Stock Dividends Quotes

The true investor . . . will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

Wisdom is really the key to wealth. With great wisdom, comes great wealth and success. Rather than pursuing wealth, pursue wisdom. The aggressive pursuit of wealth can lead to disappointment. Wisdom is defined as the quality of having experience, and being able to discern or judge what is true, right, or lasting. Wisdom is basically the practical application of knowledge. Rich people have small TVs and big libraries, and poor people have small libraries and big TVs. Become completely focused on one subject and study the subject for a long period of time. Don't skip around from one subject to the next. The problem is generally not money. Jesus taught that the problem was attachment to possessions and dependence on money rather than dependence on God. Those who love people, acquire wealth so they can give generously. After all, money feeds, shelters, and clothes people. They key is to work extremely hard for a short period of time (1-5 years), create abundant wealth, and then make money work hard for you through wise investments that yield a passive income for life. Don't let the opinions of the average man sway you. Dream, and he thinks you're crazy. Succeed, and he thinks you're lucky. Acquire wealth, and he thinks you're greedy. Pay no attention. He simply doesn't understand. Failure is success if we learn from it. Continuing failure eventually leads to success. Those who dare to fail miserably can achieve greatly. Whenever you pursue a goal, it should be with complete focus. This means no interruptions. Only when one loves his career and is skilled at it can he truly succeed. Never rush into an investment without prior research and deliberation. With preferred shares, investors are guaranteed a dividend forever, while common stocks have variable dividends. Some regions with very low or no income taxes include the following: Nevada, Texas, Wyoming, Delaware, South Dakota, Cyprus, Liechtenstein, Luxembourg, Panama, San Marino, Seychelles, Isle of Man, Channel Islands, Curaçao, Bahamas, British Virgin Islands, Brunei, Monaco, Qatar, United Arab Emirates, Saudi Arabia, Bahrain, Bermuda, Kuwait, Oman, Andorra, Cayman Islands, Belize, Vanuatu, and Campione d'Italia. There is only one God who is infinite and supreme above all things. Do not replace that infinite one with finite idols. As frustrated as you may feel due to your life circumstances, do not vent it by cursing God or unnecessarily uttering his name. Greed leads to poverty. Greed inclines people to act impulsively in hopes of gaining more. The benefit of giving to the poor is so great that a beggar is actually doing the giver a favor by allowing the person to give. The more I give away, the more that comes back. Earn as much as you can. Save as much as you can. Invest as much as you can. Give as much as you can.

We don’t talk about sex for the same reason we don’t talk about stock dividends: we have very little of it.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity. Think of these options collectively as a tool kit. Over the long term, returns for shareholders will be determined largely by the decisions a CEO makes in choosing which tools to use (and which to avoid) among these various options. Stated simply, two companies with identical operating results and different approaches to allocating capital will derive two very different long-term outcomes for shareholders.

Morgan then formed the U.S. Steel Corporation, combining Carnegie’s corporation with others. He sold stocks and bonds for $1,300,000,000 (about 400 million more than the combined worth of the companies) and took a fee of 150 million for arranging the consolidation. How could dividends be paid to all those stockholders and bondholders? By making sure Congress passed tariffs keeping out foreign steel; by closing off competition and maintaining the price at $28 a ton; and by working 200,000 men twelve hours a day for wages that barely kept their families alive. And so it went, in industry after industry—shrewd, efficient businessmen building empires, choking out competition, maintaining high prices, keeping wages low, using government subsidies. These industries were the first beneficiaries of the “welfare state.

The stock holders in the quarry were the SS and the leaders of the Nazi party. The blood of the slaves were their dividends, and the fat grew rich on human misery.

automatically compound. If you need cash, you can sell stock and pay capital gains tax at a lower rate than a dividend would be taxed.

Do not trust historical data—especially recent data—to estimate the future returns of stocks and bonds. Instead, rely on interest and dividend payouts and their growth/failure rates.

Reliability investing requires finding companies trading below their inherent worth--stocks with strong fundamentals including earnings, dividends, book value, and cash flow selling at bargain prices give their quality.

SHAREHOLDERS’ EQUITY has two components: CAPITAL STOCK: The original amount of money the owners contributed as their investment in the stock of the company. RETAINED EARNINGS: All the earnings of the company that have been retained, that is, not paid out as dividends to owners.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity.

