Wow, it has been almost 3 whole weeks that the entire market has been heading lower. The Team Alpha Retirement Portfolio was built on our original main premise; buy when others are selling.
I realize that is more difficult than just writing it down, but that is where the money is made for dividend income investors. We review our portfolio, and with the right stocks, we buy on the dips, and add to our core.
Just about every single blue chip, mega cap, dividend winning stock, has been hit rather hard of late. That means fear and panic have reared their ugly heads once again. I am hoping for my readers from nearly two years ago, that this period is being embraced as an opportunity. For my newer readers, I would urge you to click on the links I offer here so you can catch up and calm down.
First take a look at the link provided in the second paragraph, which is the foundation from which we began. Then re-read this one to get your mind thinking in a different way, and then take a look at this article which contains 4 ingredients for our recipe:
- Invest in sound, well-heeled, dividend paying, growth stocks.
- Re-Invest the dividends until you need the income stream.
- Use an option strategy to maximize returns and hedge for the dips.
- Keep an eye open to trends, politics, and the world around us.
You will find a brief overview of each point, and it never hurts to review them. For this article we will take a look and see which stocks we might want to consider adding to, right now.
The Team Alpha portfolio consists of Ford (NYSE:F) Chevron (NYSE:CVX) Apple (NASDAQ:AAPL), McDonald's (NYSE:MCD), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), General Electric (NYSE:GE), BlackRock Kelso Capital (NASDAQ:BKCC), KKR Financial (KFN), Procter & Gamble (NYSE:PG), CSX Corp. (NYSE:CSX), Realty Income (NYSE:O), Coca-Cola (NYSE:KO), Annaly Capital (NYSE:NLY), Cisco (NASDAQ:CSCO), Bristol-Myers Squibb (NYSE:BMY), Newmont Mining (NYSE:NEM), and Wells Fargo (NYSE:WFC), and Intel (NASDAQ:INTC).
So How Does Our Shopping List Look?
While the weak hands are selling perfectly good stocks, we are beginning to set up our shopping list. Some stocks have retreated more than 8% in a really short period of time. While there might be further price deterioration ahead, we can focus on the stocks we want to buy, set a number of shares to buy, and break up these purchases in bite sized pieces (I use 25% at a time myself).
Let's see what has happened:
I would consider adding a few of the best of the best, dividend winning stocks, right now. By using a bite size purchase approach, I think adding shares of CVX, JNJ, T, and O, will offer long term rewards.
The dividend yields on each are as follows:
- CVX: 3.5%
- T: 5.4%
- JNJ: 3.0%
- O: 5.6%
Of these three, the payout ratio is at 30% for CVX, 55% for JNJ, and since O is a REIT, it is irrelevant for the most part, since the IRS mandates the minimum dividend payments to be at least 90% of net earnings to maintain REIT status.
My next targets would be XOM, and MCD, but I would wait for some further pullbacks in these two to offer a better accidental yield.
How Many More Shares Should We Consider Adding?
Based on the recent dips, as well as the accidentally higher yields, I would add between 10 and 20% of your existing shares to your holdings, and go heavier in the higher yield stocks:
- CVX: 10%
- T: 20%
- JNJ: 10%
- O: 20%
Keep in mind what our ultimate goal is; increase our income stream for a more secure financial future.
For now it might not seem like a lot, but the stocks we are adding shares to are all dividend winners. None has missed a payment in decades, and each has raised its dividends, year in and year out.
That means the income stream we create will grow exponentially. For those of you lucky enough not to need the cash yet, those dividends can, and should be, re-invested right back into the same stocks, for even faster and greater income later.
The Bottom Line
With all of the noise about gloom and doom and the end of the investing world as we know it, dividend income investors can embrace the fact that our income will remain the same, or grow, in virtually any market climate.
I offer one last awesome article for everyone to review.
Disclaimer: The opinions of this author are not recommendations to buy or sell any security. Please remember to do your own research prior to making any investment decisions.
Disclosure: I am long AAPL, BKCC, BMY, CSCO, CSX, CVX, F, GE, INTC, JNJ, KFN, KO, MCD, NEM, NLY, O, T, WFC, 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.