This Will Make You Not Want To Stock Pick (Historical DJIA Components)

[MediumTex]

It seems like with dividend growth investing, you're basically treating stocks almost like adjustable rate, callable bonds. I'm no expert, but if income is the goal, wouldn't real bonds be a lot safer, and might they even provide a better return if you're willing to endure the risks inherent to investing your money with a private sector corporation? There are Verizon bonds that are returning 7% right now!

There is absolutely no growth in bond income.  How is this going to be an improvement over AgAuMoney's strategy.  I can understand AgAuMoney's frustration.  When I discussed using a 3x3 PP (no cash component) and using individual stocks instead of an index, I also met a lot of resisitance.  Resistance is one thing, but a lot of you are not very open minded about anything but a 4x4 PP.  It is obvious to me that a lot of you have not taken the time to actually carefully read and think about what AgAuMoney is suggesting.   If I were a lot younger (I am 67), I would strongly consider doing the same thing.  It makes a lot of sense.
Norm

But if it makes sense, why do so many fund managers struggle to find success with it?

I look at "dividend" stock funds and their performance looks about the same as the overall market most of the time (except for the fees the fund manager charges).  Where is the advantage with this approach over passive indexing?

I have an open mind, but I don't see the advantage that trying to pick the right dividend stocks has over just buying a proxy for the whole market with the lowest possible fees.  In other words, I see the additional risk but I don't see the additional benefit.

[Pointedstick]

It seems like with dividend growth investing, you're basically treating stocks almost like adjustable rate, callable bonds. I'm no expert, but if income is the goal, wouldn't real bonds be a lot safer, and might they even provide a better return if you're willing to endure the risks inherent to investing your money with a private sector corporation? There are Verizon bonds that are returning 7% right now!

There is absolutely no growth in bond income.  How is this going to be an improvement over AgAuMoney's strategy.  I can understand AgAuMoney's frustration.  When I discussed using a 3x3 PP (no cash component) and using individual stocks instead of an index, I also met a lot of resisitance.  Resistance is one thing, but a lot of you are not very open minded about anything but a 4x4 PP.  It is obvious to me that a lot of you have not taken the time to actually carefully read and think about what AgAuMoney is suggesting.   If I were a lot younger (I am 67), I would strongly consider doing the same thing.  It makes a lot of sense.
Norm

I have nothing particularly against dividend growth investing, but like MT and others, I struggle to understand the advantages. I have no doubt that AgAuMoney makes it work, but the fact that he's managed to beat the returns (however inadvertent) and yield (deliberately) of both total market funds and dividend growth funds shows me that he's very skilled at it. It seems like it requires a lot of market research and a healthy dose of good fortune to properly determine which companies are going to raise their dividend yields in the future and avoid companies that are likely to reduce or cancel their dividends, as AgAuMoney has spoken of in the past, when he made a bet on GM a few years ago and they immediately slashed their dividend or something like that.

That's why I compared dividend growth investing to (nonexistent) adjustable-rate, callable bonds. You're buying those dividend yielding companies for income, not capital appreciation, and there's the risk of some of your payments falling or even ceasing entirely if you choose poorly and bought the wrong companies. I totally understand the desire for a regular income stream from your investments that don't require you selling shares to realize, but it seems like that's sort of the role that bonds are supposed to play. Part of me wonders if dividend growth investing's appeal is that it can potentially offer better returns than the ultra-low bond rates we're experiencing. Will it retain its current level of popularity if and when treasuries are returning 6 or 7% again and corporate bonds are up to 10 or 11%?

[melveyr]

The fascination with dividends strikes me as very emotional. Dividends come out of the equity holders claim on cash flows. You are paying yourself. Additionally, the dividend is last in line for the capital structure so any comparison to fixed income is a serious stretch.

[WildAboutHarry]

I'm sure that in their days, GM, Polaroid, Montgomery Ward and Xerox paid nice dividends...until they didn't.

And Total Market Investors rode them down.  Only a small taste, but they rode or will ride them until they go out of existence.

I am a TSM guy.  I understand why this approach is reliable, why it works, and why it is a great way to invest in the U.S. Stock Market.  For many, if not most, indexing is the best way to invest in this asset class.  But I have considered individual issues of late.

TSM investing seems a bit soul-less.  A bit like black-box investing.  Pay no attention to the man behind the curtain, etc.

And if you can invest with Mr. Burns and own Confederated Slaveholdings, Transatlantic Zeppelin, Amalgamated Spats, Congreve's Inflammable Powder, U.S. Hay, and the Baltimore Opera Hat Company what's not to like?

