Introducing - Me!
As the new "oldie" on the block, I feel compelled to tell you up front that I know I have some very tough shoes to fill among my fellow Seeking Alpha contributors. Most of their articles are outstanding in every way. Cool graphics, informative charts, wonderful analysis and a bunch of long time followers who await their next article to be posted online. Very impressive!
I am a retired wealth manager going on five years and I logged many years in the financial world. Long ago, when I was broke and just starting out my financial career, I decided that if I was successful and was able to retire comfortably someday, my goal would then be to give back to others, in ways that I can, for the rest of my days.
Now being a retiree, I know one sure way that I can give back to others, and that's to write about something I know extremely well and then share it with the public. That "something" is earning income through stocks. To me, retirement investing is all about collecting income. Stock growth is great, but growth does not put cash in my pocket, growth does not pay the bills. In fact, the only growth that I really care about with stocks is the growth of the dividend. That means more cash in my pocket. Stock prices will go up and down and sideways, but the income you collect through stocks is yours to keep.
My way of generating income through stocks is two-fold. Most importantly, I buy solid, blue-chip stocks paying a steady and generous dividend - preferably on sale (meaning the stock is trading near it's 52-week low or has had a major drop in price for no real reason, like releasing great earnings and the stock then sells off, or if a stock analyst downgrades a great stock for valuation purposes and then the stock tanks on that news to cite - just a couple of examples). In addition to buying the targeted stock, I also sell long-dated, way out of the money calls to collect option premiums for additional income. I like to call it the double income method. Collect dividends and collect option premiums. Then repeat.
I’ve used the double income method all throughout my career working for ultra-high-net-worth clients to grow their wealth. Showing clients how much income they have earned each quarter of the year always made them happy. Showing clients how the total income in their portfolios rose year after year kept those clients under my management and not transferring their accounts to another firm. I had also been doing this for my own portfolios the whole time and for my family, friends and others.
Since being in retirement, I've continued to manage portfolios using the double income method for myself and the people closest to me. I do not follow the market as actively as I did while I was working, but I follow the market everyday to where it gives me something interesting to do during the weekdays. And in line with my goal of giving back, I've decided to pen articles to help educate fellow retirees and other income seekers about retirement and stock income methods.
My writing style will not be in a book report style that, for example, describes talks what Exxon Mobil (XOM) is and then supplies an analysis of XOM and backs it up with cool graphics, informative charts. There are many wonderful authors on Seeking Alpha that provide that sort of information in their articles. Although, I will include some educational stats, charts and pictures to help explain my reasoning.
But ultimately, I will share with you, the reader, my thoughts and opinions, about income stocks that most retired or soon to be retired folks already know much about. I will skip most of the stuff other authors already include in their articles and get directly into “Straight Talk” - from one old retiree to you, the reader.
I will lead off by discussing a great income stock presently on sale. Next article, I plan to reveal my double income retirement portfolio and discuss why certain stocks are in there. Perhaps in the future, I will get into the art of writing covered calls, if there is demand.
As you already know, and it will be repeated over and over again, my articles are about my personal thoughts and opinions only. The material in my articles will no way, no how, and never be investment advice of any kind.
I welcome your comments either positive or negative, and strenuously welcome making new friendships on Seeking Alpha.
Welcome to my retirement income investing world. Let’s begin!
General Mills - Breakfast Of Income
For this first article, I’m focusing on a very popular and well-known company, General Mills (GIS). Most of us retirees have gobbled up different GIS cereals over the years (Lucky Charms is still one of my favorites). GIS has been around for at least 80 years selling its foods, and it will probably be selling foods for a long, long time, after we’re gone.
You already have a basic understanding of what GIS does. They sell foods, best known for cereals, but they also sell other foods, baking goods, snacks and other products anyone would see at a grocery store.
The stock is not as exciting compared to technology and biotech stocks that many 20 and 30-somethings crave. GIS is rather quite boring and simple and mostly quiet in the marketplace, and that’s just fine for this retiree!
More importantly, GIS has paid and raised their dividend for many years, and to me and other retirees, that’s the biggest thing. It's all about the income.
Look at this very basic 10-year chart of GIS stock price and annual dividends paid. Notice anything special?
Price has gradually moved higher. Dividends paid have risen. And look what happens when the price and dividend lines overlap. We get a sell off. Or in my mindset, a buying opportunity. The stock price has always recovered and this time will be no different.
As of this writing, the dividend on GIS is 49 cents a quarter or $1.96 annualized for a giving it a nice 3.65% yield. That puts $1,960 or $163 in cash a month per 1,000 shares in my IRA account. I think about what $163 a month can pay for. Gas (although I do not drive much anymore), Internet (use that a lot these days), and as much Lucky Charms that I can handle in a month, plus still have money left over. Imagine accumulating 5,000 shares and what money you would collect!
You've heard of the cereal known as the "Breakfast of Champions" In the retirement investing world. I consider General Mills to be the stock that provides you with the Breakfast of Income.
The last ex-dividend date was on July 6th, which means that the next ex-date will be around Oct 6th, so there is plenty of time to catch the next dividend.
On Sale But Not On The Clearance Rack
Right now, the stock is trading hands near its 52-week low at $53.59 and its 52-week range low is $52.76. If you look at the short-term charts, you might be scared to even say the name "General Mills." Someone who is trading the stock could act on this movement and someone with near-term call options might be nervous, but as retirees, we see a well-established, well-known, blue-chip company that's been around for many years and sells products almost everyone uses and pays out a heck of a reliable and generous dividend. As a bonus, the stock is on sale for no good reason.
This sale will not last. GIS has endured through much tougher times than this over 80 years - recessions, depressions, panics, scares, etc. -and the dividends keep on coming and coming and coming. As retirees, it's that steady dividend income we want and need. Income is what we care about, and retirement investing is all about collecting the income.
We've all heard the phrase “Buy low, sell high.” Well, it a darn good phrase to know, remember and use, and it applies to stocks at all times. GIS is low (on sale) right now, making it a buy for me. I do not know what direction GIS will head in the near term, but I’m certain they will still be selling cereal in the long term, and folks will still be eating their cereals and they will still be paying out dividends - likely higher and higher dividends.
Naturally, the stock could go lower and some people might say something like “I’m gonna wait till it hits 45 and its PE is x before I buy." That’s fine for some people to wait for the stock to hit the clearance rack or a certain stock price, but what happens if it never gets to those levels?
As you can see from the chart, the last major sale on GIS was about 7 years ago. Wouldn't that of been a sweet time to buy? Well, here is another opportunity.
We retirees want our income now. When I see a great company trading at a great price with a great dividend, that company makes my A list to buy or to add to my existing position.
Last But Not Least
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Disclosure: I am/we are long GIS AND 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.
Additional disclosure: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.