Retire And Live Off Dividends

Dividend stocks are a proxy for equities, and not a different asset class. For many decades before the big bull run of the 1980s started, investors held common stocks exclusively for the right to receive dividend distributions from corporate profits. Dividend investors live off dividend income. The goal of every investor is to have their portfolio throw off enough income which would be more than enough to cover their expenses. Dividend investors do not plan on selling off principal to live off assets, which is similar to cutting off the branch of the tree you are sitting on.

Spending only income and keeping capital gains reinvested into the portfolio and not spendable is something that many organizations have done for decades. Most endowment funds, trusts and foundations follow the principle of spending only income from dividends and interest or rent and treating capital gains and losses as additions or subtractions to principal. Some examples include the Hershey Trust or the Nobel Foundation. These entities have managed to remain “retired” for far longer than most fee hungry financial advisers have stayed in business. While a typical retirement is expected to last for approximately three decades, investors could definitely learn something from these endowments. They should try to find an optimum balance for sustainable income generation that would provide maximum longevity for portfolios just in case.

Source: Dividend Growth Investor

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