I've recently read a few books about the stock market, and have essentially gleaned one central idea: the goal seems to be to buy good companies at somewhat irrationally "low" prices. What would the results be if through dollar cost averaging (say 2,000 to 6,000 per month) I elected to purchase only stocks with a strong dividend history with high earnings to share yields? Assume blue chip type companies with market caps from 2 billion and up. I believe this would be a viable strategy and one that could see long term growth while providing an income through dividends.

What would a person expect to earn in dividend income if this strategy was repeated monthly over the course of 5 years? 10 years? Assume average dividend yeilds, but historically stable companies (think kellog/coca cola). Would it be unreasonable to think that such a strategy could eventually yield enough income to retire?

Your typical dividend ETF yields 4.xx% but the type of companies you are talking about rarely break 3%.

I don't know the details but there has been some negative views on Kellogg recently and with Coca-Cola there is a trend away from cola drinks and again I don't know how Coke is addressing that or if it is significant to even warrant being addressed. My bigger point is that you need to do more than just look at current yield and PE ratio.

Coca Cola is addressing the trend away from carbonated beverages by purchasing a stake in Green Mountain. Also their still beverages only make up like 25% of their revenue, so there is room to grow there.

Thanks for the response and I was just using PE as one value metric but yes I agree..considering a 3 to 4 percent dividend yield, why are stocks superior in terms of cash flow (through dividends) then a strictly cash flow investment like real estate? Wouldn't the cash flow of real estate typically trump dividend returns? Or does it not because of long term growth..

Also, if the above were followed with the intention of deriving retirement income, wouldn't one need a tremendous amount of money to generate, say 100k, annually? Wouldn't one need in the neighborhood of 3 million invested??

First, if you are young then $100k is not going to be a lot of money when you retire. It isn't a lot of money now but even with relatively low inflation in 40 years $100k will buy you what $40k does now. The math isn't hard to do (plus there are thousands of online calculators) but if your hope was that you'd be able to save $5k a month for ten years and retire at 30 then no that is not going to work.

stocks/dividends historically insulate the investor from inflation. so wouldnt investing 3 million today generate roughly 100k yearly adjusted for inflation?

You can (and should easily) get a rate that is greater than inflation but you still need to subtract inflation when doing the math. Most people who come up with the amass a large amount of money and then live off the returns typically forget to subtract inflation. That is fine if you're old but for early retirement you need to keep increasing the invested funds -- this doesn't mean you need to add more to the pool since capital gains will likely do that but it does mean that you can't count those capital gains when doing the math.

You'd most likely be better off from a risk perspective by just buying an index since the returns from blue chip high dividend stocks are going to be highly correlated.

Its certainly possible. It very much depends on how much you need in retirement. The rule of thumb is that you can retire fairly safely when you have 25x your yearly expenses.

There is a good chance that you can generate 100k of income adjusted for inflation in perpetuity off a 3 million dollar portfolio properly invested.