[dualstow]

I like dividend stocks and a total index. How do you like them apples?

And if you can invest with Mr. Burns and own Confederated Slaveholdings,

I remember that episode. Love it!

[MediumTex]

I love dividend stocks like Intel and Altria, but I see very little safety against loss if the whole market turns over.

A PP investor is often a lot more preoccupied with safety than a typical stock investor.

[jimbojones]

Why not just let your VTI grow and convert to dividend-paying stocks later on?  A higher rate of return will result in more shares of dividend-paying stocks.  So... the quickest way to your goal is to get the highest return on your portfolio.  Adjust for your risk tolerance, as necessary.  It makes no difference what dividends are received along the way.  And this strategy requires no hubris!

If you think your strategy is more effective than owning the market, then you are ultimately saying that you can "beat the market".  Unless your goal is to reach a target dividend level eventually, rather than as soon as possible.

Keep doing what makes you comfortable.

[atrchi]

AgAuMoney is a genius - people really should pay attention. I've felt the same way about investing but never been able to articulate it quite so eloquently. "Beating the index" is such a juvenile, useless concept.

[hpowders]

No matter how many books are written with sophisticated studies proving that trading and market timing will not beat a simple, passive buy and hold of a benchmark stock market index over time, folks never seem to give up the urge to try-a combination of ego and boredom, I guess. Many of them are aware of these studies. The Mt. Everest complex?

How about The Las Vegas Complex?

Yes. One trades stocks frequently to attempt to beat the market-you may get lucky and actually accomplish it. That's when you should take your profits and run. There are three sure things in this life: Death, Taxes and the House always wins if you play long enough. Many of us have found the latter to be true the hard way. We didn't need to read it in some book.

Ask yourselves, oh brilliant traders whom we "really should be paying attention to": if the most brilliant minds in the world who run hedge funds using the most complex trading strategies can't beat the market with any measurable consistency over time, why do you still think you can? Just asking.

[Pointedstick]

the most brilliant minds in the world who run hedge funds

[MachineGhost]

It seems like with dividend growth investing, you're basically treating stocks almost like adjustable rate, callable bonds. I'm no expert, but if income is the goal, wouldn't real bonds be a lot safer, and might they even provide a better return if you're willing to endure the risks inherent to investing your money with a private sector corporation? There are Verizon bonds that are returning 7% right now!

True, corporate bonds would be a lot safer, especially high yields bought at least moderate discounts to par value.  Not only would you get higher yields with a depressed par value, but the capital gains on the way up to par value adds juicy juice.  If you look at the loss rate of corporate bonds compared to stocks, it isn't even worth debating.  To paraphase Whitney Houston, "stocks is whack".

The only way One of the proven ways to make money in stocks is by pyramiding your winners and weeding out the losers on a regular basis.  That's what indexes automatically do.

[MachineGhost]

But if it makes sense, why do so many fund managers struggle to find success with it?

Why do you deem fund managers the ones to be compared to for a gold standard?  They're Wall Street lackeys whose sole purpose is to sell you something and make themselves lot of money, not make you money (if it happens, its an accident).  We've been over this several times before.  There are numerous institutional and socio-economic factors that all collude to prevent Wall Street from having the ability to outperfom a simple cap-weighted index.  Why, stock selections operate by committee for gawd's sake!  When has committees or bureaucracy ever make the world a better place?

People continue to hold up Wall Street as some sort of enfabled authority.  It's not.  All it is is an exploitation scheme on the guillable.  Wall Street had no respectability before the '70s.  Raising capital to the economy by IPOing is a cash out for the insiders and venture capitalists; the bagholders are those that are rich and dumb enough to buy the stock.  You will not find anything moral or justifiable about Wall Street.  One doesn't need a Wall Street for individuals to "own the means of production".

Needless to say, independent traders, independent investors and a small minority of hedge fund managers** do not have any of the limitations I'm alluding to above.  But then that difference is akin to between being an entrepreneur and being an corporate employee.  If you alone are responsible for making your own money, you are bound to go beyond all of the B.S. if you want to succeed.  There's no other option.

** When I say hedge fund managers, I do not mean it from a perspective of selling access to the fund to the public for 2/20, but a private hedge fund that trades its own capital and enriches only the owners.

[hpowders]

AgAuMoney is a genius - people really should pay attention. I've felt the same way about investing but never been able to articulate it quite so eloquently. "Beating the index" is such a juvenile, useless concept.

