Retirement Strategy: Grow Your Income Without Spending More Money

by: Regarded Solutions


A dividend income investing strategy can be tweaked to pay you more income for no extra money.

Re-balancing and trimming lower yield stocks to expand the portfolio will enhance your income.

This is also not chasing yield, but taking advantage of just a few dividend opportunity stocks with a risk allocation.

To further enhance my dividend growth portfolio, and to increase income, I am not the average hardcore dividend growth investor. I will selectively add a few high yielding stocks, knowing they carry added risk, but be confident in my ability to monitor these "dividend opportunity" stocks.

Using our "Buy The Dips Portfolio" or BTDP as a guide, again without using share price as a reason to buy, I can use re-balancing and trimming just a few positions, to add just a few stocks that I happen to think are strong dividend opportunity stocks. By using this strategy, the entire transaction could cost me virtually nothing, or very little out of pocket.

Here Is How I Do It

The BTDP consists of the following stocks: AT&T (NYSE:T), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), Altria (NYSE:MO), McDonald's (NYSE:MCD), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL) General Electric (NYSE:GE), Ford (NYSE:F), Microsoft (NASDAQ:MSFT), Wal-Mart (NYSE:WMT) and Pfizer (NYSE:PFE).

Here is the chart I used in this article on allocation and diversification:

Symbol Shares Dividend Yrly Income Orig Alloc
T 300 1.84 552 9.00%
XOM 100 2.76 276 8.00%
JNJ 100 2.8 280 8.00%
KO 200 1.22 244 7.00%
PG 100 2.57 257 7.00%
GE 300 0.88 264 7.00%
MCD 100 3.24 324 9.00%
CVX 100 4.28 428 10.00%
AAPL 105 1.88 197 7.00%
MO 100 1.92 192 3.00%
F 400 0.5 200 5.00%
MSFT 200 1.12 224 7.00%
WMT 100 1.92 192 7.00%
PFE 200 1.04 208 6.00%
Annual Inc. 3838 100.00%

Since we are discussing a portfolio management strategy, share price is way down the list as my goal, and income is everything.

Now let's say I needed more annual income but I do not have much money lying around to either add to positions or to expand the portfolio. By "rebalancing" or "trimming" just a few of my core positions, I can add 3 of my personal favorite dividend opportunity stocks with a risk level of allocation, and it will cost me either very little or absolutely nothing.

Currently I like 3 stocks that pay a very nice yield, but do need to be monitored more closely than the dividend champion stocks: Annaly Capital (NYSE:NLY), BGC Properties (NASDAQ:BGCP) and American Capital (NASDAQ:AGNC).

These stocks make sense to me because we have no financial stocks, and the ones I want to add fill that void, as well as enhance my income.

Here is what I would be buying:

Dividend Opportunity Stocks
Symbol Shares Dividend Yrly Income
NLY 500 1.2 600
BGCP 500 0.48 240
AGNC 300 2.6 780
Annual Inc. 1620

Based on the current value of the entire portfolio, these 3 stocks would represent a total allocation of roughly 12% or an average of 4% each, for a total cost of roughly $16k at recent market pricing.

By adding these 3 stocks I am increasing my annual income by about $1,620. My cost is minimal if anything by making the following sales:

Sell Shares Cash Rcvd Inc. Lost
T 100 3500 184
XOM 50 5100 138
CVX 50 6500 214
Ann. Inc. Lost x x 536

By selling a calculated amount of shares in several of my highest allocation stocks to virtually offset my purchases, I will have my income reduced by $536. I will also reduce my exposure a bit in these higher allocated sectors, keep a position in each, and expand my overall portfolio which in and of itself will also diversify my portfolio even further.

As income is the most important goal of mine, I will have increased my total annual income by $1,084, to a total of $4,922 instead of $3,838.

My yield on cost will have been increased, my portfolio expanded to include a sector I was weak in, and I will be creating a higher income stream.

The Bottom Line

Income is the goal for dividend investing, and by using some simple money management maneuvers, an investor can tweak the income received even if you have little in cash reserves.

Keep in mind that nothing is risk free and the 3 "opportunity" stocks I would be adding will need to be monitored more closely that my core mega cap, blue chip dividend champs.

I have no problem doing that, because I am the CEO of my portfolio and that is my job.

Keeping it simple and in plain English, without even selling a covered call option, could do wonders for your income, almost pain free.

Disclosure: The author is long AAPL, BGCP, CVX, F, GE, JNJ, KO, MCD, MO, MSFT, NLY, T, XOM. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.