Ken
Worthy questions.
2. When you say some G&I fund goes up, why not sell at gain and redeploy to dividend payers? Well, why not just do TR and wait for the G&I fund to go up and sell enough to provide income? Nothing wrong with this approach, but its TR, it relies on market increases and the uncertainty of income while you wait, tax (in a taxable account) and transaction costs and most importantly, your ability to time the market when it is "UP". Now, hindsight tells us these points clearly....the future does not. This is the main reason I invest for income, so I don't have to deal with this uncertainty and its expenses.
8. Stocks recently, like C have cut their dividend and how to deal with this. Do you know what C's free cash flow did 2 quarters prior to their dividend cut? Or EOP? Or AEC? The free cash flow flattens out and declines. For an example of securities that are now doing this but have not yet cut their dividends, take a look at MER or BK or PFE...I don't know if they'll cut their dividend, but were I holding them as of the end of 1Q08, I'd have 'fired' them from my income portfolio and replaced them. This is how I've dealth with this concern....and a very valid concern. With 2 exceptions, this has worked for me in an income portfolio of 25 securities.
And when you ask what to do if the market 'turns away' from dividends, I assume you mean as the market did in the mid to late 90's. The answer here is very easy...I don't care. Will, for example, HCN sustain and growth their dividend? Are they generating the free cash flow to be able to do this? If so, then how the market is treating this kind of stock is of no importance to me....the stock's dividend paying ability is of great importance to me.
As to long term capital appreciation, as I'd mentioned above, this will take care of itself.
Back to my HCN example, since I've held it (1999), the price...according to a historic price table...has gone from a low of 14 to a high of around 49...and although I nearly hit the 'eject' button in late 03, their free cash flow (AFFO) finally deflected upward, which it has been doing every since. I will NEVER sell this stock, providing management continues doing what it has been doing and the cash flow remains positive.
As I've inferred, this approach to income investing in retirement requires a lot of 'up front' work and monitoring of operation free cash flow...at least for common dividends of C-corps....you can't buy-and-ignore. Some may not wish to do this, and they probably shouldn't. But it is an approach that can work for some of us.
BruceM
