Retirement Strategy: It’s Not The End Of The World, It’s Time To Make A Shopping List

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An Update On Me

It has been 3 months since I wrote this article. I know that many of my readers stated that they felt prepared for a serious correction. Due to life and health circumstances I decided to divest my equities into fixed income vehicles around the 1st half of 20018. I discussed in detail, my reasons, in this article.

I didn’t like the markets at that point anyway and being that I had already built plenty of money to last a few lifetimes, I just didn’t need the stress any longer at my stage in life. Maybe I was lucky because I have never been a great market timer, and being a dividend growth investor it had always been about the income anyway.

I FIRST morphed my portfolio into mainly dividend aristocrats about 18 months ago to soften the blow of a correction for my own sanity, but then I felt I needed to finally end the “race” and live off of my investments by moving into CD ladders and a private equity fund run by my son in law.

My priorities changed from growing my income to spending the money and focusing on family for whatever time I have left. I am doing ok, but glad to have left the “game”.

A Look At What Has Transpired

Let’s take a peek at a simple chart:

Chart^DJI data by YCharts

Lower highs and lower lows. A very typical chart for a strong correction phase and not shocking to me, but gut wrenching if you have not planned for it, or have never been through one before. It will certainly test your tolerance for risk, that’s for sure.

As you can see the market has dropped roughly 15-17% since my “heads-up” article. Being a retired investor, heavily in equities it has been a tough period, with more to come in my opinion. For DGIers, especially in dividend aristocrat stocks, your dividend income has been stable this year and has probably increased for many folks.

If you have the discipline to look at nothing but the income, you have saved yourself from having many severe headaches. It has been something I have suggested for 7 years here on Seeking Alpha. If you have followed my little simple articles, you should be in a good place right now. Unfortunately it is easier said than done, so I am speaking out to offer some of my personal suggestions, not advice of course, for those who might need some ideas.

  • Now is not the time to dump quality stocks that pay a dividend and increase it year after year.
  • My personal belief is that there is more pain to come and quality dividend aristocrats will offer great bargains for those who have the cash.
  • I myself would wait before dipping my toe in, because I am already retired.
  • If I had a long time horizon, like 15-25 years, I would be making a shopping list of great dividend aristocrats that have been taking a hit.
  • If you notice the daily trend, traders are SELLING into strength and trading the drops. I wouldn’t go near that approach because I stink at it.
  • DGIers should look at interest rates and the the Fed for them to stop raising rates for a little clue as to when it could be time to buy the dips agsin. Now is NOT the time in my opinion.
  • Watch what is going on within our government for any signs of calming down before diving into equities. (Remember, you are making a shopping list for now!)
  • Make sure your dividend portfolio can continue paying you. Check cash flow and payout ratios of each company. While earnings might drop, cash flow and strong management will keep your stocks more likely to maintain and even increase their dividends.

Rates Go Up Stocks Go Down

Compare this chart with the previous one:

Chart2 Year Treasury Rate data by YCharts

From lower than 1.75%, up to nearly 3% since the beginning of the year. That will affect all borrowing costs from mortgage rates to credit cards, not to mention higher borrowing costs for every single corporation I can think of.

The Fed has stated that there could be just 2 more increases for 2019, but I am skeptical due to a stronger economy and low unemployment levels. I myself would keep an eye on this, as well as a rising income level.

There might be a point that stocks stop dropping even if rates go up, but in my opinion we could see a sideways market at best.

Are There Any Dividend Aristocrats That Look Interesting?

Actually there are several that have taken a hit, still face headwinds but have a really nice balance sheet to weather this storm: Exxon-Mobil (XOM) and Johnson & Johnson (JNJ).

Take a peek:

ChartXOM data by YCharts

Nearly 5% for XOM, and 3% for JNJ. Both with marvelous, and continuous dividend payment and increasing, track records.

The Bottom Line

IF I was back in the market, I would not be buying the dips, nor dumping out of fear. IF I had a long time horizon I would begin thinking about which dividend aristocrats I would consider buying.

What are YOU doing during this corrrcton?

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.



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