Discounted Cash Flow The discounted cash flow method of valuation is the most sophisticated (and the most difficult) method to use in valuing the business. With this method you must estimate all the cash influxes to investors over time (dividends and ultimate stock sales) and then compute a “net present value” using an assumed discount rate (implied interest rate).

company and for similar companies in the same industry. • The percentage of institutional ownership. The lower the better. • Whether insiders are buying and whether the company itself is buying back its own shares. Both are positive signs. • The record of earnings growth to date and whether the earnings are sporadic or consistent. (The only category where earnings may not be important is in the asset play.) • Whether the company has a strong balance sheet or a weak balance sheet (debt-to-equity ratio) and how it’s rated for financial strength. • The cash position. With $16 in net cash, I know Ford is unlikely to drop below $16 a share. That’s the floor on the stock. SLOW GROWERS • Since you buy these for the dividends (why else would

Far am I from denying in theory, full as far is my heart from withholding in practice, (if I were of power to give or to withhold,) the real rights of men. In denying their false claims of right, I do not mean to injure those which are real, and are such as their pretended rights would totally destroy. If civil society be made for the advantage of man, all the advantages for which it is made become his right. It is an institution of beneficience; and law itself is only beneficience acting by a rule. Men have a right to live by that rule; they have a right to do justice, as between their fellows, whether their fellows are in public function or in ordinary occupation. They have a right to the fruits of their industry, and to the means of making their industry fruitful. They have a right to the acquisitions of their parents; to the nourishment and improvement of their offspring; to instruction in life, and to consolation in death. Whatever each man can separately do, without trespassing upon others, he has a right to do for himself; and he has a right to a fair portion of all which society, with all its combinations of skill and force, can do in his favor. In this partnership all men have equal rights; but not to equal things. He that has but five shillings in the partnership, has as good a right to it, as he that has five hundred pounds has to his larger proportion. But he has not a right to an equal dividend in the product of the joint stock; and as to the share of power, authority, and direction which each individual ought to have in the management of the state, that I must deny to be amongst the direct original rights of man in civil society; for I have in my contemplation the civil social man, and no other. It is a thing to be settled by convention.

To that end, he said, the city formed a holding company that acquired 51 percent of the stock of all the casinos in the city, in the hopes of collecting dividends. “But it was a mistake: the casinos funneled the money out in cash and reported losses every time,” Putin complained. “Later, our political opponents tried to accuse us of corruption because we owned stock in the casinos. That was just ridiculous…. Sure, it may not have been the best idea from an economic standpoint. Judging from the fact that the setup turned out to be inefficient and we did not attain our goals, I have to admit it was not sufficiently thought through. But if I had stayed in Petersburg, I would have finished choking those casinos. I would have made them share.

Nearly all the bull markets had a number of well-defined characteristics in common, such as (1) a historically high price level, (2) high price/earnings ratios, (3) low dividend yields as against bond yields, (4) much speculation on margin, and (5) many offerings of new common-stock issues of poor quality. Thus to the student of stock-market history it appeared that the intelligent investor should have been able to identify the recurrent bear and bull markets, to buy in the former and sell in the latter, and to do so for the most part at reasonably short intervals of time. Various methods were developed for determining buying and selling levels of the general market, based on either value factors or percentage movements of prices or both. But we must point out that even prior to the unprecedented bull market that began in 1949, there were sufficient variations in the successive market cycles to complicate and sometimes frustrate the desirable process of buying low and selling high. The most notable of these departures, of course, was the great bull market of the late 1920s, which threw all calculations badly out

Statisticians say that stocks with healthy dividends slightly outperform the market averages, especially on a risk-adjusted basis. On average, high-yielding stocks have lower price/earnings ratios and skew toward relatively stable industries. Stripping out these factors, generous dividends alone don’t seem to help performance. So, if you need or like income, I’d say go for it. Invest in a company that pays high dividends. Just be sure that you are favoring stocks with low P/Es in stable industries. For good measure, look for earnings in excess of dividends, ample free cash flow, and stable proportions of debt and equity. Also look for companies in which the number of shares outstanding isn’t rising rapidly. To put a finer point on income stocks to skip, reverse those criteria. I wouldn’t buy a stock for its dividend if the payout wasn’t well covered by earnings and free cash flow. Real estate investment trusts, master limited partnerships, and royalty trusts often trade on their yield rather than their asset value. In some of those cases, analysts disagree about the economic meaning of depreciation and depletion—in particular, whether those items are akin to earnings or not. Without looking at the specific situation, I couldn’t judge whether the per share asset base was shrinking over time or whether generally accepted accounting principles accounting was too conservative. If I see a high-yielder with swiftly rising share counts and debt levels, I assume the worst.

