The REITs and Utes that I follow average a 3.4% yield and 6.3% growth. You can definitely find some with higher yields, but they tend to push you down the quality or growth curve. E.g. Eversource yields 4.4% but is marginal quality, while Realty Income yields 5.2% but is probably looking at 3% growth. Most REITs and Utes can expect their growth to at least keep up with inflation.
In contrast, CEFs push a higher yield point and might or might not keep up with inflation. They mostly *try* to deliver a sustainable yield that will rise over time, but they typically don't leave enough margin of safety to be certain of that. A portfolio strategy with a 3.5% to 4% yield can be built around Utilities, Staples, REITs, Pharma, and such like, but I prefer the quality for those that target 3.5% to those that target 4%.
If I were to aim for a 5.0% yield, I would likely balance "half" in a DGI portfolio at the 3.5% yield point (or SCHD if you prefer the fund version) and "half" in higher-yield instruments such as preferreds, CEFs, MLP, and so on with a 6.5% yield point. (I put "half" in quotes because it might not be precisely 50-50.) Both halves of that are targeting a sufficiently modest yield that you can focus on selecting quality assets rather than pushing for the most extreme (and riskiest) yields. |
