Retirement Strategy: Doing Nothing Is A Strategy For Dividend Income Investors

|
 |  Includes: AAPL, CVX, F, GE, JNJ, KO, MCD, MO, MSFT, PFE, PG, T, WMT, XOM
by: Regarded Solutions

Summary

A portfolio such as the BTDP is set and producing income while we wait for opportunities.

The market looks like it is correcting, then it doesn't.

Dividend paying stocks pay you to hold on in times of market uncertainty.

The recently developed "Buy The Dips Portfolio," or BTDP was geared for the active portfolio manager who clearly wants to be the captain of its own ship. One of the major issues that active managers face is when NOT to be active and just sit back and watch the parade.

Keep in mind, a portfolio comprised of the largest blue chip, dividend winning stocks will continue to pay an investor while they do nothing. Unfortunately, many investors want to take action too often and get antsy when the market dips.

The correct course of action when we simply are confused by the markets is to do absolutely nothing!

Dividend Income Stocks Keep Paying Us While We Are Couch Potatoes

The BTDP consists of the following 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), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL), Altria (NYSE:MO), Ford (NYSE:F), Microsoft (NASDAQ:MSFT), Wal-Mart (NYSE:WMT), and Pfizer (NYSE:PFE).

A portfolio of great stocks such as these will keep doing its job if we simply let it. This particular portfolio has a dividend yield of about 3.60% with an annual income of roughly $3,700 on an initial investment of about $109k.

Aside from keeping an eye on any opportunity that might arise, as explained in my previous article on when to buy the dips, doing nothing if the opportunities do not occur is the simplest and perhaps the most prudent strategy to employ.

To review, here is a chart of each stock, its "opportunity price" using the K.I.S.S. method, and the last update that also includes the performance of just one month in this portfolio.

Buy/Wait 52 wk lo
52 wk hi
TGT PRICE Symbol Shares Yield Dividend Yrly Income Share Price Tot.Cost Tot. Value 31-Mar
BUY 31.74 39.01 35.37 T 300 5.60% 1.84 552 31.95 9585 10521 $35.07
WAIT 84.79 101.74 91.72 XOM 100 2.80% 2.52 252 90.05 9005 9768 $97.68
WAIT 81.71 99.38 90.54 JNJ 100 3.10% 2.64 264 86.78 8678 9823 $98.23
BUY 36.83 43.43 40.13 KO 200 3.00% 1.22 244 37.21 7442 7732 $38.66
WAIT 73.61 85.82 79.72 PG 100 3.10% 2.41 241 75.71 7571 8060 $80.60
WAIT 21.11 28.09 24.61 GE 300 3.60% 0.88 264 24.35 7305 7767 $25.89
WAIT 92.22 103.71 97.91 MCD 100 3.50% 3.24 324 93.02 9302 9803 $98.03
BUY 109.27 127.83 118.55 CVX 100 3.60% 4 400 111.14 11114 11891 $118.91
WAIT 385.11 575.14 480.12 AAPL 15 2.25% 12.2 183 526.45 7897 8051 $536.74
WAIT 33.12 38.58 35.85 MO 100 5.20% 1.92 192 37.71 3771 3771 $37.71
WAIT 12.65 18.02 15.34 F 400 3.20% 0.5 200 15.15 6060 6240 $15.60
WAIT 28.51 41.66 35.08 MSFT 200 2.80% 1.12 224 40.16 8032 8198 $40.99
BUY 71.51 81.37 76.44 WMT 100 2.50% 1.92 192 76.11 7611 7643 $76.43
BUY 27.12 32.96 30.04 PFE 200 3.20% 1.04 208 32.18 6436 6424 $32.12
x x x x x x 3.60% x 3740 x 109809 115692 x
Click to enlarge

I see absolutely no reason to sell any stocks, and aside from the 5 outlined previously, a dividend income investor can do nothing and still get paid. That to me is passive income at its best.

The best stocks, the best dividend records, and the simple, yet powerful, way our money is working for us while we wait out the market uncertainties.

What Correction?

I thought, as many might have, that last week was the beginning of a real correction of at least 10-15% in quality names as well as the biotech and momentum stocks. If that occurred we would have our shopping list ready to charge ahead and pick up a few "goodies" to grow our income.

Well, as they have in the last 6 years, the correction lasted for as long as we could make the list up. Now we are back to waiting for it once again, and in MY opinion, now is not the time to rush into adding to any stock unless it meets our K.I.S.S. target price.

In the meantime, you will save transaction fees, as well as keep a few more hairs on your head.

Doing nothing will pay you to wait.

Disclosure: I am long AAPL, CVX, F, GE, JNJ, KO, MCD, MO, MSFT, 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.