My Retirement Portfolio's Quarterly Update: 2 Stocks, Tobacco And A Pipeline Generate Excellent Returns

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Includes: EEQ, MO
by: Dividends#1

Summary

This is my actual Retirement Portfolio scaled down to a $1M portfolio, initially presented on 7/24/2014 here on Seeking Alpha to demonstrate its performance and how I actively manage it.

I continued to convert MO shares from my SEP IRA into my ROTH IRA. My large 2016 Roth conversions have created a large tax bill.

My projected dividend income has decreased from $70,977 to $58,803 because I sold all of my AGNC and used the proceeds to buy EEQ, and MO.

I took a penalty-free distribution from my ROTH IRA to cover living expenses and pay off all our debts. Future distributions will be the dividends from MO and EEQ.

Introduction:

This article is an update of my public Retirement Portfolio. It is my actual Retirement Portfolio. It was initially presented on 7/24/2014. I scaled the portfolio down to $1M**. The initial portfolio consisted of 3 stocks. My most recent update can be found here.

My initial retirement portfolio published on 7/24/2014 is listed below, I used the closing prices on 7/22/2014:

American Capital Agency (NASDAQ:AGNC) = 40.3% = $403,000 = 17,230 shares, price = $23.39 the current annual dividend = $2.60 = Income = $44,798

Altria Group (NYSE:MO) = 38.3% = $383,000 = 9,134 shares, price = $41.93 the current annual dividend = $1.92 = Income = $17,537

Prospect Capital (NASDAQ:PSEC) = 21.4% = $214,000 = 19,705 shares, price = $10.86 the current annual dividend = $1.325 = Income = $26,109

Total value of the portfolio = $1M Total Income = $88,444 = a yield of 8.8%

What has happened since my last report of my Retirement Portfolio:

1) I sold all of my AGNC at approximately $16.32 per share.

2) I used the proceeds from the AGNC sale to buy more MO and (NYSE:EEQ).

3) MO paid its quarterly dividend on 4/11/2016 and I reinvested it back into MO.

4) I continued to do more Roth conversions. I converted the MO shares from my SEP IRA to my ROTH IRA!!

Currently our Roth IRAs comprise about 97% of our Retirement Portfolio and my SEP IRA comprises about 3% of the Retirement Portfolio. My goal is to have 100% of the Retirement Portfolio in Roth IRAs. I plan on doing another Roth conversion in 2017 and 2018.

I am determined to reach my goal. I will continue to cut my expenses to pay the taxes. I will also take the dividends as distributions when needed and use them to pay the taxes and meet expenses.

My Portfolio as of 1/15/2016, with a yield of 6.2%

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My current Portfolio as of 4/22/2016 with a yield of 5%

Click to enlarge

The * was inadvertently not included in the current table above. It was an oversight. See below for an explanation regarding EEQ and its dividend distribution and policy.

* = EEQ pays a DIVIDEND based on EEP.

EEQ Distributions

Enbridge Energy Management (or EEQ) pays quarterly distributions in the form of additional shares. The distributions are comparable in value to the quarterly cash distributions paid by Enbridge Energy Partners (or EEP).

Specifically, the distribution of additional EEQ shares is determined by dividing the cash value of a distribution declared by Enbridge Energy Partners by the average closing price of EEQ shares for the 10 consecutive trading days prior to the ex-dividend date.

Distributions declared by the Board of Directors are distributed to shareholders of record 45 days after the end of each calendar quarter. The payment date is moved forward if the 45-day mark falls on a weekend or holiday.

I would like to thank very_thirsty_for_income for providing me with the above tables.

Conclusion:

1) Since 7/24/2014* when I initially made my dividend Retirement Portfolio public, my projected dividend income has decreased from $88,444 to its current projected dividend income of $58,803, a decrease of 33.5%. The reason for my substantial decrease in projected dividend income is because I have sold all of my AGNC and PSEC positions. I have increased my MO position substantially. I have made many changes to this portfolio, however, the one constant is my MO position and its increased allocation. MO currently comprises 83% of my Retirement Portfolio.

2) MO is the foundation of my retirement portfolio. It is a very stable and reliable stock. It is my safety net. I am very concentrated in MO and I am willing to take the risk.

3) My current retirement portfolio consists of 2 stocks (MO and EEQ), which have a projected annual yield of 5%.

4) The value of my Retirement Portfolio was $1,000,000 (scaled down) on 7/24/2014*, the date I made it public here at Seeking Alpha. The value at the close of trading on 4/22/2016 was $1,182,220. Additionally, I took several penalty-free distributions from my Roth IRA since my last article (2016 distributions) for a total amount of $98,930 (scaled down).

5) The S&P 500 closed at 1,984 on 7/22/2014. It closed at 2,092 on 4/22/2016. My Retirement Portfolio has outperformed the S&P 500 substantially since I made my portfolio public about 21 months ago.

6) My main focus is on the DIVIDEND INCOME meeting our living expenses going forward.

7) Writing for Seeking Alpha has helped me immensely regarding my management of this portfolio. It keeps me accountable and honest.

* = 7/24/2014 is the date my Retirement Portfolio was published here at Seeking Alpha; 7/22/2014 is the date used for the closing prices of my Retirement Portfolio.

Disclosure: I am/we are long MO, EEQ.

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.

Additional disclosure: This is my portfolio. I am not recommending anyone buy the stocks I own. Please do your own due diligence to decide which investments meet your individual goals and income needs. I take 100% responsibility for my decisions to buy or sell stocks and for managing my portfolio. I advocate all investors do the same with their investments and portfolio. " Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal holdings may not fit each investor's current investing strategy."