William P. Bengen is an author and a certified financial planner. In 1994 he published a study concluding that if retirees withdrew 4% (the 4% rule) of their nest egg in the first year, and then increased the dollar amount by the inflation rate every year, their savings would easily last 30 years.
At the time of the initial study, he assumed the portfolio was held in a tax-deferred account and was evenly split between large-company stocks and U.S. Treasury bonds. In a subsequent study he revised the withdrawal rate to 4.5%. The higher rate was supported by adding U.S. small-company stocks to the portfolio. This increased the portfolio's potential return, and also increased its volatility.
Bengen notes that people who retired in 2000 are of the greatest concern. Since retiring, they have endured two major bear markets. The next five years will be critical for this group. A surge of inflation above its historical average of 3 percent, could derail the 4% rule for this group.
You have to be able to survive worst-case scenarios. There is a better way...
Instead of eating away at your principle, why not live off the fruit of your portfolio? The best way to do that is with a hand-selected portfolio of dividend growth stocks. Not only will you receive an annual income, but it will grow each year.
This week, I screened my dividend growth stocks database for select stocks with a minimum 3% dividend growth rate and yield of 4% or more. The results are presented below:
Waste Management Inc. (NYSE:WM) is the largest U.S. trash hauling/disposal concern.
Yield: 4.1% | Dividend Growth: 4.4%
Southern Company (NYSE:SO) is an Atlanta-based energy holding company that is one of the largest producers of electricity in the U.S.
Yield: 4.2% | Dividend Growth: 3.6%
Avista Corp. (NYSE:AVA) generates, transmits and distributes energy as well as engages in energy-related businesses.
Yield: 4.5% | Dividend Growth: 5.5%
Magellan Midstream Partners LP (NYSE:MMP) is engaged in the transportation, storage and distribution of refined petroleum products primarily through its 9,600-mile pipeline system.
Yield: 4.5% | Dividend Growth: 4.8%
Unisource Energy (NYSE:UNS), through Tucson Electric Power Co., provides regulated electric service to over 403,000 retail customers in southeastern Arizona.
Yield: 4.6% | Dividend Growth: 7.7%
Enterprise Products Partners LP (NYSE:EPD) is an integrated provider of natural gas and natural gas liquids services, including processing, fractionation, storage, transportation and terminalling.
Yield: 4.8% | Dividend Growth: 5.2%
Avon Products Inc. (NYSE:AVP) is the world's leading direct marketer of cosmetics, toiletries, fashion jewelry and fragrances, with about 6.5 million sales representatives worldwide.
Yield: 5.0% | Dividend Growth: 4.5%
National Health Investors (NYSE:NHI) is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry.
Yield: 5.4% | Dividend Growth: 3.4%
Kinder Morgan Energy Partners LP (NYSE:KMP) is one of the largest pipeline master limited partnerships (MLPs) in the U.S.
Yield: 5.3% | Dividend Growth: 4.3%
Omega Healthcare Investors Inc. (NYSE:OHI) is a real estate investment trust (REIT) that invests in and provides financing to the long-term care industry. Its portfolio includes health care facilities in 27 states.
Yield: 8.0% | Dividend Growth: 6.4%
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long SO, UNS, AVA, NHI, OHI in my High Yield Portfolio. See a list of all my dividend growth holdings here.
- Spanning the World For The Best Dividend Stocks
- My Five Top And Bottom Performing Dividend Stocks
- 7 Dividend Stocks To Build Your Future Security
- How To Know When To Sell A Dividend Stock
- 7 Dividend Stocks Delivering The Secret To Successful Investing
Sources: Wall Street Journal, Yahoo Finance, Wikipedia
- High Yield Dividend Stocks in Gurus' Portfolio
- Top dividend stocks of Warren Buffett
- Top dividend stocks of George Soros
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