We lack space here to discuss in detail the pros and cons of market forecasting. A great deal of brain power goes into this field, and undoubtedly some people can make money by being good stock-market analysts. But it is absurd to think that the general public can ever make money out of market forecasts. For who will buy when the general public, at a given signal, rushes to sell out at a profit? If you, the reader, expect to get rich over the years by following some system or leadership in market forecasting, you must be expecting to try to do what countless others are aiming at, and to be able to do it better than your numerous competitors in the market. There is no basis either in logic or in experience for assuming that any typical or average investor can anticipate market movements more successfully than the general public, of which he is himself a part. There is one aspect of the “timing” philosophy which seems to have escaped everyone’s notice. Timing is of great psychological importance to the speculator because he wants to make his profit in a hurry. The idea of waiting a year before his stock moves up is repugnant to him. But a waiting period, as such, is of no consequence to the investor. What advantage is there to him in having his money uninvested until he receives some (presumably) trustworthy signal that the time has come to buy? He enjoys an advantage only if by waiting he succeeds in buying later at a sufficiently lower price to offset his loss of dividend income. What this means is that timing is of no real value to the investor unless it coincides with pricing—that is, unless it enables him to repurchase his shares at substantially under his previous selling price.

We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more than it is selling for. The genus includes bonds and preferred stocks selling well under par, as well as common stocks. To be as concrete as possible, let us suggest that an issue is not a true “bargain” unless the indicated value is at least 50% more than the price. What kind of facts would warrant the conclusion that so great a discrepancy exists? How do bargains come into existence, and how does the investor profit from them? There are two tests by which a bargain common stock is detected. The first is by the method of appraisal. This relies largely on estimating future earnings and then multiplying these by a factor appropriate to the particular issue. If the resultant value is sufficiently above the market price—and if the investor has confidence in the technique employed—he can tag the stock as a bargain. The second test is the value of the business to a private owner. This value also is often determined chiefly by expected future earnings—in which case the result may be identical with the first. But in the second test more attention is likely to be paid to the realizable value of the assets, with particular emphasis on the net current assets or working capital. At low points in the general market a large proportion of common stocks are bargain issues, as measured by these standards. (A typical example was General Motors when it sold at less than 30 in 1941, equivalent to only 5 for the 1971 shares. It had been earning in excess of $4 and paying $3.50, or more, in dividends.) It is true that current earnings and the immediate prospects may both be poor, but a levelheaded appraisal of average future conditions would indicate values far above ruling prices. Thus the wisdom of having courage in depressed markets is vindicated not only by the voice of experience but also by application of plausible techniques of value analysis.

We want to build up a new state! That is why the others hate us so much today. They have often said as much. They said: “Yes, their social experiment is very dangerous! If it takes hold, and our own workers come to see this too, then this will be highly disquieting. It costs billions and does not bring any results. It cannot be expressed in terms of profit, nor of dividends. What is the point?! We are not interested in such a development. We welcome everything which serves the material progress of mankind insofar as this progress translates into economic profit. But social experiments, all they are doing there, this can only lead to the awakening of greed in the masses. Then we will have to descend from our pedestal. They cannot expect this of us.” And we were seen as setting a bad example. Any institution we conceived was rejected, as it served social purposes. They already regarded this as a concession on the way to social legislation and thereby to the type of social development these states loathe. They are, after all, plutocracies in which a tiny clique of capitalists dominate the masses, and this, naturally, in close cooperation with international Jews and Freemasons. If they do not find a reasonable solution, the states with unresolved social problems will, sooner or later, arrive at an insane solution. National Socialism has prevented this in the German Volk. They are now aware of our objectives. They know how persistently and decisively we defend and will reach this goal. Hence the hatred of all the international plutocrats, the Jewish newspapers, the world stock markets, and hence the sympathy for these democrats in all the countries of a like cast of mind. Because we, however, know that what is at stake in this war is the entire social structure of our Volk, and that this war is being waged against the substance of our life, we must, time and time again in this war of ideals, avow these ideals. And, in this sense, the Winterhilfswerk, this greatest social relief fund there is on this earth, is a mighty demonstration of this spirit. Adolf Hitler - speech at the Berlin Sportpalast on the opening of the Kriegswinterhilfswerk September 4, 1940

