As you know, for several years now I have been pounding the table about building an income margin of safety, generating more dividends than is actually needed in retirement. I have done this with every portfolio I manage. When one has a margin of safety built in, they don't have to be concerned over whether T or anybody else cuts the dividend. You take it in stride and move on.
Last year I had about 4 dividend cuts, several dividend freezes and yet, based on the way I managed the portfolio I still showed 22.2% dividend growth year over year. I might add the dividend cuts came from companies with higher yields, REIT's and then D of which I had a very large position in. So, to show that kind of dividend growth indicates the confidence I have in my system.
Some would argue I raised the risk that came with making the adjustments necessary to show that kind of dividend growth, but to me, risk isn't something you avoid or run away from, it's something you learn how to manage. What you own is not as important as to how you manage what you own.
So today, in one of the portfolios I manage and has a large T position, I made some moves. I sold the position I had in BIF which has just a 3.01% yield. I took the proceeds from that sale and purchased the following.
EXD ..... yield 7.69%
ETY ..... yield 7.47%
DNP .... yield 7.46%
ASG .... yield 7.33%
BXMX .. yield 6.13%
When all is said and done, the new positions will be paying 130.2% more income than the original position in T. I have been making similar moves in other portfolios as well.
This is one option, you have provided another. What it boils down to is trying to build an income margin of safety "before" we receive any dividend cuts. Once that is complete, we have more options available to us.
The only ETF's I own are the Ark Funds, but if I wanted a more mainstream ETF I like SCHD. |
