Retirement Strategy: I Hate This Market But The Team Alpha Retirement Portfolio Keeps Producing More Income

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Includes: AAPL, BGCP, ED, F, FSP, GM, HCP, JNJ, KO, MAIN, MAT, MO, MSFT, NLY, O, OHI, ORI, OVBC, PETS, PG, STWD, T, XOM
by: Regarded Solutions

Summary

The rebound surprised me and I missed buying a dip, but doing nothing did not hurt TARP and its income stream went up.

Dividend growth investors who panicked and sold probably lost income that will now cost more to replace.

I still do not trust this market, and believe we will see even lower share prices and cheaper income.

Say anything you want, but 2016 has started out precariously. While those that bought this dip are reaping the benefits, the Team Alpha Retirement Portfolio played it too close to the vest. Not having much of a cash reserve didn't help, but nothing was sold and the income stream, by virtue of a dividend increase in HCP, went up while the S&P 500 dropped by over 5%.

^SPX Chart

^SPX data by YCharts

From my vantage point, the major headwinds have not been addressed to change my opinion of a continued dip:

  • The price of oil is still under pressure as supply is much greater than demand, and Iran will be producing massive amounts of crude very soon, to put further pressure on the price.
  • China has slowed, which impacts some of our largest exporters such as Apple (NASDAQ:AAPL). It may not be apparent across the board yet, but as the earnings season moves along, companies will see lower revenue and earnings from that region.
  • The strong dollar will continue to have a negative impact on all global US company revenues and earnings as higher prices for products will impact sales.
  • The Fed, while making a slight nod in favor of fewer interest rate hikes, has not been as definitive, and I am not convinced that they will not stay the course, and raise rates at least 4-5 times this year. Higher interest rates will impact consumer spending on higher ticket items such as homes and automobiles. It will also impact those companies that will need to borrow at higher interest rates. This has not shown up either as of yet, but as the Fed tightens, so will consumer spending.
  • Economic growth dropped to an anemic .07% last month as that will impact corporate earnings and revenues as the consumer, as well as business, slow their spending.
  • The earnings season has actually surprised me, but the projections were lowered dramatically. Thus, there still are less revenues and less profits to grow business and/or spend on capex.

The V-shaped rebound might very well be a head-fake and if I am correct, dividend growth investors will be able to pick up even more income, at cheaper prices in the months ahead.

Even With A Market I Hate For Now, TARP Continues To Perform

I may hate the market and continue neither buying nor selling, but that has not stopped the Team Alpha Retirement Portfolio from producing positively, especially with its income stream.

As you are aware, the TARP model portfolio is well diversified with a plethora of dividend champs at its core.

As of now, the portfolio consists of the following stocks: Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), Franklin Street Properties (NYSEMKT:FSP), Coca-Cola (NYSE:KO), Omega Healthcare (NYSE:OHI), Procter & Gamble (NYSE:PG), Realty Income (NYSE:O), General Motors (NYSE:GM), Ford (NYSE:F), Microsoft (NASDAQ:MSFT), Consolidated Edison (NYSE:ED), Altria (NYSE:MO), Main Street Capital (NYSE:MAIN), PetMed Express (NASDAQ:PETS), BGC Partners (NASDAQ:BGCP) , Ohio Valley Banc Corp. (NASDAQ:OVBC), HCP, Inc. (NYSE:HCP), Old Republic International Corp. (NYSE:ORI), Starwood Property Trust (NYSE:STWD), Mattel (NASDAQ:MAT) and Annaly Capital (NYSE:NLY).

Here is the COMPLETE update for the last two months (I missed the January update, so some dividends include 2 months):

Click to enlarge

The overall increase of a few thousand dollars in the face of a strong 5% decline in the S&P 500 can be attributed to the cash that accumulated over the last 2 months from the portfolio's dividend income stream, which has been added to the cash reserves.

Not to mention some relative strength in the portfolio's core dividend aristocrat holdings.

The Income Stream Increased Slightly

The beauty of the overall dividend growth investing approach is that even in a wacky and scary market, the income stream continues and can even increase if any of our dividend champs increase its dividends, and that is precisely what happened.

HCP increased its dividend and maintained its dividend status by a mere 1.8%, but an increase is an increase, and we should see quite a few more, especially from the dividend aristocrats who want to maintain that elite status. We saw that when T raised by a penny, and O increased by a fraction.

Keeping the elite aristocrat status will place an underpinning for the retail investor just by the fact that there are zero increases in any fixed income rates yet. A tumultuous market and worried investor can take solace in the fact that the income keeps rising and streaming in.

Here is my "mini" chart update to view the focus of the strategy - income:

My Strategy For TARP In February

There will be no changes made to the portfolio as I continue to hold all positions in the portfolio, not add shares nor sell shares, and will continue to watch the earnings, read the conference transcripts and wait for clear signals that major headwinds are abating.

I already know that many DGIers took advantage of the dip and have increased the number of shares and increased the income stream. I myself am being conservative at this stage, but not panic selling.

I will continue to let TARP deliver its stream of income from dividends and accumulate the cash to be deployed when prices are even cheaper. Of course, I could have missed the dip completely, but there will always be others to participate in. I am NOT gloom and doom, nor am I trying to time the market. I am simply standing pat and cashing dividend checks!

For now the markets are quite "iffy" in my book, so I can sit and wait.

What about you?

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Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.

Disclosure: I am/we are long AAPL, BGCP, ED, F, FSP, GM, HCP, JNJ, KO, MAIN, MAT, MO, MSFT, NLY, O, OHI, ORI, OVBC, PETS, PG, STWD, 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.

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