10 Dividend Aristocrats For The Ultimate 6% Yielding Retirement Portfolio

This article was published on Dividend Kings on Wed, May 31st.

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• All 133 Dividend Aristocrats Ranked By Yield

Here is part 1 of this 2-part series.

It's a very frustrating and frightening market for many investors.

The NY Fed estimates a 68% probability of recession within the next year. That's the highest in 42 years.

The bond market estimates a 100% risk of recession by the end of October 2024.

The blue-chip economist consensus expects a recession to begin in July, as does Ed Hyam, the most accurate economist of the last 42 years according to the Institutional Investor survey.

Mr. Hyam expects a 1.5% GDP recession, lasting nine months, to begin in July. That's 3X more severe than the mildest recession in history that economists expect.

Bank of America and JPMorgan agree with an average recession lasting nine months, beginning this year.

The good news is that a mild or average recession is no threat to most companies, especially not most dividend aristocrats.

The bad news? A lot of investors could be scared into painful and costly mistakes in the next few months.

S&P Bear Market Bottom Scenarios

(Source: Dividend Kings S&P 500 Valuation Tool)

The recession hasn't even started yet, and Wall Street is completely unprepared for even a modest contraction in earnings.

Don't Panic: Dividend Aristocrats Can Be Your Port In The Storm

Dividend aristocrats by definition, have been raising their dividends every year since at least 1998 through:

• three recessions
• two economic crises
• inflation as high as 9.1%
• interest rates as high as 6.5%

There are no more dependable dividend stocks in the world than aristocrats, champions, and kings.

In part one of this series, we looked at all the aristocrats sorted by yield. But that ignores things like safety, quality, valuation, return potential, and many other factors.

Let me show you how to quickly and easily find the best high-yield aristocrats for this recession and other future downturns that might be coming in the future.

How To Find The Best Very Safe High-Yield Aristocrats For These Troubled Times... In 2 Minutes

Let me show you how to screen the Dividend Kings Zen Research Terminal, which runs off the DK 500 Master List, to find the best very safe high-yield aristocrats for this recession.

The Dividend Kings 500 Master List includes some of the world's best companies, including:

• Every dividend champion (25+ year dividend growth streaks, including foreign aristocrats)
• Every dividend aristocrat
• Every dividend king (50+ year dividend growth streaks)
• Every Ultra SWAN (as close to perfect quality companies as exist)
• The 20% highest quality REITs, according to iREIT
• 40 of the world's best-growth blue chips.

The key with any screen is to remember that whatever metric you're targeting is never enough on its own.

Valuation always matters, and even some A-rated aristocrats like IBM are speculative due to their turnarounds.

And in just two minutes now, we have a portfolio of very safe non-speculative aristocrats with the highest possible yield.

10 Dividend Aristocrats For The Ultimate 6% Yielding Retirement Portfolio

I've linked to articles with more information about each company.

Here they are in order of highest yield.

1. Altria (MO)
2. Enbridge (ENB)
3. Arrow Financial (AROW)
4. Philip Morris International (PM)
5. Community Trust Bancorp (CTBI)
6. Federal Realty Investment Trust (FRT)
7. T. Rowe Price (TROW)
8. Essex Property Trust (ESS)
9. AbbVie (ABBV)
10. Chevron (CVX)

Tax Implications

Enbridge Is a Canadian company.