Apparently, genius loves company. S

[WildAboutHarry]

I look at "dividend" stock funds and their performance looks about the same as the overall market most of the time (except for the fees the fund manager charges).  Where is the advantage with this approach over passive indexing?

The S&P500 has a dividend yield and a dividend growth rate.  If these two metrics are greater in a portfolio of dividend paying stocks, then, the income stream from that portfolio, over time, will exceed that of the S&P 500.  If the overall performance is the same, then what's the difference, from a permanent portfolio standpoint?

It is probably poor form to quote yourself, but what the heck.

I ran a 10-year comparison of Vanguard's Equity Income Fund versus TSM, T.Rowe Price Dividend Growth, and Fidelity's Dividend Growth.

On a growth basis: Equity Income > TSM > T.Rowe Price > Fidelity.

On a price basis it was flipped: TSM > Fidelity > T.Rowe Price > Equity Income

This suggests that Equity Income, at least, was able to throw a good stream of dividends.

So if the market is relatively flat, higher dividend growth results in better returns.  If non-dividend-paying stocks go on a tear, then obviously you will miss out on those CGs.  But you still have dividend growth.

It is somewhat ironic that, when index funds arose in the 1970s, it was difficult and expensive to invest in individual stocks (I remember perusing Value Line at the <gasp> Library) and index funds were scoffed at.  Now that information is much more readily available and stock trading is basically free, TSM Index funds get the nod.  And I think TSM funds are wonderful.  But virtually every sub-index of TSM will perform differently than TSM.

And an assemblage of dividend-paying stocks in a portfolio of stocks, bonds, gold and cash seems fine to me.  Let's not consider assets in isolation

[AgAuMoney]

What I'm not understanding is how you are adding value through your stock picking efforts if you concede that you aren't gaining any advantage over a passive index for your efforts.

Income from dividends paid by strong companies with a history of growing those payments.

The rights to that income being procured at a favorable price for those companies compared to either their historical price or the current price for the overall market.

If you are saying that you are able to provide some additional returns through your stock picking when

Repeat:  Not returns.

The core of your argument seems to be that stocks are the best asset for the long term, and you like a certain type of dividend paying stock the best.  The problem is, though, sometimes stocks aren't the best asset for the period of a single investor's investment career (see Japan).  How do you deal with this risk that

I'm not sure about dividends on Japanese stocks, but there is no period in U.S. stock market history where dividend paying stocks were not a reasonable form of current income while also providing protection against typical inflation both in asset valuation and income.  I don't know of any other asset class which would meet those requirements in and of itself and so everything else must be combined with others to synthesize one or more of those attributes.  Therefore I believe that dividend stocks are not only sufficient to meet my needs, but are for the long run also the best choice of investment for any investor who is comfortable managing a portfolio of individual stocks.

something unprecedented (but entirely conceivable) could happen to any stock portfolio?

That should read any portfolio.

Nothing is safe, even when you put "entirely conceivable" in front of it.

if the success is a result of your own idiosyncratic approach to stock picking?  I'm not saying that it doesn't

Actually my approach works and has worked for innumerable people.  Dividend growth investing is especially advantageous because it has a more strict explicit bias for strong companies than does normal dividend investing, but investing in strong dividend paying companies has worked for over 100 years for many, many people.  Dividends, especially growing dividends, provide a level of safety and compounding that is simply impossible to achieve with non-dividend paying companies.

Perhaps what you are really saying is just that you are comfortable taking more risk and can live with more volatility, and you understand that your increased exposure to risk could expose you to losses that a PP investor is unlikely to be faced with.

Dividend stocks are definitely more volatile than a PP.  I don't remember saying that dividend stocks were my only asset class, if so I misspoke because they are not.  I don't think you have any logical basis for those conclusions.

I will say that I can live with more volatility.  Volatility is never bad in and of itself.  By your actions you can make volatility good or bad but by itself it is meaningless.  By doing dividend growth investing I've learned to tolerate and even enjoy volatility and turn it to my advantage.

Volatility becomes loss only if you liquidate a temporarily depressed asset (too often this is required, but even more often it is just stupid investor psychology again).  Volatility is an advantage if you can accumulate more of a temporarily depressed asset or if you can sell a temporarily overpriced asset.  Otherwise volatility is meaningless.

Volatility isn't loss and equating volatility to loss is a fallacy.  That's one of two common fallacies relating to volatility, the other is equating volatility to risk as is done by MPT.

