Summary

• Retire with this portfolio.
• How to stay away from trouble by using SHY as the circuit breaker.
• Stay with the highest yielding Dividend Aristocrats.
• Invest in high yielding stocks while reducing portfolio risk.
• Construct a Mosaic Portfolio from stocks and ETFs.

Providing income from a retirement portfolio requires either sufficient capital or a number of high income generating securities. The following portfolio takes the latter tack. Twelve (12) high yielding dividend aristocrats and three ETFs were selected for this retirement portfolio. The stock securities selected for this retirement portfolio are the following, and all have a yield of 3.0% or higher.

• AT & T (NYSE: T )
• Healthcare Partners (NYSE: HCP )
• Consolidated Edison Co. (NYSE: ED )
• McDonald’s Corp. (NYSE: MCD )
• Chevron Corporation (NYSE: CVX )
• Target Corporation (NYSE: TGT )
• Cincinnati Finance Corporation (NASDAQ: CINF )
• AbbVie Inc. (NYSE: ABBV )
• Leggett and Platt, Inc. (NYSE: LEG )
• Sysco Corporation (NYSE: SYY )
• Colgate-Palmolive Co. (NYSE: CL )
• Coca Cola Co. (NYSE: KO )

Three ETFs were selected for specific reasons.

• VTI is Vanguard’s Total Market ETF and covers the U.S. Equities market. This ETF provides a reference for equity performance.
• TLT provides a reference for non-stock investments, should any be added to this portfolio. Including the bond ETF, BND, is one such example.
• SHY is our cutoff ETF or circuit breaker. This ETF plays a vital roll in helping the investor stay out of trouble during bear markets.

Stock Rankings: In the following table 12 dividend aristocrats and three ETFs are ranked using three metrics. Fifty percent (50%) weight is applied to the price performance over the most recent 91 calendar days, 30% is assigned to the price performance over the most recent 182 calendar days, and 20% is devoted to volatility, where we use a semi-variance calculation so as not to penalize volatility to the upside.

The first interpretation of the table is to search for securities that are under-performing SHY as we avoid those tickers. Current data ranking tells us to avoid MCD, ABBV, HCP, and CVX.

The second interpretation is to find securities that qualify for purchase. The two top spots are locked down by Target and one ETF, TLT. Not only do these two securities have high rankings, but they also show strong absolute acceleration percentages. This indicates the growth per day is increasing over the most recent three months vs. the most recent six months.

Any stock performing above the VTI reference is a good candidate for purchase.

How do I implement this model? The portfolio is reviewed every 33 days and this table is refreshed and ranked again. Stocks that continue to outperform SHY are held in the portfolio. Nothing is done. Stocks that fall below SHY in performance are removed from the portfolio. Any stock that moves above VTI in the ranking is added to the portfolio using any available cash from sales, dividends, and new savings.

When it comes time to withdrawal cash for retirement income, the goal is to have sufficient shares saved so the dividends are sufficient to meet the income demand.

While I’ve selected dividend aristocrats and three ETFs for this portfolio, the same approach works if ETFs are used to populate the portfolio.

Disclosure: The author is long VTI,TLT,SHY. (More. ) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.