Published Wed, 13 Dec 2017 08:00:00 -0500 on Seeking Alpha
I want to discuss the intelligent way for retirees to structure their portfolio. There are a few good options. However, there is also one terrible option. I want to begin by addressing the terrible option. Occasionally, I hear from investors demanding 14% or even 16% annual returns from their portfolio. They don’t demand it because it is a reasonable goal. They demand it because that is the level required to sustain their retirement.
The problem is simple. 14% annualized returns are perfectly reasonable during a bull market. They are not perfectly reasonable for an average over multiple decades. If an investor begins their measurement period after the great recession, it should be no surprise if their annual returns are extremely high. On the other hand, if they had to include the great recession in their returns, the annualized return would be much lower.
Sucker yields When investors are demanding extremely high rates of return, they are often prone to fish for sucker yields.
This can lead to a market failure. Companies with unsustainable dividends will often be overvalued prior to cutting their dividend. Often, these retirees will look to drop the stock from their portfolio as soon as the dividend cut is announced. Consequently, when these high yield stocks cut their dividend rate, it often leads to a dramatic decline in share price. An upcoming example of this situation is Wheeler Real Estate Investment Trust (WHLR).
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|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|CBL & ASSOCIATES PROPERTIES||1.38||0.0||-0.95||0.35||27.34|
|ANNALY CAPITAL MANAGEMENT||8.60||0.0||-3.32||1.20||14.00|
|NEW YORK MORTGAGE TRUST||6.14||12.0||0.51||0.80||12.74|
|AMERICAN CAPITAL AGENCY||15.64||0.0||-1.54||1.92||12.21|
|PHILIP MORRIS INTERNATIONAL||74.90||14.9||5.03||4.68||6.12|
|SIMON PROPERTY GROUP||155.27||20.8||7.48||8.40||5.21|
|NATIONAL RETAIL PROPERTIES||54.39||35.8||1.52||2.06||3.81|
|PROCTER & GAMBLE||122.77||90.3||1.36||2.98||2.49|
|ADVANCED MICRO DEVICES||30.21||177.7||0.17||0.00||0.00|
Older articles featuring Wheeler Reit (WHLR):The Stunning Story Of Retail eREITs And Why Total Return Matters Even For Dividend Growth Investors - Part II
How To Retire Today: Dividends
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