Why diversify your portfolio? Why diversify into companies that show us the money by consistently increasing their dividends? Why reinvestment these ever growing dividends into the very same companies we’ve already diversified into?
All of these questions can be answered with another question: would you like to retire with a growing stream of income that will protect your purchasing power throughout your retirement years?
If you answered “yes” to the last question, I invite you to read on. In a previous article I touched upon the concept of monetizing your portfolio for monthly income. Here, I’ll delve further and illustrate how to answer the above questions.
Diversification
Diversification is a basic tenet of investing. In order to reduce risk to the overall portfolio, it is advisable to diversify holdings into many sectors of the market. My personal portfolio holds over 40 names in many different sectors. To illustrate today, I’ll propose 5 core holdings.
AT&T Inc. (NYSE:T) is the largest telecommunication holding company in America. AT&T and Verizon control 64% of the U.S. cellular market.
AT&T Inc. (NYSE:T)’s earnings growth rate over the next 5 years is projected to be 5.85%
| Dividend Growth Rate Calculator | |
|---|---|
| Stock | T |
| Number dividends | 113 |
| Current dividend date | 2013-01-08 |
| Current dividend amount | $0.4500 |
| First dividend date | 1984-09-24 |
| First dividend amount | $0.11667 |
| Growth rate – | 4.88% |
| Growth rate – total | 285.70% |
AT&T Inc. (NYSE:T) is a dividend aristocrat, meaning it has increased its annual dividends for 25 or more consecutive years. It sports a dividend growth rate of 4.88% and has a current yield of 4.9%. This company can be depended on to continue ringing up earnings and paying out a quarterly dividend check to you, regardless of the economic cycle. People will need and pay for their phone services no matter the economic climate.
Consolidated Edison, Inc. (NYSE:ED) is an electric utility company. Through its subsidiaries, it provides energy services to residential, commercial, industrial, and government customers in the United States. It too is a dividend aristocrat, paying out dividend checks, year in and year out, and is currently yielding 4.3%.
| Dividend Growth Rate Calculator | |
|---|---|
| Stock | ed |
| Number dividends | 171 |
| Current dividend date | 2013-02-11 |
| Current dividend amount | $0.6150 |
| First dividend date | 1970-02-02 |
| First dividend amount | $0.11300 |
| Growth rate – | 4.01% |
| Growth rate – total | 444.25% |
Its dividend has been growing at a rate of 4.01%, and will continue to keep investors well ahead of inflation.
In the services sector, kingpin McDonald’s is another dividend aristocrat that keeps us fed, paying out ever-rising dividends for over 25 years. It currently is yielding 3.2%, and its dividend growth rate is 21.34%. This outstanding growth rate will keep you satiated for years to come.
| Dividend Growth Rate Calculator | |
|---|---|
| Stock | MCD |
| Number dividends | 124 |
| Current dividend date | 2013-02-27 |
| Current dividend amount | $0.7700 |
| First dividend date | 1976-05-10 |
| First dividend amount | $0.00062 |
| Growth rate – | 21.34% |
| Growth rate – total | 124,093.55% |
Kinder Morgan Energy Partners LP (NYSE:KMP) operates as a pipeline transportation and energy storage company in North America. Its Products Pipelines segment delivers gasoline, diesel fuel, jet fuel, and natural gas liquids to various markets through approximately 8,600 miles of refined petroleum products pipelines.
