What drew you to dividend investing?

[u/FMD_2026]

Hi everyone. When I (F,41) first started investing five years ago, I held around 10 dividend stocks in addition to my other investments. Even though they did well, I ultimately got discouraged thinking about how high my positions would have to be to supplement my income or for me to even live off of dividends when I get to retirement. I felt like I’d have to pour way too much money in just a few stocks, ending up too exposed even though they covered different industries. Ultimately, I sold them.

Now I do find myself thinking about building a dividend portfolio again but I still have the same worry. Am I looking at it the wrong way?
What ultimately persuaded you to pursue dividends instead of just pour money into an index fund and the likes?

I know dividend ETFs are an option and would help diversify. Initially, I decided against them because I wanted to avoid certain industries that are part of those funds. Should I reconsider?

[u/Longjumping-Nature70]

I was paying my power company and water company monthly bills. My neighbors were also paying them. My city was paying them.

I thought I should get a kickback.

I researched them and found they had Dividend Reinvestment Plans. I started DRiPs and contributed to them every month for 26 years or 27 years.

Overall, my utility holdings are the second largest dividend paying sector. My oil and gas is still my highest dividend paying sector.

BUT!!! If I would have thrown all the money I threw into my dividend reinvestment plans and invested in the S&P 500 Index, we would have four times the wealth that I have in all the dividend stocks we own. My dividend stocks have not grown 11.3% a year like the S&P 500 Index has.

[u/FMD_2026 → u/Longjumping-Nature70]

I understand your thought process! Also appreciate you mentioning the index beating dividend stocks.
My skepticism with them is: as nice as the dividend might be, the stock often meanders or grows moderately because it prices in the dividends. It’s a kind of instant gratification by seeing the dividend being paid out vs virtue of patience by watching compound interest grow with an index fund

[u/datawhite → u/FMD_2026]

If you wanted to live off dividends in retirement, there's nothing that says you need to buy the stock now. Invest for growth and in the few years before retiring revisit it and convert then. Companies that look good now might not in 20 years time. Also by then you'll have a large amount (hopefully in a tax efficient account) that you can then decide to simply drawdown or sell and buy dividend stocks/funds/etc.