Basic Retirement Portfolio

[OldTimer]

Hi All,

I have constructed what I believe to be a basic retirement portfolio (below). I am about 6 months from retirement so this portfolio is geared toward investing for income and capital preservation.

The only 2 stocks on the list that I am not sure will make the final cut are Cummins and Kinder Morgan. I appreciate any comments that anyone has as to other companies I should consider adding or others on the list I might want to remove.

Thanks.


Symbol Company Name
ABBV AbbVie Inc.
CBRL Cracker Barrel
CL Colgate-Palmolive
CMI Cummins Inc.
CVX Chevron Corp
DLR Digital Realty Trust
ED Consolidated Edison
EMR Emerson Electric
GE General Electric
HCP HCP Inc.
JNJ Johnson & Johnson
KMB Kimberly-Clark
KMI Kinder Morgan Inc.
KO Coca-Cola Co.
MO Altria Group
MSFT Microsoft
OHI Omega HealthCare Investors Inc.
PEP PepsiCo
PFE Pfizer
PG Procter & Gamble
SO Southern Company
T AT&T
TGT Target
VTR Ventas, Inc.
VZ Verizon
WFC Wells Fargo
WMT Wal-Mart Stores

[EricL]

I think you have a very good list there Old Timer, all very high quality companies with good track records of growth. I also own CMI and KMI and think they are fine choices as well.

[rapidacid]

Great list Old Timer. For me personally, if I was 6 months from retirement I'd swap out KMI and put in XOM to help me sleep better at night. But I also own KMI, and have been building a full position in CMI at current prices.

[OldTimer]

Thank you both very much for your comments. It really helps to have someone else take a look to confirm what I am doing.

Would you let the fact that GE has frozen their dividends for 2015 and 2016 keep you from investing in them?

Last question ... what do you think about Bank of Nova Scotia (BNS)?

[Dividend Watcher]

OldTimer, nice list you have there.

I don't necessarily see a problem with GE. I recently swapped out GE for an EMR/ETN combo. You can see my reasoning here about midway down the page. Since then GE has sped up shedding some financial products & businesses it held. See here and here for further developments, tidbits and starters. One thing GE has in its pocket is all the data it has collected over the years. I used to be amazed at how their engineers could balance a turbine rotor bigger than my house with the most rudimentary of equipment. This rotor used to operate above 4 critical speeds which meant the shaft got quite twisted when up to operating speed. For more information, see this document. This article talks about the IoT collection of this data but GE has tons of it on file already. If they can perform, this is worth a ton of business.

KMI & CMI are cyclical just like the oils and to a lesser extent industrials but, with that diversification, it shouldn't be too much of a hassle unless you need every last penny of the income this portfolio spits out. CMI has a pretty low payout ratio and Mr. Kinder has been pretty shrewd managing his empire.

Are you planning to buy all at once or are you purchasing in stages? I suspect we'll have some more volatility like we've experienced the last couple months at least until the end of the year so you may be able to boost your yield a tad when you find some weakness.

I was a little surprised by only 1 utility, ED, in the list. Not that you have to load up on utes.

As to BNS. I own it and think its global diversification is a plus in its favor. However you not only have the USD/CAD exchange rate to deal with but also the CAD and South American currencies it has major stakes in. Despite that they've kept up the dividend increases. I also hold some RY and BMO in our portfolios and looking to add TD to the wife's portfolio once I have the cash to designate to it. Our own Roadmap2Retire had a series about Canadian banks on SeekingAlpha. He could point you to them.

The only caution I have is that the price and dividend amount will vary with the exchange rate. I'm way underwater on BNS and BMO because I bought them when the dollar and loonie were close to par. Now we are back to the average long-term exchange rate again so I expect them to fluctuate up and down from here. Over a decade, everything will average out so I'm not too worried about it. Since they manage to either freeze the dividend when times are tough or keep increasing 1x to 2x per year, the dividends I receive haven't taken as much of a hit as one would think. I just keep reinvesting the dividend to lower my average cost and boost the YOC.

Here's a graph of the exchange rate for the last 25 years:

   

Hope you get in at decent prices and have a long and healthy retirement. I'm not that far behind you.

