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2013 has started nicely for the Wells Retirement Income Portfolio. I am pleased to report that we began the year more than 98% invested in dividend growth stocks helping support our retirement income. Our portfolio now contains 51 holdings and yields just below 5%. None of our holdings represent more than 3% of our overall portfolio with nearly all positions under 2%.

Our portfolio was constructed from the lists of Dividend Champions, Challengers and Contenders (CCCs) maintained by Seeking Alpha Contributor David Fish and available here. Each stock from this list has the distinction of not only maintaining their dividend during the bear market of 2008 but growing it each year with most growing at a rate greater than inflation.

As retirees, our goal was to construct and maintain a portfolio that would substitute for selling holdings each month to provide our necessary retirement income. Our portfolio acts as a substitute for the 4% withdraw plus inflation rule recommended by our former advisors relying instead exclusively on income generated from dividends growing at a rate greater than inflation. We set two major goals for our dividend growth investments: increased annual income and capital preservation.

I believe our continuing success as investors lies in having a portfolio business plan that sets out specific guidelines for buying, selling and even trimming portfolio positions. Our plan available here was developed over a period of nearly a year after first defining our retirement income requirements and our personal risk tolerance. This plan defines our principal investment goals and sets out the clear performance benchmarks upon which success will be measured. A comprehensive quarterly review is conducted at the end of each quarter and modifications are made when required.

Let's take a look at our 1st Quarter Review. Our portfolio began 2013 yielding just below 4.9%. Our overall goal for 2012 of 4.5% income exclusively from dividends was surpassed by 10%, an amount far greater than inflation for the year. It was exciting to experience firsthand the direct results of strong consistent dividend growth. Since our portfolio is designed to produce growing dividend income this metric, referred to by many as the "chowder rule," best represents our success.

As risk adverse investors, our overall portfolio beta remains under .70 as required by our plan. It is currently registered at .65. I'm pleased to announce none of our holdings cut dividends for the quarter. None of our stocks finished this quarter down more than 10%.

We sold one position during the past quarter, Heinz (NYSE:HNZ). Uncertainty surrounding the Buffett takeover made it in our opinion a great candidate for sell and redeployment. From the sell of HNZ I added to the following positions: Lorillard (NYSE:LO), Southern (NYSE:SO), Verizon (NYSE:VZ), BCE Inc. (NYSE:BCE) and LinnCo (NASDAQ:LNCO). Each of these positions enjoy higher yields than HNZ coupled with dividend growth. Overall the move will result in higher dividend income.

Below are the current holdings making up our portfolio:

Stock

Ticker

Yield %

5-Year

DGR

%

10 Year

Ave Return

5 yr.

EPS

Growth

Omega Healthcare

Investors

OHI

5.93

9.4

29.56

7.3

Reynolds American

RAI

5.30

7.8

10.91

7.8

W.P.Carey

WPC

4.87

4.8

11.99

6.4

Pepsi

PEP

2.87

9.3

7.80

7.0

Procter & Gamble

PG

2.92

10.2

7.73

8.4

National Retail Properties

NNN

4.37

2.2

12.2

3.8

Altria

MO

5.12

15.0

17.1

7.4

Magellan Midstream Partners

MMP

3.74

6.8

21.60

(3.0)

Verizon

VZ

4.19

4.1

5.75

6.0

Conoco

COP

4.39

12.9*

13.5

4.53

Stock

Ticker

Yield %

5-Year

DGR

%

10 Year

Ave Return

5-Year EPS

Growth

Chevron

CVX

3.03

9.2

15.54

1.0

Health Care Reit

HCN

4.51

5.4

13.19

13.4

Digital Realty

DLR

4.66

20.6

16.29

8.1

Kinder Morgan Partners

KMP

5.75

7.4

13.54

11.8

Coke

KO

2.77

8.4

6.8

8.2

McDonald's

MCD

3.09

13.9

22.56

8.7

AT&T

T

4.91

4.4

7.01

6.1

Kimberly Clark

KMB

3.31

7.0

9.33

7.3

Sunoco Logistics

SXL

3.33

10.6

24.09

8.65

Plains All America

PAA

3.98

5.2

18.60

5.1

Stock

Ticker

Yield %

5-Year

DGR

%

10 Year

Ave Return

5-Year

EPS

Growth

Southern

SO

4.18

4.0

7.7

5.1

Darden Restaurants

DR

3.87

25.8

9.66

10.8

Realty Income

O

4.80

1.5

13.28

4.5

Enbridge Energy Partners

EEP

7.21

3.0

8.33

4.7

BCE Inc.

BCE

5.05

16.4

11.83

2.5

Royal Dutch Shell

RDS.B

5.14

6.7

9.54

Nat. Health Inv.

NHI

4.25

5.8

19.48

10.0

Vanguard Nat. Resources

VNR

8.55

45.5

17.11

(12.7)

Avista Corp.

AVA

4.45

14.3

12.04

4.0

Lorillard

LO

5.45

17.3

21.6

8.6

Rogers Communication

RCI

3.11

38.2

27.26

9.3

Stock

Ticker

Yield %

5Year

DGR

%

10 Year

Ave Return

5 Year EPS

Growth

Lockheed Martin

LMT

4.77

22.2

7.55

4.6

Leggett & Platt

LEG

3.43

10.1

6.50

8.7

Enterprise Product Ptrs.

EPD

4.38

5.4

14.88

6.9

Westar Energy

WR

4.10

4.3

11.99

6.4

Enterprise Transfer Prt.

ETP

7.41

0.8

18.42

21.35

PPL Corp.

PPL

4.69

3.4

9.15

.3

Hasbro

HAS

3.64

18.1

14.37

7.4

Waste Management

WM

3.72

8.1

7.30

7.3

Astrazeneca

AZN

5.70

10.2

6.96

(3.5)

Triangle Capital

TCAP

7.72

9.6

22.38 3 yr.

15.0

Stock

Ticker

Yield %

5-Year

DGR

%

10 Year

Ave Return

5 Year

EPS

Growth

Paychex

PAYX

3.65

*

5.42

9.54

Phillip Morris

PM

3.67

12.8

25.86 - 3yr

11.03

Eli Lilly

LLY

3.40

2.7

1.48

(6.0)

Dr. Pepper Scrapple

DPS

3.19

22.3 - 3 yr.

6.9

Kraft

KRFT

3.84

3.35

Alliance Resources

ARLP

6.95

13.6

22.83

1.42

Bank of Montreal

BMO

4.62

4.6

12.15

7.12

LinnCo

LNCO

6.85

Am Capital Mortgage Invest.

MTGE

14.00

B&G Foods

BGS

3.97

18.0

28.87- 5 yr.

14.2

Capital preservation has exceeded expectations particularly for a low beta portfolio with 35% less risk than the S&P 500 Index. For the 1st Quarter of 2013 our total return is 14.25% vs. a total return for the S&P 500 of 10.61%. Our cumulative total return since February of 2011 is 35.41% vs. 27.98. We are in the distribution stage of our investments and while such returns do not directly affect our monthly income they do help insure our holdings maintain their dividends and hopefully increase their growth.

Source: Our First Quarter Retirement Income Portfolio Review