10-19-2020, 04:44 AM
(10-18-2020, 03:08 PM)ken-do-nim Wrote: Okay, let me rephrase. Today I have zero of these equitiies, and in 15-20 years, when I plan to switch over to this style of portfolio, you are right many of these companies may be gone. So it was really presented as, "If I were to retire now and live off my portfolio, this is what I'd get into, and when I'm ready to retire, I will look for similar equities." I think the 10-20-40-20-10 bell curve is the most significant takeaway.
The 10-20-40-20-10 indeed sounds like a good starting point. Just keep in mind to keep everything but the highest 10% in a range where the dividend is safe. And even more importantly, I'd pay attention to building the portfolio so that total estimated dividend growth beats inflation.
These will undoubtedly lower the current yield expectations, and I know that's hard especially when you plan on living on the dividend payments. But if you do retire at 62-ish, that'll still hopefully give you 20-30 years to enjoy retirement. That is an eternity in the financial world. Somewhere in that 20-30 years a part of your dividend income will get wiped away when a company cuts it's dividend. This I can almost guarantee. At the same time, each and every year, inflation eats up 1-3% of your purchasing power if the dividend payments remain the same. You simply do not want to be left in a situation where your portfolio is generating less and less purchasing power each year, so some growth should still be a requirement to account for inflation and those eventual dividend cuts which will happen.
All this becomes even more valid if you do indeed eventually put these holdings into a trust that would keep paying your children and grandchildren.
And the reason why I'm pointing these out? Because I think that in this very rough draft that you've made in your first post, everything in the first 70% of your portfolio (with the exception of AT&T) will either lower their dividend or not match inflation during the next few decades. I'm not saying they are bad picks, I just think that you are "forcing" extremely high yields and that might work for a year or two, but it most likely won't work for a decade or two.
And I realize that this is just a rough draft. But indeed if I were to do a similar portfolio exercise right now, I think it might look something along these lines.
1st bracket (10%): yield 7%+
2nd bracket (20%): yield 5-6%
3rd bracket (50%): yield 3-4%
4th bracket (20%): yield 2-3%
I left out the last bracket since 1-2% yield really doesn't make sense if you want income, and instead put that 10% into 3rd bracket since that is a level where I'm comfortable finding companies where dividend growth will beat inflation.
I also did some calculations with my own portfolio about a year ago, and I came to the conclusion that with my current dividend growth rates, I could comfortably sell 2% of my whole portfolio every year, and the dividend growth would still beat inflation. So that might be something to consider here too as an alternative to extremely high yield. This also gives you a bit more flexibility, just in case you need more (or less) cash in some years. I think it's time for me to do that calculation again at the end of 2020 and see if that is still the case.