Wednesday, August 26, 2020

7 Dividend Stocks Beating The 4% Rule

Over time the 4% rule has been criticized for leaving too much money on the table and in some cases retirees could outlive their money. For those not familiar with the 4% rule, William P. Bengen in 1994 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 week, I screened my dividend growth stocks database for select stocks with a minimum 3.75% dividend growth rate and yield of 5.0% or more. The results are presented below:

Matthews International Corp. (MATW) primarily designs, manufactures, and markets custom-made identification products. 
Yield: 3.8% | Dividend Growth: 5.0%

Eaton Vance Corp. (EV) engages in the creation, marketing and management of investment funds in the US. EV also provides investment management and counseling services to institutions and individuals. 
Yield: 3.9% | Dividend Growth: 5.3%

MEC Industrial Direct (MSM) is a direct marketer that offers a range of industrial products to customers throughout the U.S.; it focuses on maintenance, repair and operations (MRO) supplies. 
Yield: 4.7% | Dividend Growth: 12.9%

Bank of the Ozarks (OZK) owns Bank of the Ozarks, which provides retail & commercial banking products and services mainly in the southern United States. Yield: 4.7% | Dividend Growth: 15.0%

Abbvie Inc. (ABBV) is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013. AbbVie's key drug is Humira for rheumatoid arthritis. 
Yield: 5.0% | Dividend Growth: 10.6%

UGI Corp. (UGI) operates propane distribution, gas and electric utility, energy marketing and related businesses through subsidiaries. 
Yield: 5.6% | Dividend Growth: 7.3%

National Health Investors (NHI) is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry. Yield: 7.0% | Dividend Growth: 5.0%

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 Excel spreadsheet containing more than 20 columns of information on the 150+ 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 ABBV, NHI,

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