Hi Copie and Greg<
I am repeating this from the long Jill Evens thread that you may not be reading any longer:
The bottom line is it is all about the payout, not how you get it.
I surely do agree that those inclined to hold individual dividend yielding and dividend growing stocks will have lower expenses and if they can hold enough stocks to feel well diversified, then they should see good results.
Your strategy of using just the yield you need and reinvesting the rest is very sound and works with individual stocks or Mutual funds alike.
The biggest difference is I'm trading perhaps .2% per year for more diversification, and professional active management. I have come to the conclusion that that is what works best for my temperament.
While you may hold a stock like XOM for 20 years, my managers will likely buy XOM when it is depressed, sell it when it reaches a certain target price, and then buy something else. That doesn't seem like a very good way to grow dividends, after all they may hold the stock only 2-3 years. The new stock they buy will have to be bought at the current dividend, which should be pretty good since they are buying it at a depressed price.
However, although the fund itself isn't seeing a great increase in payout per share, all those reinvested dividends are causing an increase in payout. Certainly this is not equal to owning and holding the individual stocks where the dividends are growing, because you are reinvesting both the dividends and the growth of dividends, whereas I'm only reinvesting the dividends and whatever growth there is during the holding period.
But the great equalizer is that I am also reinvesting the capital gains from all those stocks that are being sold by my managers. My funds are averaging around 3-4% in capital gains per year. That is 3 to 4% of the NAV per share, which is generally a lot higher than a 7-10% growth of a dividend.
So see? We both can smile :o}
best,
Bill
