In a word, yes. If you are wondering what I am rambling about, stay with me a moment. I came across an article on Yahoo Finance yesterday called Growth Strategy Can Trump Income Investing by Juan Carlos Arancibia. I was drawn to this article because most studies have shown that over a long period of time, value investing usually trumps growth investing. Since income investing is a close cousin of value investing, I figured Juan might have some compelling arguments to make.
The article starts out with the following statement “The idea behind income investing sounds logical: Buy bonds and dividend-yielding blue chip stocks, and live off the guaranteed income.” and then goes on to offer reasons as to why growth investing offers better returns when compared to income investing. To make his case, towards the end of the article he lists 20 high yielding dividend stocks and shows how all of them except 2 have performed badly over the last year. There are four major flaws with this reasoning.