[OldTimer]

Thanks, Dividend Watcher, for all of the great information.

I pulled the trigger yesterday afternoon and bought equal amounts of the following stocks:

Symbol Company Name
ABBV AbbVie Inc.
APPL Apple
BNS Bank of Nova Scotia
CBRL Cracker Barrel
CL Colgate-Palmolive
CMI Cummins Inc.
CVX Chevron Corp
DLR Digital Realty Trust
ED Consolidated Edison
EMR Emerson Electric
GE General Electric
GPC Genuine Parts
HCP HCP Inc.
JNJ Johnson & Johnson
KMB Kimberly-Clark
KMI Kinder Morgan Inc.
KO Coca-Cola Co.
MSFT Microsoft
OHI Omega HealthCare Investors Inc.
PEP PepsiCo
PFE Pfizer
PG Procter & Gamble
SO Southern Company
T AT&T
TGT Target
VTR Ventas, Inc.
VZ Verizon
WFC Wells Fargo
WMT Wal-Mart Stores
XOM Exxon Mobile

I added Apple, Bank of Nova Scotia, and Genuine Parts and I removed MO Altria (my wife decided she didn't want to invest in tobacco). I haven't actually purchased the 4 REITs yet. I am in the process of doing a Roth conversion and plan to put the REITS in the Roth. I was able to purchase WalMart after the drop in price yesterday although I understand that it may drop some more.

Now I need to figure out the best way to monitor my portfolio (probably quarterly) to make sure that all the companies are continuing to pay dividends and (hopefully) raise them a bit each year.

[Roadmap2Retire]

Thanks for the mention, Dividend Watcher.

OldTimer - here are the links to my analysis of the Big Five Canadian banks.

• Royal Bank of Canada (RY)
  
• Toronto-Dominion Bank (TD)
  
• Bank of Nova Scotia (BNS)
  
• Bank of Montreal (BMO)
  
• Canadian Imperial Bank of Commerce (CM)
  

As Watcher mentioned, there are some problems when considering the currency conversion rates. As a Canadian resident - I am very happy with the earnings in the US market from these banks as it buoys the balance sheets, but for US investors, the strong US$ means that your returns are more depressed and the even with the dividend growth included, the overall dividends seem to point lower.

Let me know if you have any specific questions

[OldTimer]

Hi Roadmap2Retire ... Those are some great articles. Thanks for the links.

I am sure I will have many more questions in the eeks and months to come but, right now, I don't feel like I know enough to recognize what I need to ask questions about.

[NilesMike]

(10-15-2015, 06:26 AM)OldTimer Wrote: PFE Pfizer

I added Apple, Bank of Nova Scotia, and Genuine Parts and I removed MO Altria (my wife decided she didn't want to invest in tobacco). .

...and she's OK with the "morning after pill" manufacturer?


I'm OK with both btw. Just asking as I often see these types of comments.

[Dividend Watcher]

(10-15-2015, 06:26 AM)OldTimer Wrote: I haven't actually purchased the 4 REITs yet. I am in the process of doing a Roth conversion and plan to put the REITS in the Roth.

That's a smart move, OT. REIT distributions/dividends are not qualified so they don't qualify for the favorable tax treatment in a taxable account and, since Traditional IRA withdrawals are taxed as ordinary income, you get them tax free in the Roth.

(10-15-2015, 06:26 AM)OldTimer Wrote: I was able to purchase WalMart after the drop in price yesterday although I understand that it may drop some more.

At least you are aware of the risk. I think, being a long-term holder, over time you should be fine. WMT is not going the way of the dodo unless they just ignore the macro retail trends. So far, I haven't seen that although the reactions have been slow. At least they seem aware of it.

(10-15-2015, 06:26 AM)OldTimer Wrote: Now I need to figure out the best way to monitor my portfolio (probably quarterly) to make sure that all the companies are continuing to pay dividends and (hopefully) raise them a bit each year.

I don't see a need to closely monitor this portfolio. May just want to scan the earnings headlines and keep track of dividend increases.

One other question ... are your reinvesting the dividends now before actually retiring or are you collecting them?