Applying
the worst case dividend cut of the S&P 500 index since 1950, the buying power could fall to a 4.2 %.
I have seen in some Notes here that you cite the historical
worst case dividend cut across a broad spectrum of stocks as something like 25 %.
Not exact matches
Long story short, with 2009 under my belt as a bounded tentpole of a
worse case real world experiment, I envisage a 1 - year bonded income equivalent tranche of emergency funds backed by a 2 - yr income equivalent tranche
dividend fund (Vanguard's low - cost
dividend growth, for ex.).
The economy is going to get
worse before it gets better, but I think it's very hard to make a bear
case at these levels, with
dividend yields well over stupidly expensive government bonds in the US and the UK.
The art part of it for me is sticking with companies / brands that I know or use regularly, and relying on
dividend index funds for the majority of my investments in
case my individual stock picks go
badly.
Any potential
dividend gains though, have to be considered against the risk that the share price could drop and mean that I would have to wait for a period of up to three years before I could withdraw my investment without incurring a loss, or
worst -
case scenario I could be faced with an overall loss at the end of up to a long and painful three year wait.
The
worst case would be that
dividend yields never return to their historical range.
I think the
case is pretty clear that
dividends have
worse tax treatment in taxable accounts.
Many times, they might even cut the
dividends or in the
worst case, may go bankrupt.
Most importantly, in a
worst -
case scenario, the 60/40 portfolio lasts 8 years longer than the
dividend - focused portfolio.
It is very close to the
worst case reduction of the S&P 500's real
dividend (in the post 1950 period).
The
worst case outcome is that you never add to your
dividend portfolio.
Aiming to avoid the
worst case outcome from their perspective — in my example, finding no one willing to buy the 100 shares of the Select
Dividend ETF the market maker bought from you at the price it paid to you — market makers guessed very low, you might say, at current ETF prices.
In other words, non-recourse debt limits STORE shareholders» liability and helps ensure the
dividend remains intact, even in a
worst case scenario (non-recourse loan default).
In a
worst -
case scenario, BP could of course suspend the
dividend, but what if it needed more cash?
At today's level, the
worst case would be a permanent, (real)
dividend cut of 20 %.
The
worst case scenario of a
dividend cut is when the company stops paying it out completely.
Call me foolish, but I don't actually have a base bear
case here — at
worst, over the next 5 years (noting the company's stable record over the last five), I'm highly confident Record can declare & maintain total
dividends (inc. special
dividends) of at least 2.25 - 2.50 p pa.
What is the absolute
worst case withdrawal rate when you own TIPS and high quality
dividend stocks?
Based on S&P 500
dividend behavior, real
dividends could decline as much as 25 % under
worst case conditions (hyperinflation).
The guaranteed column (a
worst case scenario) illustrates how long the policy would stay in force if the insurer charged the maximum fees and paid the minimum interest or
dividend crediting rate.
Recall that
dividends are paid when the company's income less its expenses exceeds its projected
worst -
case scenario.