What is risk?  Or more accurately, what do you consider a risk?  The biggest risk of concern to me is not having enough income over the remainder of my life.  Risk of capital is a concern, but that only happens for me if companies suffer a significant impairment to future earnings.  Even BP hasn't resulted in me losing capital.

When you properly understand what you consider a risk, for most if not all of them you are forced to admit that risk is unknowable for the future and not measurable in the past (which is why MPT was forced to equate risk with volatility in order to have a number to plug into the equations).  Therefore neither you nor I know if my portfolio is more risky or less risky than a PP, nor do we know what losses a PP investor might face.

Personally I believe dividend growth to be less risky over my expected lifetime than a PP, but I don't know so I have about 40% of my assets in the PP.  (The other 60% is in more of the same assets I have in my PP, except no more Treasuries.  You could say I have a big PP with only 10% Treasuries, 18% cash and with extra precious metals and stocks.)

[AgAuMoney]

You keep setting up this STUPID false dichotomy.

I'm not doing any trading or market timing.

In fact I do less of that than the S&P 500 or the DJI.

I'm trying to follow what you are getting at, but it seems if you are picking stocks based upon your own personalized stock metrics, isn't that active portfolio management (even if your portfolio has low turnover)?

By accepted definition my approach would be considered active portfolio management.  I never said it wasn't.  However, typically "active portfolio management" is assumed to have high turnover and commensurately high costs, so as long as you understand I have very low turnover and very low costs I'm happy to be considered an active investor.  However, by those same definitions the PP is also considered active, because gold and long-term treasuries are individual assets.  By selecting those individual assets instead of commodity or bond index, a PP investor is practicing active portfolio management.  (a fund does not make an investment passive)

Usually I and other dividend growth investors are accused of having "back door index" portfolios, or of practicing "hidden indexing."  It's quite humorous that a PP investor would be accusing me of having an active portfolio. 

 Hasn't such active management been shown not to provide any advantage over indexing?  

No.  See turnover.  In fact, dividend investing has been shown in innumerable studies and in practical application to have a total return advantage over indexing.  (see things like low-volatility investing, value investing, etc.)

You can say that you don't care what an index does, but I don't believe that.  If a passive index outperformed your strategy significantly every single year with lower volatility I have to think that at some point it would cause you to reassess your strategy, right?

First, I like volatility so that will never be a consideration.

If some passive index were to outperform your PP strategy significantly every single year then at some point would you drop the PP and invest solely in that index?  Would volatility be the only thing stopping you?  Why would you place such an artificial limit like volatility on your results?

Second, define "outperformed."

I'll assume you mean growth of capital since it seems to be the implicit assumption you and others repeatedly make.

I do not measure my performance by the amount of capital available to me according to the current balance of my accounts.

I measure my performance by the growth of my dividend income over the prior year.  I am not trying to reach some amount of capital.  My goal is to replace my current earned income with dividend and other passive income (passive to me, not necessarily the IRS) that grows every year without regard to the capital balance.  This has been my goal since I was a pre-teen.  (Unfortunately the goal posts keep moving...)

If you could come up with an index having continued dividend growth, and it was shown to have done so in excess of my approach, then I would consider using that index.  Nothing so far has come anywhere close in index or in active funds of any kind.

[hpowders]

I believe the PP is true genius. Otherwise I wouldn't risk so much of my own money to be invested in it. I believe!!!

[AgAuMoney]

There is absolutely no growth in bond income.  How is this going to be an improvement over AgAuMoney's strategy. 

Exactly.

If I were a lot younger (I am 67), I would strongly consider doing the same thing.  It makes a lot of sense.
Norm

I would not want to push someone into any investing decision they do not understand or are not comfortable making.  With that in mind, there are a lot of folks your age and older doing dividend growth investing who post on seekingalpha, writing both articles and in the comments.  If you are interested in learning more about this approach you might find their perspective helpful.

Some people there who seek dividend growth are retired, such as Norman Tweed, richjoy403, or Bob Wells (who first retired and then started managing his own portfolio).  Others are near or have postponed retirement or consider themselves semi-retired like David Crosetti or David Van Knapp.  And of course there are younger folks as well.  People doing dividend growth range from just starting while still in college (Tim McAleenan et al) on up to much older than you who are either just starting or have been doing this for decades.  See also Chowder, mjs_28s, and many more.

[AgAuMoney]

But if it makes sense, why do so many fund managers struggle to find success with it?

Name me one who has tried dividend growth?