The performance of the American stock market is perhaps best measured by comparing the total returns on stocks, assuming the reinvestment of all dividends, with the total returns on other financial assets such as government bonds and commercial or Treasury bills, the last of which can be taken as a proxy for any short-term instrument like a money market fund or a demand deposit at a bank. The start date, 1964, is the year of the author’s birth. It will immediately be apparent that if my parents had been able to invest even a modest sum in the US stock market at that date, and to continue reinvesting the dividends they earned each year, they would have been able to increase their initial investment by a factor of nearly seventy by 2007. For example, $10,000 would have become $700,000. The alternatives of bonds or bills would have done less well. A US bond fund would have gone up by a factor of under 23; a portfolio of bills by a factor of just 12. Needless to say, such figures must be adjusted downwards to take account of the cost of living, which has risen by a factor of nearly seven in my lifetime. In real terms, stocks increased by a factor of 10.3; bonds by a factor of 3.4; bills by a factor of 1.8.

It nevertheless remains true that, in most countries for which long-run data are available, stocks have out-performed bonds – by a factor of roughly five over the twentieth century.9 This can scarcely surprise us. Bonds, as we saw in Chapter 2, are no more than promises by governments to pay interest and ultimately repay principal over a specified period of time. Either through default or through currency depreciation, many governments have failed to honour those promises. By contrast, a share is a portion of the capital of a profit-making corporation. If the company succeeds in its undertakings, there will not only be dividends, but also a significant probability of capital appreciation. There are of course risks, too. The returns on stocks are less predictable and more volatile than the returns on bonds and bills. There is a significantly higher probability that the average corporation will go bankrupt and cease to exist than that the average sovereign state will disappear. In the event of a corporate bankruptcy, the holders of bonds and other forms of debt will be satisfied first; the equity holders may end up with nothing. For these reasons, economists see the superior returns on stocks as capturing an ‘equity risk premium’ – though clearly in some cases this has been a risk well worth taking.

A good rule of thumb is to never, ever pay more than 15 years fair rental value for any residence.c This computes out to a 6.7 percent (1/15th) gross rental dividend, or 3.7 percent after taxes, insurance, and maintenance, which is about what you might expect from a mixed portfolio of stocks and bonds.

So, how can you figure out the dividend yield? It’s easy! Simply divide the number of dividends paid to you ($100) by the amount you have invested in the stock ($10,000). After dividing these figures, you will come up with a dividend yield of 1%.

It costs more to transact abroad, and many foreign governments tax stock dividends; although you can recover this cost in a taxable account through the foreign tax credit on your U.S. tax return, you cannot do so in a retirement account.

Perhaps there is no better illustration of the ethical impotency of the modern church than its failure to deal with the evils and ethical problems of stock manipulation. Millions in property values are created by pure legerdemain. Stock dividends, watered stock and excessive rise in stock values, due to the productivity of the modern machine, are accepted by the church without murmur if only a slight return is made by the beneficiaries through church philanthropies [1927].

We find stories more convincing than statistics. Academic studies tell us that value stocks—those shares that are cheap based on market yardsticks like price-earnings ratios and dividend yield—outperform growth stocks, despite the latter’s rapidly increasing earnings and sales. But academic studies are no competition for a good story: We are still drawn to hot growth companies with their slick innovations and adoring customers.

You’re a business owner, not a stock trader.

Each ran a highly decentralized organization; made at least one very large acquisition; developed unusual, cash flow–based metrics; and bought back a significant amount of stock. None paid meaningful dividends or provided Wall Street guidance. All received the same combination of derision, wonder, and skepticism from their peers and the business press. All also enjoyed eye-popping, credulity-straining performance over very long tenures (twenty-plus years on average).

