Doing it on Dividends Alone?

[wells]

you might research preferreds, senior notes, closed end funds and some total return mutual funds all of which can provide 6% and up depending on your risk tolerance. i allocate 50% of my assets to the above and the other 50% is in a cd ladder. the cd interest is shrinking as they roll over but the stable principal smooths the volitility of the other investments. this meets my lifestyle needs and i reinvest ss and pension benefits. to answer your question, yes you can do it.

[Ken11]

IMHO IF you skew your investment mix heavily towards dividend yielding equities in order to pursue a dividends only strategy then you are sacrificing diversification in your portfolio.
That would be bad.

However, if you can float on dividends alone from a highly diversified portfolio (containing not just dividend oriented stocks) then this strategy could make sense.
It does provide a fairly stable cash flow at attractive yields versus short-mid bonds.

If in a taxable account then tax minimization could work against dividends - depending on your marginal income tax rate.

[obgyn65]

I don't, sorry.

Quote:

Originally Posted by RetirementColdHardTruth Does anybody get all their current and future needs met on dividend income alone?

[justplainbll]

Quote:

Originally Posted by RetirementColdHardTruth I searched the forum, but couldn't get the answers I am looking for. Does anybody get all their current and future needs met on dividend income alone? By that I mean producing an income flow that allows money left over at the end of the month to keep up with inflation pad out the emergency fund etc. Look forward to you input.

At current market prices it seems unlikely to be able to build a diversified $2 million portfolio of well capitalized equities that provides pretax dividend income of more than $60,000.
The equities in our portfolio have been held for a cost weighted average of 5.0 years (a range of 1 day to 38.8 years) and are yielding 2.8% of their cost basis.

[MichaelB]

Quote:

Originally Posted by wells you might research preferreds, senior notes, closed end funds and some total return mutual funds all of which can provide 6% and up depending on your risk tolerance. i allocate 50% of my assets to the above and the other 50% is in a cd ladder. the cd interest is shrinking as they roll over but the stable principal smooths the volitility of the other investments. this meets my lifestyle needs and i reinvest ss and pension benefits. to answer your question, yes you can do it.

Hi wells, welcome to the forum. Please stop by here Hi, I am... - Early Retirement & Financial Independence Community to tell us a little about yourself.
One question about your allocation of 50/50 to CDs and preferreds. None of those instruments increase in asset value over time. How do you deal inflation?

[ScaredtoQuit]

Quote:

Originally Posted by justplainbll At current market prices it seems unlikely to be able to build a diversified $2 million portfolio of well capitalized equities that provides pretax dividend income of more than $60,000.

My portfolio which consists of dividend stocks (78%), preferred stock (3%), individual debt secuities and debt mutual funds (7%), and Cash based GIC's (12%) has an overall yield of 4.29%. At that rate, a similar $2MM portfolio would generate $85.8K

By the way, I don't advocate a portfolio with this much risk. I got sucked into it during the most recent crisis. As equity prices went down, instead of selling to cut my losses, I kept buying more equities in anticipation of prices going back up. Eventually, thanks to Ben Bernanke, it worked. After three years, I made good on all of my losses, but by that time my AA was close to its high of 90% equities. I am now trying to slowly move my AA back toward a more reasonable ratio, however, a dearth of reasonably priced debt securities, makes it difficult. I mean how can I justify selling a security that yields 3.38% and has increased an average of 11.4% per year for the last 5 years (actual stats on one of my holdings, Proctor & Gamble) to buy a bond yielding just 3%?? Regardless, at a minimum, I am reinvesting all current dividends and interest in debt securities.

[justplainbll]

Quote:

Originally Posted by ScaredtoQuit My portfolio which consists of dividend stocks (78%), preferred stock (3%), individual debt secuities and debt mutual funds (7%), and Cash based GIC's (12%) has an overall yield of 4.29%. At that rate, a similar $2MM portfolio would generate $85.8K By the way, I don't advocate a portfolio with this much risk. I got sucked into it during the most recent crisis. As equity prices went down, instead of selling to cut my losses, I kept buying more equities in anticipation of prices going back up. Eventually, thanks to Ben Bernanke, it worked. After three years, I made good on all of my losses, but by that time my AA was close to its high of 90% equities. I am now trying to slowly move my AA back toward a more reasonable ratio, however, a dearth of reasonably priced debt securities, makes it difficult. I mean how can I justify selling a security that yields 3.38% and has increased an average of 11.4% per year for the last 5 years (actual stats on one of my holdings, Proctor & Gamble) to buy a bond yielding just 3%?? Regardless, at a minimum, I am reinvesting all current dividends and interest in debt securities.

What's the dividend yield on the current value of your equities?

[ScaredtoQuit]

I already said... it's 4.29%

I don't keep track of yield on cost on a commingled basis. I don't believe it's pertinent. (although I do know my yield on cost of individual securities)

[wells]

Quote:

Originally Posted by MichaelB . One question about your allocation of 50/50 to CDs and preferreds. None of those instruments increase in asset value over time. How do you deal inflation?

good question m.b. this is something i ponder daily. i am well hedged in r.e., will probably relocate in 8 years. one view of my "plan" is that it is a well paying annuity that will have some value in 30 years. less than, equal to, or greater than the orginal invested amount as opposed to a spia that dies with the holder. as far as cds go i have reinvested the interest since 2000, when i began this "plan" , so they have kept up with inflation until now as they roll over. my thought going forward is to take 25% of the rollover and move into higher yield/more risk to increase over all yield yet maintain lower volitility with the cd. cds also provide dry powder to take advantage of fire sale prices. some call the high yield volitile/low yield stable configuration a barbell or matching pairs strategy. another way i have always dealt with inflation is my spending habits. i always go for quality but never pay retail, there are exceptions but i am a good steward of my assets. this is a work in progress that i moniter daily looking for opportunities. so far my income needs have been met and i sleep at night. regards, jw