Lili,

"1) Dividends continue indefinitely.

I think the Citigroup, Wachovia and Washington Mutual shareholders might have something to say about that one.

I am a dividend investor, too, but the recent cut back in dividends by the financials has me a bit worried."

The MAJOR risk of a yield focused investor is that dividend/interest yield is cut, or eliminated.  You diversify that risk by NOT having all of your eggs in the WM or Citi basket!

Compare that to the risk that the share price of those same stocks declines, and you are relying on the TR (actually, share price APPRECIATION) to fund withdrawals.  That is, you are selling shares, spending capital/principal, rather then yield income.

In my particular case, the overall weighted yield of my portfolio is 10.46%, and I can, if needed, comfortably withdraw the 6% that JWR mentions, and still have 4.46% 'excess' yield to both 'cover' any dividend cuts, or allow future increases in withdrawals, or to 'grow' that yield over time.