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?
Originally Posted by twaddle
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.