Look into a couple of direct purchase no cost stock companies with long records. You may want to start off with a boring util. like Southern company(SO) that has a no cost direct and drip stock plan. They have paided a dividend every year since 1955 and are in a business that people can not do without! I have them now on a bank deposit for my dividends and a bank debit at the same time that buys more shares every month so my dividend is more the next quarter or you can buy when you want to anytime. They pay a dividend on 3-6-9-12 months and if that is what you are looking for then for your next one research and find a stock that pays on say 2-5-8-11. Lot of ways you can do it, but try to do it the cheapest way as you will find the direct stock plans that charge fees stock dividends spend the same at Walmart as SO dividends does!

Hope this helps.

Copie

The safest way to avoid 20% market drops for dividend portfolios are to be diversified, just like every other portfolio.  You'll want to look at lots of different options.

One thought for consideration is quarterly versus monthly payments.  For instance, O pays monthly  [over 6%].  A lot of REITs and Canroy and Amroy Trusts also pay monthly.  Most stocks pay quarterly.  Several big, "safe" companies like GE, BAC, PFE, & GIS pay about 3 - 4%.  [GIS just had a 52-week high.  Amazing!. 

You might be interested in shipping companies.  Several pay handsome dividends and also grow well  [for instance FRO, DSX, & GMR].  MLPs are another safe, smart bet. 

There are some VERY high dividend payers, upwards of 10 - 12% -- but, of course, you have to factor in the risk.  Some seem to be companies one wouldn't want to touch with the proverbial 10-foot pole.  Others may have solid fundamentals and may be worth a second look.  This forum is always a good place to toss out an idea to see what others think of it. 

Another option you might consider is Closed-End Funds.  These are actively managed like mutual funds.  They are bought and sold like stocks and ETFs and, indeed, because of the pricing of supply and demand, can often be purchased at a discount to NAV.  Many of them are geared to providing retirement income.  You might check out the CEF Discussion Board.  Many of its members are in your same situation, trying to maintain retirement income without eroding principal.

Good luck!

Zwilnik

copie:

Look into a couple of direct purchase no cost stock companies with long records.

When a company sells new shares directly to the public like that, doesn't it dilute the outstanding shares?

You'll probably get a lot more good answers b/c there are a lot of people around here that do just that including me.  I just want to throw some cautionary thoughts in here.

Good stocks that provide good dividends can blow up and drop 20% too.  What are you going to do when that happens?

I believe inflation is coming.  What are you going to do when your SO is paying 4.57% and price is flat and CD's are paying 8%??

Picking good stocks and putting together a diverse portfolio yielding 4-5% takes time, thought and work and then regular attention.  A cursory glance reveals a lot of good balanced mutual funds that pay from 2.77%-4.35% with e.r.'s under 0.50%.  A lot of people here use them either as their "sole" portfolio or as a core with some kicker MLP's or CEF's.  You might want to give some more thought to this option. 

The whole purpose of Asset Allocation is to reduce risk and prevent that dreaded 20% portfolio drop.  Bonds not only provide income but reduce and protect, to some extent, against those drops.  Are you thinking of going 100% stocks?  I do use the kind of stocks you're talking about to replace part/most of the bond allocation in my portfolio.
 

We talk about growing good, high yielding portfolios and, sometimes, the concept of something called personal yield which is really, kinda, sorta talking about the time value of money and what that stock I paid $20 for umpteen years ago and left to grow is now "yielding".  I think you're looking for immediate yields which leads us back to risk and return and higher yielders may have higher risk.

Copie talks about using DRIP plans which are outstanding methods to grow a portfolio.  I mainly use a discount broker when I'm buying a chunk rather than  growing one over time.

Roberta 

Look at exchange traded funds DVY and SDY to satisfy your need for diversification. They are in the right ball park in terms of yield.

Add some individual stocks as well.

You should never need to sell any shares. 

In terms of income drops, the worst case S&P500 dividend drop was to 75%. Much more often, dividends grow a little bit faster than inflation. 

[My own preference is for two dividend portfolios, one for dividend growth and the other for a high initial yield. I refer to this as a dividend blend. With careful cash management, it is straightforward to reach a withdrawal rate exceeding 5% of your original balance that grows faster than inflation.] 

Have fun.

John Walter Russell 

Lili a lot of stocks an investor buys from the company is already in the treasury of company and is used for raising money for company so I guess really all new stock a company sells cuts back on there value some. A lot of the companies buy their stocks back on the open market and use them for drip plans and such. Other companies like XOM buys back stock and retires them so less and less shares are in the market every quarter and that should increase their stock value over time.

Copie

Thanks very much for all the comments! 

Good stocks that provide good dividends can blow up and drop 20% too.  What are you going to do when that happens? 

 If this happens I plan to ride it out and live on the dividends. 

I believe inflation is coming.  What are you going to do when your SO is paying 4.57% and price is flat and CD's are paying 8%??

I want to have 3 years of living expenses in CDs, money markets, short and medium term bonds.

Alpha28, you've come to the right place.  Living on dividends without selling shares is the prime focus of most of the folks in this forum. 

At your age of 55 you probably can't withdraw from tax-sheltered savings yet.  One of the best sources of dividends in a taxable portfolio is MLPs.  They pay high and tax-sheltered dividends and tend to be very stable, slow growth businesses. You should read up on these income vehicles.  Most of them pay around 5-7% and the income is mostly not taxable until or unless you sell.  Some that I own are KMP, TPP, APU and ETP.

Your prime focus when selecting stocks for dividend income should be the growth of the dividend.  Over the long retirement run you need income that will grow with inflation.  Selecting stocks with good dividend growth history and prospects will provide that, as well as leading you to the more stable and conservative businesses.

If you plan to use stocks for your income (instead of funds) you will need a dozen or two of them for diversification.  An outstanding source of stock analysis for income purposes is the M* DividedInvestor newsletter, and if you wish to dive deeper and perform you own analysis the newsletter's author, Josh Peters, also has a good book out. 

And, enjoy your retirement!

I would be looking into four asset classes:

1) Dividend stocks

2) Straight bonds

3) TIPS

4) REITs

The actual %s you put into each is a personal thing...risk, preferences, etc.

I would also be looking for expenses lower than that 1% figure, IMO it's too high.

This approach comes out Stein & DeMuth's two books on retirement investing, which I recommend you take a look at, "Successful Income Investor" and "Retiring Comfortably".

You may also wish to consider adding a broad balanced fund for a small percentage, to spread your risk a little bit...concentrating on quality dividend stocks is going to constrain you to large and mid caps in the value and blend categories.

I'm putting 80% into the 4 classes and 20% into a global allocation fund. Right now the  income producing part of my portfolio (the 80%) looks something like:

10.0% REITs

10.0% TIPS

12.5% Bonds 

54.0% US Stock

13.5% Int'l Stock 

Good Luck, Ken.
 

I'll just echo some of the advice that's already been given here.

Be sure to diversify. That means owning shares (whether individually and/or through mutual funds) of many companies in a number of different industries. That means also owning high-quality bonds.

Don't use yield alone as your primary selection criterion. Look at the payout ratio. Look at the company's history of sales, earnings, and dividends. Did the company have a hard time covering the dividend during the last recession?

Don't give up on mutual funds just yet. Vanguard's Admiral class of funds have very low fees, and the balanced funds Wellesley and Wellington are certainly worth considering for part of a retirement portfolio.

Regards,

Duane