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This is the fourth in a series of articles which chronicle my struggle to establish a safe and growing income stream in retirement. The first three are available here: I, II, III.

In this series I present the results of the back testing I've done of the period between 2002-2011. I set out at the end of 2011 to put together a 30 stock portfolio and back test its performance year by year from 2002 to 2011. I was looking specifically for stocks with a track record of safety. If there were capitol gains then that was a bonus. As a retiree, I was more interested in a steady stream of income, protection from inflation and preservation of capital. If you haven't read them already, I strongly recommend you read each of the above articles before continuing.

I set up a screen to look for all stocks paying dividends of at least 2% and had finished 2011 with 6% gains, gains equal to my returns for 2011. 200 plus stocks made the cut. I evaluated the individual performance of each stock for each of the ten years included in this testing period.

In my search for safety, I put emphasis on the top performers in the severe bear markets of 2002 and 2008. I found stocks that had gains while the S&P was down over 23% in 2002 and over 38% in 2008. More importantly, I found a large number of stocks that suffered less than half the lost of the S&P and had offset those losses by the gains they made the following year. The process, as tedious as it was revealed information that will prove invaluable in the years ahead.

56 Stocks emerged from my back testing. Of that number 48 have the distinction of being among the over 450 Dividend Champions, Challengers and Contenders complied by David Fish. These were the stocks did not cut their dividends during the bear markets of 2002 and 2008. In fact they raised them each of the ten years under review. I believe that every Dividend Growth investor must download this free list regularly and make it one of their considerations when considering a stock for purchase.

What follows is a chart of the fourth set of ten stocks from my research for your review. This go round I added ABV for foreign exposure.

Stock

Ticker

Yield %

5-YearDGR

%

10 Year Ave Return

Notes

Consolidated Edison

ED

0.9

10%

Enbridge

ENB

14.1

23.2%

Realty Income

O

2.7

15.9%

Colgate Palmolive

CL

12.7

7.0%

RPM International

RPM

5.2

9.6%

Omega Healthcare Investors

OHI

10.1

19.1%

Reynolds American

RAI

9.4

18.7%

McCormick

MKC

9.2

11.6%

Compendia de Bebidas

das Americas

ABV

12.8

31.2%

Nike

MO

13.8

14.7%

The above chart includes current yield, 5 year dividend growth rates and average annual return for the 10 years of review. The average yield for this group of 10 stocks is just over 3.9%. The 5 year DGR for the group was 9.09% a year, clearly keeping up with inflation and then some. On top of that the group outperformed the S&P 500 every year in the period. During the same period, the group reported an average annual gain of 19.18% vs. an average annual gain in capitol for the S&P 500 of 0.9%.

In my next article I reveal more from my list of Safety Superstars. My final portfolio remains a work in progress. Hope to have each of you along for the ride.

Disclosure: I am currently long OHI, RAI

Watch list: CL, ABV, ENB

Disclaimer: I am not a professional investment advisor or financial analyst. You need to do your own research and due diligence before you decide to trade any securities or other products.

Source: One Man's Search For A Safe And Growing Income Stream - Part 4