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The World’s Greatest Retirement Portfolio

I think that most retirees would prefer to own stocks that meet the following investment goals.

1. Preserve capital, because retirees have a shorter time frame in which to recapture investment losses.

2. Have liquidity, because higher trading volumes reduce stocks volatility.

3. Have a consistent and stable income flow, because replacing salary or business income is a big plus.

4. Are low maintenance stock investments, because most retirees would rather spend time enjoying their retirement, than spend time keeping track of their investments.

5. Own stocks that have the potential for capital appreciation, because good investments that grow in value are always desirable.

6. Are diversified, because a diversified stock portfolio reduces risk.

The stocks that are discussed in this article meet all of the above investments goals.

Annaly Capital Management (NLY) has a market cap of $15.9 billion with a price to earnings ratio of $44.41. The stock has traded in a 52 week range between $14.05 and $18.79. The stock is currently trading around $16. The company reported year 2011 revenues of $3.5 billion compared to revenues of $2.6 billion in the fourth quarter of 2010. Year 2011 net income was $344 million compared to net income of $1.2 billion in 2010.

One of Annaly’s competitors is the Capstead Mortgage Corporation (CMO). Capstead is currently trading around $13 with a market cap of $1.2 billion and a price to earnings ratio of 7.6. Capstead pays a dividend which yields 13% versus Annaly whose dividend yields 13.8%.

Annaly is a real estate investment trust that owns and finances a portfolio of real estate investment securities. Annaly has paid quarterly dividends since 1997. The dividend has varied from quarter to quarter, but its fourth quarter dividend of $0.57 was 300% higher than the fourth quarter dividend in 2006. Over the last five years, the yield has averaged around 13%. The stock has been stable and has a beta of 0.22 and a three month average daily trading volume of over 12 million shares. The company is attractive to investors that are looking to protect capital and draw a strong stream of dividend income. The stock price has decreased by 6.4% over the last 52 weeks but increased by 98% over the last three years. Annaly has an excellent dividend paying record, and its stock price should be safe if the dividend yield remains above 11%. Prospective investors should do further research.

Kinder Morgan Energy Partners (KMP) has a market cap of $29.1 billion with a price to earnings ratio of 341.06. The stock has traded in a 52 week range between $63.42 and $90.60. The stock is currently trading around $87. The company reported fourth quarter revenues of $2 billion compared to revenues of $1.9 billion in the fourth quarter of 2010. Fourth quarter net income was $475 million compared to net income of $409 million in the fourth quarter of 2010.

One of Kinder Morgan’s competitors is Enterprises Products Partners (EPD). Enterprise is currently trading around $52 with a market cap of $45.6 billion and a price to earnings ratio of 21.74. Enterprise pays a dividend which yields 4.7% versus Kinder Morgan whose dividend yields 5.2%.

Kinder Morgan is a Master Limited Partnership that operates a pipeline and energy storage business. In the fourth quarter, the company increased year-over-year revenues by 5% and net income by 16%. Kinder Morgan has paid quarterly dividends since 1992 and has increased its dividend by 39.7% over the last five years. The current dividend is $4.64 per share. The stock is relatively stable and has a beta of 0.46 and a three month average daily trading volume of over 690 thousand shares. Kinder Morgan has been a favorite stock for dividend investors, and the stock price has increased by 18.7% over the last 52 weeks and 154% over the last three years. Kinder Morgan’s valuations (price to earnings ratio 341/price to book ratio 4.11) are on the high side, but given its history of capital appreciation and increasing distributions I would consider it to be a best of breed dividend stock. CNBC stock analyst Jim Cramer agrees and on March 2, 2012 he once again endorsed the stock. Prospective investors should do further research.

Duke Energy (DUK) has a market cap of $28.1 billion with a price to earnings ratio of 16.41. The stock has traded in a 52 week range between $16.87 and $22.10. The stock is currently trading around $21. The company reported fourth quarter revenues of $3.3 billion compared to revenues of $3.4 billion in the fourth quarter of 2010. Fourth quarter net income was $288 million compared to net income of $427 million in the fourth quarter of 2010.

One of Duke’s competitors is Consolidated Edison Inc. (ED). Consolidated is currently trading around $58 with a market cap of $17.1 billion and a price to earnings ratio of 16.34. Consolidated pays a dividend which yields 4.2% versus Duke whose dividend yields 4.8%.

