There’s a retirement crisis in this country.
And we need to act quickly if we want to spend our golden years on the golf course instead of behind a desk.
It’s no surprise that the Congressional Budget Office says Social Security is running out of money… But the pace at which the program is failing is what’s most troublesome.
The current forecast is that Social Security will run out of money between 2031 and 2033. At the latest, it will run out of money in 2037.
That’s less than two decades from now.
But there’s more…
More than 75 million working Americans don’t have a retirement plan. And half of all Americans have less than $10,000 in savings. To make matters worse, over the last three decades, the S&P 500 Index averaged an annual return of 11.1%. Which isn’t bad… but the average investor is managing to eke out only a mere 3.7% annually.
The market is outperforming the average investor by more than twofold.
That means it’s a Mount Everest-type climb for almost anyone trying to prepare for retirement. And the later you get started, the worse off you will be.
Creating a Diversified Income Stream
For a while, I contemplated this problem and worked on various ways to beat it.
My goal was to create a “Set It and Forget It” portfolio that would continue to build over time. The more time it had to run – using the magical power of compounding – the better the end result would be.
To accomplish this, I needed a mix of dividend stocks – high-yield and growth – as well as companies that had good revenue forecasts.
Most importantly, I wanted to make sure these companies were spread out across a number of different industries. That way, because of the diversification, challenges in one industry won’t drag down the entire portfolio.
Eventually, I came up with a list of five companies…
The “Set It and Forget It” Portfolio
| Company | Symbol | Industry | Current Yield |
|---|---|---|---|
| AbbVie | ABBV | Pharma | 4.9% |
| Universal Corp. | UVV | Tobacco | 6.9% |
| Federal Realty Investment Trust | FRT | REIT | 5.4% |
| Exxon Mobil Corp. | XOM | Oil & Gas | 8.3% |
| AT&T | T | Telecom Services | 7.0% |
| Average Yield | 9.48% |
Now, there were a number of reasons these companies were attractive to me.
For example, AbbVie (NYSE: ABBV) is a pharmaceutical powerhouse and a spinoff of Abbott Laboratories. It began trading a few years ago at the beginning of 2013. From 2013 to 2019, its revenue grew from $18.7 billion to $33.3 billion and it is projected to reach $45.6 billion in 2020.
Then there’s Universal Corp. (NYSE: UVV) in the tobacco industry, which is a sector that offers high yields and, again, steady growth. Universal Corp. currently generates about $1.9 billion in annual revenue.
Federal Realty Investment Trust (NYSE: FRT) is a commercial property developer and manager with more than 100 properties primarily in major coastal U.S. cities, bringing in over $935 million in annual revenue.
Exxon Mobil Corp. (NYSE: XOM), one of the largest oil and gas companies in the world, generated more than $255 billion in 2019. And AT&T (NYSE: T), one of the largest telecommunications and cellular service providers in the world, brought in over $180 billion in 2019.
All five of these companies are huge moneymakers in their respective industries. But they’re also excellent dividend payers.
In fact, not only are they some of the best yielding dividend stocks in the market today, they’re also some of the most reliable. Each one has paid increasing annual dividends every year for the past 25 years or more.
Of course, when looking at dividend income it helps to find dividend-payers offering yields that are higher than the average rate of inflation, which is officially 3%.
These five have an average yield at least twice that – 6.5% – which makes them an excellent source of reliable dividend income for the long term.
Good investing,
Kristin Orman
Director of Research
Liberty Through Wealth