Retirement Strategy: Buying The Dips Will Increase Your Income

Includes: CVX, GE, JNJ, KO, MCD, PG, T, XOM
by: Regarded Solutions

Executive summary:

  • Buying the dips will save you money.
  • Your income from dividends will increase when you buy the dips.
  • You can buy more shares when the dips occur.


Last week we launched a new portfolio for folks who might just be starting out, or current investors seeking to add shares to existing positions, or to fill a targeted allocation. The hope is that regular folks can grasp the concept of buying the dips when they occur.

We have labeled the new portfolio as the "Buy The Dips Portfolio" or BTDP for short. Personally, I think the strategy works beautifully with the largest, mega cap blue chip, dividend champion stocks. Not only are these companies going to be around for a very long time (longer than me anyway) but they pay us to hold their shares, and give us raises just about every single year.

The BTDP consists of just these stocks: AT&T (NYSE:T), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), General Electric (NYSE:GE), McDonald's (NYSE:MCD), and Chevron (NYSE:CVX).

Buying The Dips Saves You Money And Can Buy More Stock

This is really not that tough to grasp, but if you buy a stock at a reduced price, you will save money. The saved money can either be used for a new pair of sneakers, or better yet, more shares of either the same stock, or shares in a different stock.

Growing wealth does not need to be difficult as long as you know why you are investing, what your goals are, and have the discipline to stay focused on your ultimate goal; more income for a more secure financial future.

Buying The Dips Will Increase Your Income All The Time

Keeping this simple, the more shares you own of a dividend winning stock, the more income you will receive. That income can be used to reinvest or when the time comes, to fund a more secure retirement.

To illustrate how this works, let's take a look at the last dip purchases for our BTDP and the effect in just 10 days!

2/3/2014 STOCK YIELD 2/13/2014 YIELD +/- %
31.95 T 5.60% 33.49 5.40% 5.00%
90.05 XOM 2.80% 91.43 2.70% 1.10%
86.78 JNJ 3.10% 92.56 2.80% 7.00%
37.21 KO 3.00% 38.65 2.90% 3.50%
75.71 PG 3.10% 77.81 2.95% 2.25%
24.35 GE 3.60% 25.44 3.50% 5.00%
93.02 MCD 3.50% 95.46 3.40% 2.45%
111.14 CVX 3.60% 112.51 3.55% 1.00%
3.54% 3.40%

On the left is what we paid for the stock on 2/3, and on the right is what the share price is as of today, 2/13 and the percentage increase in share value. In the middle of the chart is the dividend yield when we bought the stocks, and what the yield is right now for each of the stocks.

Obviously, not rocket science. For the sake of simplicity, just for fun, let's say we bought an equal number of shares in each stock, and spent $50,000. The average yield on cost when we bought the shares was 3.54%. That would mean you would have an income stream of roughly $1,770 per year, or almost $150 per month.

If you had waited until the market turned around, and spent the same amount of money in equal numbers of shares for each stock, your yield would be 3.40% and your income would be $1,700 per year, or 4% LESS, coming right out of the box.

That might not seem like very much, however, when paychecks stop coming in and you have repeated this over and over and over, for let's say 20 years or so, the amount of money coming would be hugely more than if you just did nothing. For a retired person, every penny earned counts, and every penny saved counts.

My Bottom Line

It is going to be fun to track this little portfolio, especially for our younger readers and for those just starting out. Many of my readers already are aware of how well we have done with our three existing portfolios: The Team Alpha Retirement Portfolio, Team Alpha Growth And Income, and our Young And Restless Portfolio.

There is no reason to think that you have missed the boat and the ship has sailed. This little portfolio will work for YOU also.

Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please remember to do your own research prior to making any investment decisions.

Disclosure: I am long CVX, GE, JNJ, KO, MCD, T, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.