Duke operates as an electric and natural gas utility company. In the fourth quarter, the company’s year-over-year revenues decreased by 3% and its net income decreased by 48%. One reason for the lower earnings was the unusually warm weather during the fourth quarter of 2011. Over the last five years Duke’s earnings have been remarkably steady. The company has paid quarterly dividends for decades and over the last five years it has increased its dividend by 19% to $1.00 per share. Duke’s stock is a relatively low risk stock with a beta of 0.18 and a three month average daily trading volume of over 11 million shares. Duke is another dividend stock that has been endorsed by CNBC stock analyst Jim Cramer. Duke’s stock is currently trading near the top of its 52 week range, and its stock price has increased by 14% over the last 52 weeks and 104% over the last three years. Prospective investors should do further research.

AstraZeneca Plc (AZN) has a market cap of $57 billion with a price to earnings ratio of 6.05. The stock has traded in a 52 week range between $40.89 and $52.54. The stock is currently trading around $44. The company reported fourth quarter revenues of $8.6 billion compared to revenues o$8.6 billion in the fourth quarter of 2010. Fourth quarter net income was $1.4 billion compared to net income of $1.6 billion in the fourth quarter of 2010.

One of AstraZeneca’s competitors is GlaxoSmithKline (GSK). GlaxoSmithKline is currently trading around $44 with a market cap of $218.5 billion and a price to earnings ratio of 26.92. GlaxoSmithKline pays a dividend which yields 5.9% versus AstraZeneca whose dividend yields 8.6%.

AstraZeneca develops and markets prescription drug medications. The company has done a good job of producing steady revenues flows. The company has also done an admirable job of paying dividends. The company has paid bi-annual dividends since 1993 and has increased dividends in each of the last ten years. Over the last five years, the company has increased its dividend by 58.5%. AstraZeneca has three drugs that are coming off of patent (Seroquel, Nexium, and Crestor). AstraZeneca has prepared for the revenue losses by downsizing. The company has $11.82 billion in cash which gives it a number of options about how to recoup the revenues that will be lost from the patent expirations. AstraZeneca stock has a beta of 0.46% and has an average three month daily trading volume of over 1.4 million shares. The stock price has decreased by 8.4% over the last 52 weeks but has increased by 69% over the last three years. AstraZeneca’s future is not totally clear, but it has a long record of producing steady earnings and paying high yield dividends. Prospective investors should do further research.

Verizon (VZ) has a market cap of $109.7 billion with a price to earnings ratio of 45.5. The stock has traded in a 52 week range between $32.28 and $40.48. The stock is currently trading around $39. The company reported fourth quarter revenues of $28.4 billion compared to revenues of $26.3 billion in the fourth quarter of 2010. Fourth quarter net income was $-2 billion compared to net income of $2.5 billion in the fourth quarter of 2010.

One of Verizon’s competitors is AT&T (T). AT&T is currently trading around $31 with a market cap of $182.1 billion and a price to earnings ratio of 46.2. AT&T pays a dividend which yields 5.7% versus Verizon whose dividend yields 5.1%.

Verizon provides wireless and wireline telecommunication service. In the fourth quarter, the company increased revenues by $200 million but saw its net income decrease by $4.5 billion. The reason for the decrease in net income was because of a one-time charge of $5.6 billion for pension benefits. The company’s long term earnings have been relatively steady. Verizon has paid quarterly dividends since 1983, and over the last five years, it has increased the dividend by 23.4% to $2.00 per share. Verizon is the second largest telecommunications company in the US and has invested in its infrastructure in an attempt to improve its position. Verizon plans to benefit from the lucrative and growing smartphone business, and has built the largest 4G LTE network in the nation. Verizon offers its customers a wide variety of smartphones and Forty four percent of its post paid customers use smartphones. The company’s stock price has been relatively stable. The beta is 0.41 and the stock has an average three month daily trading volume of over 13.5 million shares. The stock price has increased by 5.5% over the last 52 weeks and 69% over the last three years. Prospective investors should do further research.

About the author:

Dividend King
I am primarily an investor interested in creating passive income streams through dividends. I focus on finding and analyzing dividend paying stocks, MLPs and REITs that are a good fit for income investors.

I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.

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