Funds are a poor place for dividends.  And people have to understand the approach before they become comfortable with it.  Otherwise, just like funds are required to do, they just keep talking about year over year gains in capital, and seldom if ever report dividend performance criteria.  (Of which yield is the least important, if it has any importance at all.)

[AgAuMoney]

It seems like it requires a lot of market research and a healthy dose of good fortune to properly determine which companies are going to raise their dividend yields in the future and avoid companies that are likely to reduce or cancel their dividends, as AgAuMoney has spoken of in the past, when he made a bet on GM a few years ago and they immediately slashed their dividend or something like that.

It isn't hard to predict.  Hundreds of companies have been growing their dividend payouts for a decade or more.  Many of them specifically address dividends and their intent to continue growing dividends.  When the companies are doing well, and they have historically had that commitment to investors, they are a much safer bet than throwing a dart at random companies.

BTW, it was GE, and I hadn't just "made a bet."  I'd been holding them for years, I was getting uncomfortable with them in light of the financial crisis, but the CEO assured investors the dividend was safe.  In light of his remarks I only sold half instead of my whole position, then it turned out the CEO lied.  I sold my whole position in others (e.g. BAC) because they seemed like trouble.  And it turned out they were.

That's why I compared dividend growth investing to (nonexistent) adjustable-rate, callable bonds. You're buying those dividend yielding companies for income, not capital appreciation, and there's the risk of some of your payments falling or even ceasing entirely if you choose poorly and bought the wrong companies.

Yes.  But it literally almost never happens out of the blue.

Will it retain its current level of popularity if and when treasuries are returning 6 or 7% again and corporate bonds are up to 10 or 11%?

I hope not.  If it loses popularity I'll be able to buy my shares much cheaper!

And BTW, if/when bonds go up to those rates, anyone holding bonds paying today's rates will suffer a huge cap loss if they have to sell.  Or if they are holding bond funds, they'll just lose even if they don't sell.  Or they'll have to live with low rates in a high-rate environment, which means inflation will be eating them alive.

[edsanville]

Personally, I can't imagine Apple will still be on the DJIA in 10 or 15 years.

I'm confused...  Apple's not even in the DJIA today, is it?

[AgAuMoney]

Why not just let your VTI grow and convert to dividend-paying stocks later on?

Because if your index fund is high, the market is high, and dividend stocks will also be high.  If you convert all at once you will get a very low average yield.  For example, the typical financial planner "safe" withdrawal rate from your portfolio is 4%, and you will find it very hard to build a portfolio of solid, strong dividend growth companies yielding 4% if you convert all at once.

Buying dividend growth stocks over time (ideally a decade or more) allows you to put the advantages of dollar cost averaging at work on each individual stock (where it often works much better than with an index) and if you pay additional care and attention to valuation you can pick up some stunningly good deals every now and again which greatly boost your yield and margin of safety with a given company.  (I'm still learning about valuation, but I have made some great buys, many good buys, and a few bad ones.  I hope to do even better as I learn more.)

For example, if I had converted in 1999 or 2000 then I would have been purchasing many of the preferred dividend growth companies at yields well under 3%, many barely over 1%.  By 2002-3 those same companies were almost all yielding high 2% to low 3%.  (And double that in March of 2009.)  Averaging in over time is a good strategy, but only if you are averaging in to where you want to be.

Another conversion approach would be at retirement with your index fund you keep the index fund but start to convert (or average in) as opportunities arise.  Then you might find your best opportunity as in March or April of 2009, but you will discover that while your favored dividend stocks are down 30% (that's what my dividend stocks did on average) the market (and your index fund) is down 60%!  Not a good time to convert!

And while waiting to convert after retirement, what will you live on?  Will you sell some of your index fund?  Even if or as it goes down?

Or will you have a large allocation to cash and a bond position to provide income?  In other words, sacrificing growth you have had in stocks for the safety of bonds.

With dividend growth instead you might find (as I have) that you don't need as much safety from bonds so you can have a greater allocation to stocks and receive that growth instead, thus making your entire portfolio grow more than if you had a traditional 60/40 split using index funds.

Becoming familiar and comfortable with dividend growth investing might be easier before retirement, when you have a smaller portfolio so normal market movements do not result in such large value swings while you learn about dividend growth investing and the behavior of your chosen companies.

Finally, before retirement you can more easily afford mistakes with other income coming in and time to recover.  Wouldn't it make more sense to practice and learn while you can afford mistakes than to take on something new when life literally is depending on it?

