The Case for Generating Retirement Income With a Dividend Strategy

Lawrence C. Strauss Retirement MPW Medical Properties Trust Charles Lieberman David Blanchett Lieberman Financial Performance Earnings Dividends Corporate Actions Corporate/Industrial News Political/General News Personal Finance Retirement Planning Content Types Factiva Filters C&E Exclusion Filter C&E Industry News Filter MPW N/CAC N/CNW N/DIV N/DJN N/ERN N/GEN N/PFM N/PFN N/RET N/WER Barrons.com Barrons Blogs Wires CODES_REVIEWED Dividends Financial Planning Income Investing Investing Markets Retirement author Lawrence C. Strauss author|Lawrence C. Strauss topicid 8541 name Lawrence C. Strauss extractedtext Lawrence C. Strauss rank 1 codetype author code lawrence_c_strauss nameformat surname_first author Lawrence C. Strauss id Lawrence C. Strauss barrons_display_subject BARRETIRE barrons_display_subject|BARRETIRE codetype BARRONS_DISPLAY_SUBJECT canbedisplaysubject true value BARRETIRE source MANUAL status modified name Retirement code BARRETIRE co MEDPTI co|MEDPTI symbol MPW country US codetype co displayname Medical Properties Trust extractedtext Medical Properties Trust source MANUAL code mpw name Medical Properties Trust significance prominent onlinesignificance prominent exchange U.S.: NYSE exchangeisocode XNYS chartingsymbol STOCK/US/XNYS/MPW fcode MEDPTI status modified company MPW company|MPW name Medical Properties Trust significance PROMINENT djn MPW djn|MPW significance passing onlinesignificance passing-mention name MPW why occur source FACTIVA fcode MPW codetype djn code mpw djn N/RET djn|N/RET significance prominent onlinesignificance prominent name N/RET why about source FACTIVA fcode N/RET codetype djn code n_ret djn N/DIV djn|N/DIV significance prominent onlinesignificance prominent name N/DIV why about 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Investment Management and contributor seoname david-blanchett firstname David topicid 8367 name David Blanchett topicname David Blanchett codetype pe code david_blanchett nameformat surname_first pe Lieberman pe|Lieberman lastname Lieberman displayname Lieberman name Lieberman extractedtext Lieberman source FACTIVA codetype pe code lieberman nameformat surname_first relay SYND relay|SYND name Syndication source EXPANDER value SYND codetype RELAY code synd status modified statistic CODES_REVIEWED statistic|CODES_REVIEWED name CODES_REVIEWED value CODES_REVIEWED codetype STATISTIC code CODES_REVIEWED subject BARINVST subject|BARINVST ruleid BARINVST codetype SUBJECT value BARINVST canbedisplaysubject true name Investing title Investing status modified code BARINVST subject BARMKTS subject|BARMKTS ruleid BARMKTS codetype SUBJECT value BARMKTS selectable true canbedisplaysubject true name Markets title Markets status modified code BARMKTS subject BARFIN subject|BARFIN ruleid BARFIN codetype SUBJECT value BARFIN selectable true canbedisplaysubject true name Financial Planning title Financial Planning status modified code BARFIN subject BARDIVS subject|BARDIVS ruleid BARDIVS codetype SUBJECT value BARDIVS canbedisplaysubject true name Dividends title Dividends status modified code BARDIVS subject BARFININCINV subject|BARFININCINV ruleid BARFININCINV codetype SUBJECT value BARFININCINV canbedisplaysubject true name Income Investing title Income Investing status modified code BARFININCINV subject BARRETIRE subject|BARRETIRE ruleid BARRETIRE codetype SUBJECT value BARRETIRE canbedisplaysubject true name Retirement title Retirement status modified code BARRETIRE wordcount 527 wordcount|527 id facebook id|facebook news_tab_url https://www.barrons.com/articles/using-dividend-stocks-for-retirement-income-the-case-for-it-51574084774 Photograph by Max Harlynking The Case for Generating Retirement Income With a Dividend Strategy The Case for Generating Retirement Income With a Dividend Strategy Using Dividend Stocks for Retirement Income. The Case for It.

One strategy: Have 80% of a portfolio in stocks, including higher-yielding master limited partnerships and real estate investment trusts, with the remaining 20% in fixed income and preferred shares.

The Case for Generating Retirement Income With a Dividend Strategy

One strategy: Have 80% of a portfolio in stocks, including higher-yielding master limited partnerships and real estate investment trusts, with the remaining 20% in fixed income and preferred shares.

https://www.barrons.com/articles/how-to-generate-income-in-retirement-with-dividend-stocks-51573837865 https://www.barrons.com/articles/how-to-generate-retirement-income-with-a-total-return-strategy-51574079592 https://www.barrons.com/articles/in-december-the-stock-market-worked-the-extremes-51546043703 https://www.barrons.com/articles/retirement-myths-debunked-why-the-4-rule-is-outdated-51569153602?refsec=retirement&mod=article_inline mailto:lawrence.strauss@barrons.com The Case for Generating Retirement Income With a Dividend Strategy By Lawrence C. Strauss Photograph by Max Harlynking

The following is an excerpt from How to Generate Income in Retirement With Dividend Stocks, Barron’s cover story on Nov. 18.

Charles Lieberman, chief investment officer at Advisors Capital Management in Ridgewood, N.J., dislikes the total-return approach to dividend income.

For starters, there’s the “sequence of returns problem,” which is a commonly cited concern among retirement researchers. If, say, an investor’s portfolio runs into a cluster of down years as retirement approaches, it can mean a much lower base of assets on which to generate income.

Making portfolio withdrawals to raise cash when the market is declining is particularly vexing to him, partly because it can mean tapping principal—something many investors are loath to do. “When the market goes down sharply, you have to sell off more assets,” Lieberman says. “When the market recovers, the portfolio is operating on a smaller base, and it potentially never recovers.”

The so-called safe annual distribution, or withdrawal, rate for a retirement portfolio is around 4%, says Lieberman. But even at that rate, he says, there’s a chance a retiree can run out of funds. (Many retirement researchers these days are encouraging a more fluid withdrawal rate.)

So one of his firm’s strategies aims to produce income that keeps up with inflation. The strategy typically has about 80% of its holdings in stocks, in many cases including higher-yielding master limited partnerships and real estate investment trusts, with the remaining 20% in fixed income and preferred shares. Since its inception in 2001, the strategy has had a net annual composite return of 6.8%.

One REIT that Lieberman holds is Medical Properties Trust (MPW), which develops and leases health-care facilities such as hospitals. It yields 5.2%.

Lieberman doesn’t worry about the notion that emphasizing income-producing stocks can lead to dangerous overweightings in value stocks. “I have sufficient knowledge to be able to make some judgments about what sectors—and what companies—can safely provide income,” he says. “I don’t feel like I am required to invest in every sector proportionally.”

David Blanchett, head of retirement research at Morningstar, says there are times when the income approach—even one that’s less diversified—makes sense in retirement.

“Portfolios focused on income are likely to be less diversified than their total-return counterparts, but tend to produce higher levels of income, and may be attractive alternatives to total-return strategies for investors focused on current consumption,” he wrote in a 2015 paper that he co-authored in the Journal of Portfolio Management.

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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