my overall dividend growth will decline. Sometimes because of the overall slowdown of the economy my dividend increases are low.
The lowest increase I have had is 3.9% in 2014. The year of 2010 was a low growth year with only a dividend growth of 5.3%. It has been a long slow recover from the bear market and decline of 2008 and I have had some low dividend growth years. However, dividends tend to growth more than inflation. Also my overall rate includes by RIF accounts from which I am making withdrawals and therefore has lower dividend increases or negative increase.
If I look at my Trading Account, which is the one I use for my income, my dividend growth is better. The lowest growth was 5.1% in 2017. For the last three years my dividend income growth was 13.5%, 7.59% and so far this year 8.3%.
Some company will not cut or cancel dividends unless they absolutely have to. This is because dividend investors are an unforgiving lot. Stocks that cut or cancel dividends get hammered by the market. Some companies will keep their dividends flat for a number of years if they have some financial problems. They will hope that they can resolve the problems before they have to cut dividends. Other companies regularly declare what they believe that they can afford and ignore the market. Their dividends can go up and down over time.
Know your companies and understand what their dividend policies are. Some companies will say what their dividend policy is and others you will be able to tell what it is from past history.
But all this volitivity is just background noise. If you can ignore the noise you can do well with dividend stocks over the long term. The best advice is never panic. People lose money in the stock market because they panic and do the wrong thing. Sometimes they buy because they think that they need to buy now otherwise the price of the stock will get too high in the future to buy, or they panic and sell because their stock has plummeted in price and they are afraid of losing more money. Never buy or sell because of panic. That is how you lose money.
You need to know the companies you have invested in. If you are in for the long term, then at some point a company will have problems. Most of these problems are solvable. However, I have sold companies that I have had for years. The reason is always because I have lost hope that they will recover.
On my other blog I wrote yesterday about TECSYS Inc (TSX-TCS, OTC-TCYSF) ... learn more. Next, I will write about Savaria Corporation (TSX-SIS, OTC-SISXF) ... learn more on Friday, August 2, 2019 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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