Latest Retirement Portfolio Additions

Last week on the day before they went ex-dividend we bought Kinder Morgan, Inc. (KMI) and Omega Health Investors (OHI). These were purchased in Roth IRA's and the plan is to hold them long term and to reinvest the dividends. Both of these issues have been raising dividends quarterly as of late which is quite extraordinary. So long as they raise their distributions once per year we will continue to hold them. If the dividend/distribution is frozen or is cut we will sell.

I think it's very wise to hold REIT's in a Roth IRA as they would normally be taxed as ordinary dividends. Even with the market getting a bit frothy there are a couple of securities that I like for our retirement portfolio. Defense and oil stocks still seem to be reasonably priced. If you are a contrarian, and we try to be, I would look at emerging markets index funds/ETF's or opening a position in a dividend paying precious metals stock.

Present Portfolio Allocation

My wife and I have our stock and bond portfolio allocated as follows:

Cash        21.02%
Muni's     12.61%
O             6.39%
LOW        4.20%
KMB        4.12%
WMT       3.90%
INTC       3.88%
JNJ          3.82%
PG           3.43%
T             3.34%
KO          3.29%
MCD       3.27%
PEP         3.26%
PM          2.82%
MO          2.74%
MSFT      2.71%
XOM       2.64%
RTN        2.55%
FCX        2.54%
PSEC      2.38%
COP       2.13%
PSX       1.02%

I am looking to add some international exposure, probably through SDIV to start. I also want to diversify further by adding high yield corporate bonds, both U.S. and Int'l, especially if they are monthly payers. I will add all of these in Roth IRA's. If the market corrects more I will add to our dividend growth portfolio.

Lastest Additions to Retirement Portfolio

On Monday I added IIM, Invesco Insured Municipal Income Trust. I had no bonds in my retirement portfolio so I wanted to diversify and lower overall portfolio risk. My position in IIM is fairly large. This is in my taxable account, of course, and IIM yields 5.5% tax-free with monthly distributions. In large down days this has either risen a bit or stayed the same.

Today I added FCX, Freeport-McMoran Copper & Gold. I bought it pennies above it's 52 week low. I view this as a contrarian play during the precious metals capitulation. At my entry point the yield is well over 4%. I plan to reinvest the dividends and hold indefinitely.

As you can see, I am preparing my portfolio for a correction and/or a crash and taking advantage of fear and capitulation. In our Roth IRA's I'm looking at SDIV for international exposure and diversification and GG, a monthly paying gold stock, if GG's yield can get closer to 3%.

Let the correction begin!

It started with increased volatility and as per history the next move is down. I sold some SLV and FCX puts in the last few weeks as a hedge. Do you remember the days when the market was down big and the only risers were precious metals and metal stocks? I do.

Hopefully long term dividend growth investors have some cash at the ready as bargains will soon be available again.I am going to be looking very closely at present yields compared to historical yields. My long term investments have done the best when I buy dividend growers when their yield is above historical norms. For example I bought Lowe's when the yield was nearly 3% and Wal-Mart when the yield exceeded 3%. Both of these now have higher yield on cost along with significant capital appreciation.

Let the games begin!

Morning Thoughts

This morning I sold some OTM puts on SLV. Silver has fallen below it's Bollinger bands and precious metals are oversold and out of favor. Meanwhile this bull market is getting a bit long in the tooth, printing presses are cranked and the war drum is beating. Precious metals have been moving inversely to the S&P as such this is also a small hedge against market decline.

In reviewing my retirement portfolio I notice a couple of things. My greatest total return gainers are those dividend growth stocks that started with the lowest yield but had the highest dividend growth rates. These type of stocks will definitely be in the mix for future purchases. I am also looking closely not just for low payout ratios but also low free cash payout ratios. This combined with a high dividend growth rate seem to be great candidates for strong total return now while still providing great yield on cost and income in later years.

I love dividend growth investing. Every time I reinvest the dividends my monthly income rises. It is my own Social Security fund. When I contribute more funds it's even better. The combination of reinvesting dividends in companies that grow their dividends along with putting new capital to work really sets in motion the power of compounding. Compounding one's savings is the key to financial security and wealth.