Author Topic: Dividend Growth: Index Funds vs. Dividend Aristocrats  (Read 1275 times)

prst58

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Dividend Growth: Index Funds vs. Dividend Aristocrats
« on: May 06, 2018, 05:43:58 PM »
I'm fairly new to the Mustachian way of life after recently erasing all debt and starting to look into growth towards FI.

My thoughts are on the index funds that MMM uses (which are at a %2.9ish average dividend return rate). Why are these better options than, say, going through some of the higher yielding Dividend Aristocrats that can yield higher? Or even high dividend yielding REITs that can yield far higher? If the whole goal is to have the best returns through dividends to grow a stash over time, wouldn't this be best? Or would that be much more risky in the long run?

Just trying to get the hardest bang for my dollar.

Thanks for any help!

MDM

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Re: Dividend Growth: Index Funds vs. Dividend Aristocrats
« Reply #1 on: May 06, 2018, 06:36:36 PM »
If the whole goal is to have the best returns through dividends to grow a stash over time, wouldn't this be best?
If it were then it would be but it isn't.

The goal is to have the best growth, period.  Whether that comes from capital growth or reinvested dividends is irrelevant.

One may have an opinion on the types of investments most likely to provide the highest growth, but that's a different question.

prst58

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Re: Dividend Growth: Index Funds vs. Dividend Aristocrats
« Reply #2 on: May 06, 2018, 06:50:20 PM »
Ah... I see what you're saying. I thought MMM's way to go was something through dividend by his quote in his famous post about where to invest money.

"But then what do I do with all the money?

You invest it. In stock index funds, in paying off your own house, in rental houses if you are interested in local real estate, and in other sources as you continue to learn about making money work for you. As of 2016, my own retirement income comes from a dead-simple asset allocation: a bunch of index funds at Vanguard and Betterment which pay quarterly dividends.

Maybe I put too much emphasis on the dividend part?

MDM

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Re: Dividend Growth: Index Funds vs. Dividend Aristocrats
« Reply #3 on: May 06, 2018, 07:10:21 PM »
Maybe I put too much emphasis on the dividend part?
Yup.

P.S. Welcome to the forum!

Telecaster

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Re: Dividend Growth: Index Funds vs. Dividend Aristocrats
« Reply #4 on: May 06, 2018, 08:46:48 PM »
I'm fairly new to the Mustachian way of life after recently erasing all debt and starting to look into growth towards FI.

My thoughts are on the index funds that MMM uses (which are at a %2.9ish average dividend return rate). Why are these better options than, say, going through some of the higher yielding Dividend Aristocrats that can yield higher? Or even high dividend yielding REITs that can yield far higher? If the whole goal is to have the best returns through dividends to grow a stash over time, wouldn't this be best? Or would that be much more risky in the long run?

Just trying to get the hardest bang for my dollar.

Thanks for any help!

There is a Dividend Aristocrat ETF (NOBL). As it turns out, its price performance is worse than the S&P 500 ETF (SPY), and the dividend performance is about the same.

You could try to replicate it yourself, but then you have to pay lots of spreads and commissions.    Bottom line is look at the total return.