Keep doing what makes you comfortable.

Exactly.  I'd add one little bit:  Keep learning!

[Pointedstick]

AgAuMoney, are you worried what happens if we "fall off the fiscal cliff"? (love that term!) The tax rate on dividends is set to rise quite a bit, depending on what income tax bracket you're in.

[AgAuMoney]

AgAuMoney, are you worried what happens if we "fall off the fiscal cliff"? (love that term!) The tax rate on dividends is set to rise quite a bit, depending on what income tax bracket you're in.

That is a good question, but for me personally, not really.

My marginal rate was about 25% federal, but more importantly, over 70% of my portfolio is in tax advantaged accounts.  In taxable I keep most of my "emergency" cash and investments mostly that have some tax advantage of their own (such as Master Limited Partnerships) or have foreign tax implications, as well as a few that are more speculative in nature (well under 5% of my portfolio at present, such as Silver Wheaton and Sandstorm Gold) where I might want to write off losses or hopefully have large capital gains. 

I have considered that other people might not think the same and so might sell dividend stocks if/when the rate goes up.  That might present a buying opportunity...

To that end (and because valuations on the market have been pretty high since summer) I've been accumulating cash and hope to find some deals either because of election fallout, selling due to the tax increase or just the end of year, or simple malaise either in the market or a specific company(s).

[jimbojones]

Why not just let your VTI grow and convert to dividend-paying stocks later on?

Because if your index fund is high, the market is high, and dividend stocks will also be high.  If you convert all at once you will get a very low average yield.  For example, the typical financial planner "safe" withdrawal rate from your portfolio is 4%, and you will find it very hard to build a portfolio of solid, strong dividend growth companies yielding 4% if you convert all at once.

Buying dividend growth stocks over time (ideally a decade or more) allows you to put the advantages of dollar cost averaging at work on each individual stock (where it often works much better than with an index) and if you pay additional care and attention to valuation you can pick up some stunningly good deals every now and again which greatly boost your yield and margin of safety with a given company.  (I'm still learning about valuation, but I have made some great buys, many good buys, and a few bad ones.  I hope to do even better as I learn more.)

For example, if I had converted in 1999 or 2000 then I would have been purchasing many of the preferred dividend growth companies at yields well under 3%, many barely over 1%.  By 2002-3 those same companies were almost all yielding high 2% to low 3%.  (And double that in March of 2009.)  Averaging in over time is a good strategy, but only if you are averaging in to where you want to be.

Another conversion approach would be at retirement with your index fund you keep the index fund but start to convert (or average in) as opportunities arise.  Then you might find your best opportunity as in March or April of 2009, but you will discover that while your favored dividend stocks are down 30% (that's what my dividend stocks did on average) the market (and your index fund) is down 60%!  Not a good time to convert!

And while waiting to convert after retirement, what will you live on?  Will you sell some of your index fund?  Even if or as it goes down?

Or will you have a large allocation to cash and a bond position to provide income?  In other words, sacrificing growth you have had in stocks for the safety of bonds.

With dividend growth instead you might find (as I have) that you don't need as much safety from bonds so you can have a greater allocation to stocks and receive that growth instead, thus making your entire portfolio grow more than if you had a traditional 60/40 split using index funds.

Becoming familiar and comfortable with dividend growth investing might be easier before retirement, when you have a smaller portfolio so normal market movements do not result in such large value swings while you learn about dividend growth investing and the behavior of your chosen companies.

Finally, before retirement you can more easily afford mistakes with other income coming in and time to recover.  Wouldn't it make more sense to practice and learn while you can afford mistakes than to take on something new when life literally is depending on it?

Keep doing what makes you comfortable.

Exactly.  I'd add one little bit:  Keep learning!

Given the same account balance, I can buy your exact portfolio today.  We all have the option to switch to your exact portfolio at any time.  You don't get extra yield because you bought the stock 10 years ago.  The value of the account balance can be converted to an approximate dividend income stream at any time by using your weighted-average yield.  If you're getting 4%, then my $1 million account is the same as an account with dividends yielding $40,000 per year.  If my goal is income of $50,000 per year, and a balanced and diversified portfolio of dividend stocks earns 4% yield, then I need to make sure my account balance grows to $1.25 million. 

The only relevant question for me (in the accumulation phase) is how to maximize that account balance.  I'm not commenting on whether a dividend-growth strategy will provide a better return than an index strategy, but it's the return that matters.  [of course, adjust the preceding statements for risk too]