Million Dollar

[DontWannaWork]

My Dad have recently pass and left her close close to a million in cash.
I am asking the dividend investors here for recommendation on investing this money. Yes, i am also going to talk with a financial adviser as well. But would like to know what are your though on this matter. She's in her late 50's and wanting about 5k/month.

[Dividend Watcher]

$60k per year on $1 million is 6% return. To get that with just dividends you'll be reaching for yield and probably taking undue risks. If you didn't want to spend the principal, you could get a reasonably blended rate of about 3.5%-4% using REITs & higher yielding stocks. You could also add spending down the principal on top of the income received to get that amount with some judicious planning.

I can hear some drooling coming the financial adviser corner.

[EricL]

I agree with DW that you should be careful to avoid chasing yield. I would probably focus on high quality consumer staples, utilities, telcoms, and possibly a oil & gas company with dividend growth rates of 5%+. I would put it in a minimum of 20 stocks, and would guess you could build pretty easily build a portfolio yielding 3.5-4% with more than enough dividend growth to safely sell the necessary 1.5-2% per year needed to get your 6% total withdrawals.

I am assuming the $5k per month she is wanting is gross and not net after taxes?

[crimsonghost747]

5% yield is manageable with a portfolio largely based on REITs, utilities, telecoms and financials. 5% would be $4167 per month before taxes. Anything above 5% is definitely getting very risky, even a 5% yielding portfolio will be heavily weighted on the types of stocks I mentioned above and will be lacking in terms of diversification. Also, as this is a dividend GROWTH forum, you will quickly notice that those types of stocks I mentioned above usually have quite low dividend growth numbers.

So that is one option. A second one is pretty much what Eric suggested, a solid portfolio with 3-4% dividend income, then sell what is needed to get up to 6% income per year. This second one seems a bit more balanced and gives a bit more flexibility to spending as you are selling assets and can choose to do so when necessary, but it does take a little bit of management as opposed to just sitting back and cashing in on just the dividends. Also selling assets each and every year puts a bit of pressure on the dividend growth rate if you want to keep up with inflation.

[NilesMike]

900K @ 3.5-4% dividend stock= 31-36K per annum

100K selling option premium in a portfolio margin account should be able to raise the remaining cash flow desired.

[Foodstamp]

Sorry to hear about your loss

Invest everything in MNDO.

[ChadR]

Any reason why you would pick MNDO? 12% yield usually scares me off of a stock. Under 50 million market cap and it's an annual dividend payer. The payout was 3/26 so you have a long time before you get any money from the stock.

[rapidacid]

(06-01-2015, 08:40 AM)ChadR Wrote: Any reason why you would pick MNDO? 12% yield usually scares me off of a stock. Under 50 million market cap and it's an annual dividend payer. The payout was 3/26 so you have a long time before you get any money from the stock.

Based on their other posts I would not be surprised to find that MDNO was a family business of Foodstamp's

From a 264MM market cap in 2005 to 49MM in 2015 ... a cursory look at any meaningful metric of theirs over the last 10 years shows them all over the map ... who knows what their story is, but their 15 year stock chart tells a pretty good one

[Kerim]

(06-01-2015, 09:33 AM)rapidacid Wrote: Based on their other posts I would not be surprised to find that MDNO was a family business of Foodstamp's

Lol. Yeah, my spammy-sense was tingling a bit on that one, but posts have been mostly benign, so I thought I would wait it out a bit before taking action.

[800peace]

RIP to your loved one. Here's my assumptions:

1) Mom has 31 years to live.
2) Mom has $1M.
3) Needs $5,000 monthly.
4) Future rate of inflation is 4%, so $60,000 a year needs to grow 4% per year.

Mathematically, your Mom would need an average rate of total return of 8.54% (not dividend yield). The only place you'll achieve that return is in equities. As has been mentioned, high-yield is dangerous. Currently, a reasonable dividend yield of companies with solid financials is 2% to 4%, so your Mom will need to tap equity monthly in the beginning. Hopefully within 15-20 years your Mom will be receiving her principle back annually in the form of dividends.

Considering your Mom will be relying on this money, I do not advise a DIY approach.