How to Retire on Dividends: Earn a Safe 8%, Leave Your Principal Intact

The familiar names can’t recommend our high-income producers to you. Instead, they stick you in pretty much what everyone has. And one more thing. If these are stocks, owning them is not much different than owning a low-cost index fund from Vanguard. The same stocks dominate the same market indexes Vanguard uses! If you own a handful of the big nam

The common shares from JPMorgan Chase (JPM) pay 3.1%. But the firm recently issued Series DD preferreds paying 5.75%. JPMorgan Chase shareholders looking for more income may be happy to make this tradeoff. Meanwhile, Bank of America (BAC) common pays 2.1% today. But B of A just issued some preferreds that pay a fat 5.88%.

Two simple yet important things set Main Street apart: 1.The firm increases its investment income annually, and 2.It pays a conservative dividend so that it never has to cut it. Since its IPO in 2007, Main Street has boosted its dividend (which is paid monthly) a lovely 77%. It’s never been cut. The company smartly keeps a buffer and pays out extra

The secret is to buy bonds the big money isn’t allowed to. To illustrate the point further, let’s look at the BlackRock Floating Rate Income Strategies Fund (FRA), which buys floating-rate debt. (More about floating-rate debt in a moment). For now, just know that most of the bonds it buys are issued by corporations, and most of them are below the “

Bengen found that a 50-50 mix of stocks and bonds and a 4% annual withdrawal rate worked. In no case from 1926 to 1976—with inflation, deflation, higher or lower prevailing interest and dividend rates, and booms and busts—did a 4% withdrawal rate exhaust a portfolio in under 33 years.* This has been often been called “The Bengen Rule,” the maximum

For bond funds, upside can come in two ways. First, when the price of a fund lags its net asset value, there is a “discount window” which could subsequently narrow or close. A buyer pays, say, $0.90 for $1.00 of actual investment value (who wouldn’t do that all day long?). We specifically target funds when they are unfairly out of favor and have bi

It’s a recipe for running out of money, and along the way, there is a drip, drip, drip of financial “blood” too. Remember the annual $40,000 you thought you were banking on your million? As you deplete your million through withdrawals, there is less money to earn dividends for you. The $40,000 slowly declines.

We have found that you don’t have to choose between income now and growth later when you can achieve both with a CEF like AllianceBernstein’s Global High-Income Fund. (And by the way, as we write, that fund is offering up a “free” $1.92 per share discount. How’s that for a supposedly efficient market!)

For dividend investors like us, the most important insight from Marks is hidden in a chapter of his excellent book The Most Important Thing: Uncommon Sense for the Thoughtful Investor. It’s a work that won acclaim from legendary value investors Joel Greenblatt, Jeremy Grantham, Seth Klarman, and even Warren Buffett.