Graham’s timeless lesson for the intelligent investor, as valid today as when he prescribed it in his first edition, is clear: “the real money in investment will have to be made—as most of it has been made in the past—not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value.” His

Contrarily, for those who invest and then drop out of the game and never pay a single unnecessary cost, the odds in favor of success are awesome. Why? Simply because they own businesses, and businesses as a group earn substantial returns on their capital and pay out dividends to their owners. Yes, many individual companies fail. Firms with flawed ideas and rigid strategies and weak managements ultimately fall victim to the creative destruction that is the hallmark of competitive capitalism, only to be succeeded by others.3 But in the aggregate, businesses grow with the long-term growth of our vibrant economy.

An equity investor buys and holds the shares of stock in a company in anticipation of dividends and/or capital gains.

In the early years, top incomes were derived from capital, and the richest people were what Piketty and Saez call “coupon clippers,” who received most of their incomes from dividends and interest. The fortunes underlying these receipts were eroded over the century by increasingly progressive income and estate taxes. Those who used to live off their (or their ancestors’) fortunes have been replaced at the top by earners, people like CEOs of large firms, Wall Street bankers, and hedge fund managers, who receive their incomes as salaries, bonuses, and stock options. Entrepreneurial

Evade purchasing stocks which purely look like a bargain.

Blue-chip stocks are a reasonable investment for the elderly investor because they usually pay cash dividends which the retired person may need to live on, and are usually more conservative than other investments, excluding bonds. Holdings in these stocks should be long-term to avoid trading costs and speculation.

To fill this gap in the capital market, Davis and Rock set themselves up as a limited partnership, the same legal structure that had been used by a short-lived rival called Draper, Gaither & Anderson.[18] Rather than identifying startups and then seeking out corporate investors, they began by raising a fund that would render corporate investors unnecessary. As the two active, or “general,” partners, Davis and Rock each seeded the fund with $100,000 of their own capital. Then, ignoring the easy loans to be had from the fashionable SBIC structure, they raised just under $3.2 million from some thirty “limited” partners—rich individuals who served as passive investors.[19] The beauty of this size and structure was that the Davis & Rock partnership now had a war chest seven and a half times larger than an SBIC, and with it the ammunition to supply companies with enough capital to grow aggressively. At the same time, by keeping the number of passive investors under the legal threshold of one hundred, the partnership flew under the regulatory radar, avoiding the restrictions that ensnared the SBICs and Doriot’s ARD.[20] Sidestepping yet another weakness to be found in their competitors, Davis and Rock promised at the outset to liquidate their fund after seven years. The general partners had their own money in the fund, and thus a healthy incentive to invest with caution. At the same time, they could deploy the outside partners’ capital for a limited time only. Their caution would be balanced with deliberate aggression. Indeed, everything about the fund’s design was calculated to support an intelligent but forceful growth mentality. Unlike the SBICs, Davis & Rock raised money purely in the form of equity, not debt. The equity providers—that is, the outside limited partners—knew not to expect dividends, so Davis and Rock were free to invest in ambitious startups that used every dollar of capital to expand their business.[21] As general partners, Davis and Rock were personally incentivized to prioritize expansion: they took their compensation in the form of a 20 percent share of the fund’s capital appreciation. Meanwhile, Rock was at pains to extend this equity mentality to the employees of his portfolio companies. Having witnessed the effect of employee share ownership on the early culture of Fairchild, he believed in awarding managers, scientists, and salesmen with stock and stock options. In sum, everybody in the Davis & Rock orbit—the limited partners, the general partners, the entrepreneurs, their key employees—was compensated in the form of equity.

Two lists of potentially attractive stocks for covered writing are the 30 stocks making up the Dow Jones industrial average and the stocks in the S&P 500 Dividend Aristocrats index mentioned in Chapter 4.

Wealth grew more concentrated during his reign. Before Welch, corporate profits were largely reinvested in the company or paid out to workers rather than sent back to stock owners. In 1980, American companies spent less than $50 billion on buybacks and dividends. By the time of Welch’s retirement, a much greater share of corporate profits was going to investors and management, with American companies spending $350 billion on buybacks and dividends in 2000.

