Diversification, Allocation, And Yield: Retirement Alpha?

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 |  Includes: AEP, EXC, GLW, INTC, JNJ, NLY, PG, PM, UNH, XOM
by: Regarded Solutions

Much has been written by not only myself, but a slew of very good authors here, with extremely valuable insight and opinions.

This is what makes Seeking Alpha so compelling and important to so many. Diversity of opinions, suggestions, ideas, as well as a wealth of knowledge to learn from.

This article will focus on actions that can be taken right now, using a hypothetical married couple (which I have used before), a hypothetical amount of available funds for investing, and a "basket" of stocks that are moderate in risk, and might be appropriate for a well balanced core portfolio for retirees, or those on the verge of retiring.

I will also add to this article, my personal suggestions for allocation of funds for each stock and category. Since I could never make a suggestion that would fit everyone's needs, I will give you my own allocation suggestions based on my somewhat conservative leaning towards investments in retirement.

Let Me Set the Scenario First

1) Married couple both eligible for Social Security and Medicare

2) A $100,000 cash position ready to invest over and above all essentials

3) A separate 5 year cash reserve to cover all expenses on a yearly basis

4) Another "emergency" reserve for basically anything, equaling about 10-15% of the 5 year cash reserves.

5) Expenses and spending in line with income received, and under control

Our Basket of Sectors and Stocks

1) Healthcare: Unitedhealth Group (NYSE:UNH), Johnson and Johnson (NYSE:JNJ)

2) Energy/Utilities: Exxon Mobile (NYSE:XOM), Exelon (NYSE:EXC), American Electric Power (NYSE:AEP)

3) Consumer Products: Phillip Morris International (NYSE:PM), Procter and Gamble (NYSE:PG)

4) mREITS: Annaly Capital Management (NYSE:NLY)

5) Technology: Intel (NASDAQ:INTC) Corning (NYSE:GLW). (Yes I added Corning to tech because of their positioning within the tech world, just my opinion.)

Our Funding Allocation, Basic Dividend Yield Overview and ESS Rating

1) UNH: 10% allocation: $10,000-1.4% yield-ESS rating: Very Bullish

2) JNJ: 10% allocation: $10,000-3.6% yield-ESS rating: Neutral

3) XOM: 10% allocation: $10,000-2.4% yield-ESS rating: Bullish

4) EXC: 10% allocation: $10,000-4.7% yield-ESS rating: Bullish

5) AEP: 10% allocation: $10,000-4.9% yield-ESS rating: Bullish

6) PM: 10% allocation: $10,000-4.3% yield-ESS rating: Very Bullish

7) PG: 10% allocation: $10,000-3.4% yield-ESS rating: Bearish

8) NLY: 5% allocation: $5,000-14.7% yield-ESS rating: Neutral

9) INTC: 12.5% allocation: $12,500-3.5% yield-ESS rating: Very Bullish

10) GLW: 12.5% allocation: $12,500-2.1% yield-ESS rating: Very Bullish

By taking action now, and putting this basket of stocks and sectors into your portfolio for retirement, or frankly for any sort of dividend/growth strategy, you will receive roughly $3,900/year or a 3.9% yield.

In addition to this, by utilizing a covered call strategy on some, or even all, of these positions, it is very possible to add significantly more yearly income.

My Opinion

As I have always suggested, a balanced, well diversified portfolio of solid dividend and growth stocks, could generate both income as well as the potential for capital appreciation. Now I have added one further step of allocation of available funds.

Remember this is NOT a one size fits all formula, nor does it take everyone's individual situation into account. It should be viewed as a guide, as well as a snapshot of what you can potentially do.

Your own research on any stock is imperative, as well as understanding your own personal tolerance for risk vs. reward.

That being said, this is yet another way to maximize your retirement portfolio. In my opinion, of course.

Disclosure: I am long GLW, JNJ, XOM, EXC, NLY, INTC.