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Mark, nice to hear from you again.

"You can be patting yourself on the back for getting a 35% dividend yield compared to a 5% current dividend yield on another stock, when the other stock might be a much greater opportunity."

Just how big a (growing) dividend would you have to get before you'd pat yourself on the back?

With regards to greater opportunity elsewhere, Lynch said that if you "...you spend your time flitting from flower to flower, you'll eventually end up selling your flowers to water your weeds."

In my opinion, "greater opportunity" elsewhere is a time-worn excuse money managers and brokers use to encourage individual investors to trade too much, and thereby churn themselves out of any gains they might have made.

Such people like to have you focus on the capital gains because that's where they make their money off you - by convincing you that you need their expert managerial skills.

"Point #2: I can create an increasing "dividend" out of other investment opportunities."

You may be able to create a 3% return elsewhere, but where are you going to find the 35% return on your original investment that you referred to above?

"So it is very important to compare the potential additional growth in dividends of a stock compared to this risk-free benchmark. It is foolish to be proud of your investment acumen for picking a stock with consistently increasing dividends if the growth rate of those dividends is close to what you would have gotten with risk-free bonds."

This indicates to me that you completely miss the point on how dividends can grow.

"A similar effect can be created using stocks that don't pay dividends, although it is a little trickier. You would simply sell a percentage of your shares that is less than the annual growth rate in the share price. It is a little trickier to manage because you would obviously want to sell when the stock is overvalued or even appropriately valued. You would need to make sure that you have enough cash on hand to allow you to wait for this condition to occur. The advantage of this method is that you will most likely save taxes because of the favorable capital gains tax rates."

I agree with you on this point. As I've indicated earlier, although I may not have emphasised the point well enough, companies such as Berkshire Hathaway, or Dell Computer etc... may make good "dividend" investments if you choose to look at it this way.


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