Dividends are paid by stocks, which could fluctuate in price. So if you bought a $100 stock, the price can go up and down which affects your return. Therefore, if the stock is paying you 5% but has dropped to $90, then you've just lost $10 on your stock even though you've earned 5% in dividend income.
If you invest your money in a retirement account, your return will increase due to deferred taxes and compounding. There are pros and cons depending on the type of account: 401k, Traditional IRAs, Roth IRAs, etc.
You need to read about investing because there's no one simple answer. Also there are many so-called financial planners who'll sell you annuities or other investments for commission but at your loss.
Investing a modest amount of money in a dividend-paying stock, and holding to gain long-term dividends will not make you rich.
You either need to start with a large sum invested, or continually compound your portfolio to become rich.
I certainly wouldn't retire on that. That's 24k/year if you don't touch principal. Not even CLOSE. And if you are invested in dividend paying stocks you are probably going to get very little principal appreciation.
And how do you figure dividends protect against inflation?
P.S. 3% average annual return on an 800k portfolio is pretty pathetic even for a conservative investor. Do you know what the average historical rate of inflation is over say 50 years? For the past 25 years it's about 3%. For the 20 years prior to that it was about 6%.
Even at that lower rate the total cumulative inflation from January 1990 to September 2012 was 81.64%.
dividends are not guaranteed, the corporations can decrease, increase or stop paying them.
however, there are at least ten companies, like PG, which historically increase their dividend each year.
that is what you want, an increasing dividend stream.
that's why you diversify your portfolio, it is not always about dividends, think growth (like apple)
With peer to peer lending I am earning 14.69% interest.
That's $461 a week...
Can you live comfortably on $461 a week?
Adjusted for inflation, 7-10 years from now that will be $230 a week ($32 a day), can you live comfortably on THAT?
I know I couldn't!
I read the book, The Lazy Investor, he is the youngest Canadian Retiree (that is, his life is his own and he can do with it as he chooses) He writes books still etc but he only chooses to, doesn't have to. He is retired and living on dividends and in this book he explains how to do it. If you are American Im sure there are other equivalent books to teach you the same thing but even his book can help you as the principal is the same and he does talk about American Stocks too.
They seem to protect against inflation. Assuming one earns a 3% annual return, would someone with $800k invested in dividends be able to retire safely?