General Electric was the largest company in the world in 2004, worth a third of a trillion dollars. It had either been first or second each year for the previous decade, capitalism’s shining example of corporate aristocracy. Then everything fell to pieces. The 2008 financial crisis sent GE’s financing division—which supplied more than half the company’s profits—into chaos. It was eventually sold for scrap. Subsequent bets in oil and energy were disasters, resulting in billions in writeoffs. GE stock fell from $40 in 2007 to $7 by 2018. Blame placed on CEO Jeff Immelt—who ran the company since 2001—was immediate and harsh. He was criticized for his leadership, his acquisitions, cutting the dividend, laying off workers and—of course—the plunging stock price. Rightly so: those rewarded with dynastic wealth when times are good hold the burden of responsibility when the tide goes out. He stepped down in 2017. But Immelt said something insightful on his way out. Responding to critics who said his actions were wrong and what he should have done was obvious, Immelt told his successor, “Every job looks easy when you’re not the one doing it.

Adequate size. A sufficiently strong financial condition. Continued dividends for at least the past 20 years. No earnings deficit in the past ten years. Ten-year growth of at least one-third in per-share earnings. Price of stock no more than 1½ times net asset value. Price no more than 15 times average earnings of the past three years.

Investing in dividend stocks is one of the best ways to build wealth. The reason it works so well is that you can take the cash from a dividend payment and use it to buy more dividend stocks. Then those dividend stocks will pay you more dividends.

The dividend discount model suggests that in an efficient market, the current price of a stock should equal the present value of all expected future dividends, assuming for the sake of simplicity that the investor has no intention of selling the stock. (The present value is sometimes called the discounted value, since the present value of an item is discounted from its value in the future.)

Each ran a highly decentralized organization; made at least one very large acquisition; developed unusual, cash flow–based metrics; and bought back a significant amount of stock. None paid meaningful dividends or provided Wall Street guidance. All received the same combination of derision, wonder, and skepticism from their

In December 1972, Polaroid was selling for 96 times its 1972 earnings, McDonald’s was selling for 80 times, and IFF was selling for 73 times; the Standard & Poor’s Index of 500 stocks was selling at an average of 19 times. The dividend yields on the Nifty-Fifty averaged less than half the average yield on the 500 stocks in the S&P Index. The proof of this particular pudding was surely in the eating, and a bitter mouthful it was. The dazzling prospect of earnings rising up to the sky turned out to be worth a lot less than an infinite amount. By 1976, the price of IFF had fallen 40% but the price of U.S. Steel had more than doubled. Figuring dividends plus price change, the S&P 500 had surpassed its previous peak by the end of 1976, but the Nifty-Fifty did not surpass their 1972 bull-market peak until July 1980. Even worse, an equally weighted portfolio of the Nifty-Fifty lagged the performance of the S&P 500 from 1976 to 1990.

Don’t increase your lifestyle until your passive income surpasses your active income. You’ll know you can and should buy that luxury item when the cost of keeping it is totally covered by your passive income. The things you own (such as dividend-paying stocks, oil partnerships, and real estate investment trusts) should pay for the things you enjoy and consume.

These steps will help you remember that correlation is not causation, and that most market prophecies are based on coincidental patterns. That was the problem in the late 1990s at the Motley Fool website. Its Foolish Four portfolios were based on research claiming that factors like the ratio of a company’s dividend yield to the square root of its stock price could predict future outperformance. In the long run, however, a company’s stock can rise only if its underlying business earns more money.

Inspired by Sharpe’s work, Fouse in 1969 recommended that Mellon launch a passive fund that would try to replicate only one of the big stock market indices, like the S&P 500 of America’s biggest companies. It got nixed by Mellon’s management. In the spring of 1970, he then proposed a fund that would systematically invest according to a dividend-based model devised by John Burr Williams—who had nearly two decades earlier inspired Markowitz’s work—but that too was summarily squashed. “Goddammit Fouse, you’re trying to turn my business into a science,” his boss told him.14

Following the 4 Percent Rule still gives you a 5 percent chance of running out of money, due to a phenomenon known as sequence-of-return risk. Your backup plan is to use the Cash Cushion and the Yield Shield. Cash Cushion: A reserve fund held in a savings account that you can use to avoid doing a full portfolio withdrawal during down years. Yield Shield: A combination of dividends and interest being paid by your ETFs that is delivered as cash without selling any assets. The Yield Shield can be raised by pivoting some of your assets into higher-yielding assets, such as . . . Preferred shares Real estate investment trusts (REITs) Corporate bonds Dividend stocks The size of the Cash Cushion is determined using the following formula: Cash Cushion = (Annual Spending − Annual Yield) × Number of Years

It’s true that interest rates are lower today than they were in 1989, so you’d expect yields on bonds and dividends on stocks to be lower.