Broker Check

Inflation, Interest Rates and Dividends, oh my!

July 20, 2023

         Let’s try to keep this simple.

         We know inflation. It affects us each time we spend money.

         We know interest rates are rising.

         Dividends are slightly hidden. Stocks pay them – into your money market. We use them for your monthly distributions.

                  But they are complicated. Each firm that pays a dividend makes the decision when to do so and for how much typically every 90 days.                                  The distribution may be in a few days, weeks or more after their announcement.       

                  The amount and date often change.

                  The dividend yield calculation so frequently used is out of date as soon as a new dividend is declared. Worthless info.

                  The dividend may be fully, partially or not taxable – at different tax brackets depending upon the type of dividend.

         So very easy to understand, no? Not really. This is why you have us.

         Nevertheless, these dividends can be priceless for your comfortable retirement. As you know, I even wrote a book on the subject.

         Divs can be an excellent tool for your retirement distributions to use to keep pace with inflation.

They may pay you more as inflation rises and typically do.

So, how do we build an income portfolio?

With a base of money market and bank CDs.

Then a careful layering of dividend paying stocks and ETFs (a low cost collection of stocks).

         Adding a few investment grade bonds and some gold.

Since the turn of the century, it has been quite difficult to get more than .5% from money markets or bank CDs.

         As of the last half of ’22, this has become as easy as falling off a log.

         This has happened exactly twice in my 37 years of providing you with financial advice.

         Most of us suspect the Fed will stop raising interest rates in early ’24.

         Elections are coming and they like to keep their masters ‘fat and sassy for the challenges ahead’.

So laissez les bon temps rouler!

Yields for virtually riskless cash haven’t been this high since 1984 when I was a guppy in the business.

         We shall use the yield while it is good. Within your risk tolerance experience and tax expectations.


Eat wisely

Sleep well

Love with Abandon!

John Graves, AIF, CLU, ChFC                        

Registered Principal
The Renaissance Group, LLC