Total Dividend Return Will Guide My 2014 Investment Decisions

February marked my third anniversary as a Self Directed Investor. The past three years have been quite a learning experience, and I'm sure 2014 will prove no different. Like most investors I have a primary measure with which to gauge my success. As a retired investor in the distribution phase, my primary measure of success is to achieve an overall gain in dividend income greater than inflation. 2013 saw an increase in my retirement income of over approximately 8%, more than twice that of inflation. My objective for 2014 remains to exceed that number.

My central focus for this year shifts from yield to Total Dividend Return (TDR). Many Dividend Growth Investors refer to TDR as the "chowder rule" in honor of chowder, a regular contributor here on Seeking Alpha. Under this rule, a stock yielding 4% along with a 5 year Dividend Growth Rate of 8% would produce a total dividend return of 12%. A stock yielding 3% would require higher dividend growth to produce a TDR of 12%. The rule is relaxed a bit for higher yielding/slower growing equities such as utilities, telecoms and mlps. With this group a total dividend return of 8% is sought.

Source: Seeking Alpha

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