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REIT Heavy Income Portfolio For Retirees

Summary

The 1st of three Income Portfolio examples for retirees.

I am a REIT lover these days so I decided to make this one REIT heavy and as high yield as possible. This does come with a little more risk.

A 4.63% overall yield. $23,174.50 annual income off of $500,000.

With the current bull-market coming to an inevitable end I have found many retirees are worried about protecting capital while maintaining the steady stream of income needed to get by. For years now this has been fairly easy to do with simple high yield portfolios, but with valuations as high as they are I fear these days are coming to an end. It seems the bears are beginning to outnumber the bulls in this market and a recession may be looming. As always I will preach patience, but the risks are there. To this end I decided to come up with some example income portfolios that yield over 4% and will be safe during recession.

The first is a REIT heavy portfolio that yields over 4.6%, because of its higher yield it does carry slightly more risk(the most of the three I will be putting out). Still, I believe you will be able to hold this portfolio through a recession and come out just fine with solid income throughout. 65% of the portfolio is made up of some of safest high yield players in the market, some with growth potential, many of them dividend champions. While the other 35% is made up of high yielding and well respected REIT players. Although REITs performed horribly back in the end of 2008 and through 2009 that was a distinctly different situation than the one we are facing now. In my opinion REITs deserve respect and I am not alone in believing this. If you combine these equities with bonds, real estate and your other investments you will be able to ride out any incoming downturn with confidence.

Dividend Champs & Portfolio Cornerstones

Ticker

% of Portfolio

Dividend Yield (fwd)

$ Invested

Annual Income

Novartis AG

NVS

5 %

3.27 %

$25,000

$817.50

The Kraft Heinz Company

KHC

5 %

2.86 %

$25,000

$715.00

Waste Management, Inc.

WM

2.5 %

2.31 %

$12,500

$288.75

The Proctor & Gamble Company

PG

5 %

3.15 %

$25,000

$787.5

Blackstone Group LP

BX

5 %

10.54 %

$25,000

$2,635.00

Caterpillar Inc.

CAT

2.5 %

2.90 %

$12,500

$362.50

3M Company

MMM

5 %

2.24 %

$25,000

$560.00

PepsiCo Inc.

PEP

5 %

2.79 %

$25,000

$697.50

Sysco

SYY

2.5 %

2.66 %

$12,500

$332.50

AT&T

T

5 %

5.14 %

$25,000

$1285.00

Wells Fargo & Co.

WFC

5 %

2.72 %

$25,000

$680.00

Johnson & Johnson

JNJ

5 %

2.51 %

$25,000

$627.00

Hormel Foods

HRL

2.5 %

2.02 %

$12,500

$252.50

Old Republic International Insurance

ORI

5 %

3.88 %

$25,000

$970.00

Ford Motor Company

F

5 %

5.31 %

$25,000

$1327.50



65 %

3.41 % (avg)

$375,000

$12,337.25

REITS

Ticker

% of Portfolio

Dividend Yield (fwd)

$ Invested

Annual Income

STAG Industrial

STAG

5 %

5.16 %

$25,000

$1402.50

Omega Healthcare Investors

OHI

5 %

7.62 %

$25,000

$1905.00

Washington Prime Group

WPG

2.5 %

11.82 %

$12,500

$1477.50

Realty Income Corporation

O

5 %

4.60 %

$25,000

$1150.00

STORE Capital

STOR

5 %

5.19 %

$25,000

$1297.50

KIMCO Realty Corp.

KIM

5%

6.05 %

25,000

$1512.50

Jernigan Capital

JCAP

5 %

6.37 %

$25,000

$1592.50

Realty Opportunity Ivestment Corp.

ROIC

2.5%

3.92%

$12,500

$490.00



35 %

6.13 % (avg)

125,000

$10,827.50

Total Investment: $500,000  Yield: 4.63%  Total Annual Income: $23,174.5

A little anecdote to show you are not alone...

In 1948, after earning the rank of Lieutenant in WWII, my grandfather Ray Wanek left the Navy and set off for Alaska. He had dreamed of the breathtaking mountain ranges and open wilderness of the American Northwest all throughout the war and his mind was made up that Alaska was the place for him. On his way he decided to take a detour to meet up with some Navy buddies in Arizona, and as he passed through Flagstaff he got a glimpse of the San Francisco Peaks, it was exactly the image that had been burned into his mind all those long nights at sea. So he bought 13 acres of Ponderosa Pine in what was then considered to be a quite remote area and built a cabin by hand(yes people did that back then). Five years later he met my grandmother and when they got married he decided to open the Arizona Mountain Inn. They built the place up from 1948 until 1998 when they finally sold it to a great couple who still own it today. Sadly my grandfather passed away in 2004, but his legacy still lives on at the Inn and through the money he earned with his hard work for all those years.

Cabin-BWray-pauline-wedding_edited-1

I loved my grandfather, he was the best man I have ever known. These days my grandmother is still living off the capital that their hands made together. So, needless to say protecting that capital is pretty important to her.

When I began writing for SA I realized a lot of retirees on this site are in a similar position to my grandmother. They want to live a happy and fruitful life without having to spend down their life savings. Giving a nice chunk of change to their children after they pass away is a final gift to the next generation after a hard working, beautiful life. 

These days, my family helps my grandmother invest her money in some real estate, stocks, bonds, etc. so that she doesn't have to worry too much about her finances. Still, in these uncertain economic times income is getting harder and harder to come by. I hope this first example portfolio is helpful for you and gives you some confidence that you can make it through a recession without having to bail out of the markets.

There are some more risky names in this portfolio that I feel it necessary to issue a warning about, namely Washington Prime Group. The high yield makes it an attractive play in my mind and although it is a volatile stock that has used debt heavily to leverage its position, it is well managed, has impressive NOI and after its recent fall during the overblown 'retail apocalypse' I see its current price tag as an entrance opportunity for additional income. Of course, this could be debated(and has been) so I would recommend reallocating the 2.5% of WPG into one of the other more well respected REITS like ROIC or STAG if you fear the volatility.

I think this portfolio makes a compelling case as a safe income play if you are as high on REITs as I am. I will be publishing the two other income portfolio's that have different focuses and less associated risk in the coming days, so stay tuned and as always thanks for reading.

Disclosure: I am/we are long nvs, WM, OHI, BX, WPG, CAT.