I retired back in 2000, just as the tech bubble was bursting. My company had prepared the prospective retirees through seminars and I knew just what to do - roll the 401k money into an IRA with 30% bonds and 70% stock funds. I proceeded to do that, but someone forgot to tell the market how this was supposed to work. Thank goodness for the small pension that got me through the first year.
With my feet firmly planted in the sand, I watched the Twin Towers collapse on live TV in 2001 and saw the stock market close. For the first business cycle of the 21st century, I took a 30% hair cut in stock funds, but the bond fund VUSUX provided income and slight capital appreciation. I spent ½ the bond fund. Then came 2007 and the next leg down. I took a 50% hair cut on the stock funds, which had just about recouped the losses from the first crash and spent the rest of the bond fund, by 2009.
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With bond yields on the 30 year bond hovering at 4% yield, I'm looking for an income substitute to replace bonds. I have had dividend growth stocks in my portfolio since 1980, starting with PG. Then I added AT&T (T), Verizon (VZ), Century Link (CTL) and Dominion (D). Finally, in 1996, I invested in health care stocks Johnson & Johnson (JNJ), Abbott (ABT), and others. I believe strong dividend growth stocks with 4% minimum yield will provide my income needs for the next decade.
Although the health care stocks I purchased had good dividend growth, they don't meet the 4% minimum rule. The telecommunications stocks met the yield, but only the strongest, T, could be considered equivalent to a treasury 30 year bond. Due to price appreciation, D has fallen to 4.1% yield, still acceptable.
I looked for diversification similar to SPY and found INTC at $21 to have a 4% yield, and purchased a position in it. Other stocks on my buy list are Raytheon (RTN) at $43 and Nucor NUE at $36.25. Other possibilities include Waste Management (WM) below $30.22, Lockheed Martin (LMT) below $75 and Sysco (SYY) below $26.
T - Dividend Champion with 27 consecutive years of dividend increases 5.88% yield, 5.4% 5-year annual average dividend growth rate. P/E 12.9
D - Dividend Challenger with 8 consecutive years of dividend increases, 4.1% yield, 6.4% 5-year annual average dividend growth rate. P/E 14.6
INTC - Dividend Challenger with 9 consecutive years of dividend increases, 3.76% yield, 14.5% 5-year annual average dividend growth rate. P/E 10.2
RTN - Dividend Challenger with 7 consecutive years of dividend increases, 3.82% yield, 10.8% 5-year annual average dividend growth rate. P/E 8.1
NUE - Dividend Champion with 38 consecutive years of dividend increases, 3.73% yield, 36.9% 5-year annual average dividend growth rate. P/E 26.28
Additional disclosure: I have buy orders out for RTN and NUE.