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Old 09-10-2007, 01:19 PM   #41
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There are enough REITs with a 5-7% yield to put together a decently diversified portfolio, as long as the REITs are only a portion. Obviously, it won't be risk-free, but neither is the alternative of using an index fund with periodic sales. The names I own in this category are O, FR, SNH, LTC, and NNN. While I wouldn't want to try a 5% withdrawl rate with them over the long haul (I suspect that some of the dividends will need to be re-invested to keep pace with inflation), I think they should be ok at 4%.

Currently, there are plenty of bank stocks that give a 5% yield. I would put a few names like BAC and UBS into this portfolio. Obviously, these stocks have risk as well. KRE is the diversified approach, but you give up some yield.

I would add some high-yielding drug companies like PFE at about 5% yield too. Hopefully, they come up with something to replace the Lipitor sales pretty quick

MO is yielding about 4.4%. I bet that one's dividend increases actually outpace inflation

There are some decent higher-yielding utilities.

I don't think that focusing on dividends is going to increase your SWR. It will allow you to avoid the unpleasant task of selling stocks in a down market, since your living expenses could come almost entirely out of dividends.

What is ScV?

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Originally Posted by twaddle View Post
The second link gives some context. He talks about preferreds, which I view as callable bonds with more BK risk. REITs might be better, but there are few with that kind of yield.

MLPs seem like the best fit, but you get both stock-like risk with the business cycle and bond-like risk with changes in interest rates.

No free lunch. If you reach for yield, you're increasing your exposure to risk.

If a retiree is willing to take on that much risk, why not just load up on ScV and increase your SWR based on expected returns of 14% or so? I think there's a thread here somewhere that suggests one could increase their SWR to something like 5-7% based on such a strategy.

If he presented some evidence that risk-adjusted returns should be better than more traditional approaches, that would be interesting to see. But I believe the academic consensus is that selecting high-yield stocks is nothing more than a poor way of gaining a value tilt.
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Old 09-10-2007, 01:20 PM   #42
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And again if we're long-term dividend investors then why would we care how the stock is traded? Put the paper certificates in UncleMick's file cabinet and go play!
Call me wild and crazy, but I like liquidity and rigorous reporting requirements in my stocks.
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Old 09-10-2007, 01:25 PM   #43
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I don't think that focusing on dividends is going to increase your SWR. It will allow you to avoid the unpleasant task of selling stocks in a down market, since your living expenses could come almost entirely out of dividends.

What is ScV?
ScV = Small-cap Value.

I like dividends. I own BAC, MO, and others as part of a diversified portfolio. Would I ever consider a 100% high-yield portfolio today? No, it's a risky non-starter for all of the reasons I've outlined.
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Old 09-10-2007, 04:14 PM   #44
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I know you're a zealot on dividend stocks but I've seen various cycles where different investment styles work and others don't. Stretching for dividends where they are 75+% of the companies earnings tells me that the company is not investing in growth which is needed to support the dividend long term. And, yes, sometimes long term is measured in decades.

I won't come back on your point by point but I suggest you look carefully at what is behind your dividend. I have bought many high yielding stocks only to be terribly disappointed with the 5 or 6% yield when the stock falls 25%.

Dividends make up a large part of the stock markets total returns this century and paying a dividend has somehow gone out of fashion.
I appreciate your advice above, and take it to heart -- much wisdom.
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Old 09-10-2007, 04:20 PM   #45
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Nice reply. You beat me to it. ABT also has a P/E of 41. I'd be careful with this one on any kind of down draft.
Very much agree -- I'd check the whole story, including recent M&A and regulatory issues.

I only used Abbott as a prototypical industry example of div payout profile, not as a stock recommend.



(disclaimer -- I neither work for ABT, nor hold ABT stock)
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Old 09-10-2007, 04:27 PM   #46
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Likewise my BAC DRIP plan is doing stellar - even though I should cancel and move to my Vanguard broker account to simplify.

Dang! - I couldn't stay in the bleachers. Down to one file cabinet instead of two - if discipline doesn't fail me - the last of my DRIP plans will be canceled and stock put in my Vanguard broker account by years end - maybe.

heh heh heh - some drugs are hard to kick(DRIPs since 1989).
he he he Yup, I was awash in quarterly statements, and spreadsheets tracking individual issues... all gone now, though for index. I took the tough love!

As to BAC, those rascals make me so mad! The DRiP never went wrong, it and XOM were a couple of my favs, and though I still bank with them, I hate their customer service, and attitude. If ever there was proof of the 'too big to fail' theory, I guess they is it.... ref recent cynically self-serving prop-up for ailing mortgage giant boneheads Countrywide... apparently they will make a silk purse out of that sow's ear...
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