Retirees: I Did Not Buy IBM To Sell; It's About The Dividend Income, Stupid


  • There are many investing strategies investors can utilize to reduce the risk when investing in equities.
  • Choosing the highest quality stocks sits at the top of the list.
  • The primary determinant of high quality is superior financial strength.
  • Regarding safety considerations, cash flows are more relevant than earnings.


There are many investing strategies and principles that retired investors can utilize to reduce the risk associated with investing in equities (stocks) for their retirement portfolios. Choosing to invest in the highest quality stocks your mind can conceive sits at the top of the list. There are many components that investors can analyze and examine to determine whether a company is of high quality or not.

The primary determinant of high quality is superior financial strength. Financially strong companies possess the staying power and resources to weather the occasional bad storms that will inevitably occur. Every business will on occasion face challenges and difficulties. Meeting those challenges requires a strong balance sheet and an adaptive and competent management team to guide the company across troubled waters.

Evaluating financial strength can be accomplished through the examination of a few simple but important fundamental metrics. Fortunately, much of that work is already done for us by established and reputable reporting agencies such as Standard & Poor's, Value Line, Morningstar, etc., in the form of credit ratings.

There are many available sources where retired investors can find that information. The key is to look for companies that are awarded what is referred to in financial circles as investment-grade ratings. Typically, the companies with the best ratings will have a capital A or better in their credit rating.

Retired investors concerned with safety can dig deeper by examining important fundamentals such as cash flow, free cash flow, and debt levels. Stated overly-simplistically, you will be looking for companies that have the strength of cash flows to support debt payments and current and future dividend distributions. Regarding safety considerations, cash flows are more relevant than earnings. Because when it comes to the survival of a business, cash flow is king. As it relates to safety, a business surviving as an ongoing concern is the

This article was written by

Chuck Carnevale profile picture
Maximize your income with the world’s highest-quality dividend investments
Charles (Chuck) C. Carnevale is the creator of FAST Graphs. He is also Co-Founder of The Dividend Kings, along with Brad Thomas and Adam Galas (Dividend Sensei), offering a premium service on Seeking Alpha's Market Place. Chuck is also Co-Founder of an investment management firm. He has been working in the securities industry since 1970: he has been a partner with a private NYSE member firm, the President of a NASD firm, Vice President and Regional Marketing Director for a major AMEX listed company, and an Associate Vice President and Investment Consulting Services Coordinator for a major NYSE member firm. Prior to forming his own investment firm, he was a partner in a 30-year-old established registered investment advisory in Tampa, Florida. Chuck holds a Bachelor of Science in Economics and Finance from the University of Tampa. Chuck is a sought-after public speaker who is very passionate about spreading the critical message of prudence in money management. Chuck is a Veteran of the Vietnam War and was awarded both the Bronze Star and the Vietnam Honor Medal.

Disclosure: I am/we are long IBM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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