Doug Carey Blog | Dividend Payouts Keep Breaking Records | Talkmarkets - Page 2
President at WealthTrace
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I am the owner and founder of WealthTrace, which provides web-based financial planning software to both financial advisors and consumers.. I have over 20 years of experience in the financial markets and I am a Chartered Financial Analyst (CFA). I hold a masters degree in Economics from Miami ... more

Dividend Payouts Keep Breaking Records

Date: Wednesday, June 13, 2018 6:25 PM EDT

In any case, the table above demonstrates how dividend payers can be ballast during market turbulence. They can also help increase your chances of a successful retirement--which is to say a retirement where you never run out of money.


The Dividend Difference

Putting the WealthTrace planning software to work, we took a look at a hypothetical case of a couple in their early 60s who hope to retire soon. They have around $900,000 in invested assets, and estimate their spending will be about $70,000 annually. They would prefer not to take Social Security until they are 67.

 

At present, their investment portfolio is pretty well diversified. But they know they'll have to change that as retirement approaches.

 

That bond allocation kept the volatility down over the years, and that's the way the couple liked it. But current bond yields aren't going to be enough to generate the income they'll need in retirement.

 

If we run the plan through our Monte Carlo simulation, which looks at 1,000 possible outcomes based on historical returns and asset class correlations, things don't look so great for them:

 

 

So what can they do? Weighting the portfolio toward dividend payers is one option--and the one that we usually prefer.

 

Have a look at this list. There are more than 100 companies who have paid increasing dividends, year in and year out, for 25 years or more. A few have done so for more than 60 years!

 

Now, granted, the past does not predict the future. Also, a lot of these companies, while boosting dividends consistently, only yield 1% or 2% at the moment, given the performance of the stock market.

 

But you could put together a portfolio of these stocks that can get you an average of 4% a year--and growing. And these are mostly household names, too. Coca-Cola. AT&T. Chevron. Clorox.

 

And what happens if we do that?

 

 

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