• NO K1 tax form
• qualified dividends
• 15% dividend withholding for US investors in taxable accounts
• none in retirement accounts
• tax credit available for taxable accounts
• own in retirement accounts to minimize tax paperwork

Fundamental Summary

• Yield: 5.4%
• dividend safety: 93% (1.43% severe recession cut risk)
• dividend streak: 42 years (1981)
• quality: 92% (Ultra SWAN)
• credit rating: BBB+ stable (4.56% 30-year bankruptcy risk)
• S&P long-term risk management: 62% global percentile, low risk, good risk management
• discount to fair value: 24% (potential strong buy)
• growth consensus: 6.3%
• long-term return potential: 11.7%
• 5-year consensus total return potential: 17.1% CAGR = 120% vs. 50% S&P

Altria 2025 Consensus Total Return Potential

Enbridge 2025 Consensus Total Return Potential

Arrow Financial 2025 Consensus Total Return Potential

Philip Morris International 2025 Consensus Total Return Potential

Community Trust Bancorp 2025 Consensus Total Return Potential

Federal Realty 2025 Consensus Total Return Potential

T. Rowe Price 2025 Consensus Total Return Potential

Essex Property Trust 2025 Consensus Total Return Potential

AbbVie 2025 Consensus Total Return Potential

Chevron 2025 Consensus Total Return Potential

Ten blue-chips in 5 sectors.

• Average 2025 consensus return potential: 70%
• average annual return potential: 27%

S&P 2025 Consensus Total Return Potential

Aristocrats with more than 3X the yield of the S&P also offer 3X the short-term return potential of the market.

Long-term, these aristocrats offer an 18% better return potential.

3X higher yield, higher quality, better safety, BBB+ balance sheet, and a 42-year dividend growth streak, and better returns than the market.

Total Returns Since 1994

Fantastic market-beating returns with lower volatility despite having 50X fewer companies. And a 33% smaller peak decline in the Great Recession.

Consistently market-crushing returns and with far fewer bear markets.

14.4% Annual Income Growth For 27 Years

S&P dividend growth was 8.1% CAGR since 1995.

The yield on cost for the ten aristocrats is now 200% and for the S&P, 23.6%.

Ok, this is some impressive stuff. But here's how to make this portfolio even better.

ZEUS High-Yield Aristocrat: Crank Up The Yield And Low Volatility To 11

Do you know why Warren Buffett never worries about 30%, 40%, or even 50% market crashes? Because Berkshire Hathaway Inc. (BRK.A) generates $25 billion per year in free cash flow, and it's sitting on $138 billion in cash.

Buffett owns the world's best companies... and always has money to buy more in bear markets.

You probably don't own insurance companies and thus might think that you need cash set aside for bear market blue-chip buying.

Actually, you need non-correlated blue-chip assets that zag when the market zigs.

Consider the DK ZEUS strategy: Zen Extraordinary Ultra Sleep-Well-At-Night

Consider adding a 16.67% allocation to long-duration bonds like Vanguard Extended Duration Treasury Index Fund ETF Shares (EDV).

• 6 High-Yield ETFs For Up To 60% Gains In The Coming Recession.

And a 16.67% allocation to managed futures like KFA Mount Lucas Index Strategy ETF (KMLM).

• 4 High-Yield ETFs That Could Boost Your Retirement Income 33%.

Take a look at what this balanced Zen Extraordinary Ultra Sleep Well At Night or ZEUS Wide Moat aristocrat portfolio does.

• 16.66% EDV
• 16.66% KMLM
• 6.66% each of the ten high-yield aristocrats.

Take a look at what adding this hedging bucket does to the fundamentals.

ZEUS High-Yield Aristocrat Vs. 60/40

(Source: DK Research Terminal, FactSet)

That's almost market-like 10% long-term return potential with triple the yield of a 60/40 and far better long-term return potential.

• 116% better inflation-adjusted returns over 30 years

And volatility so low it's like riding over the worst market potholes in a Rolls Royce.

Total Returns Since December 2007 (Start of The Great Recession)

2.1% better returns than a 60/40 with lower volatility and a peak decline during the Great Recession of just 19%.

And now, take a look at how ZEUS High-Yield Aristocrat has performed during the bear markets since 2007.

(Source: Portfolio Visualizer Premium)

60% smaller peak declines than a 60/40 in bear markets, 73% smaller declines than the S&P, and 69% smaller than the Nasdaq.

Why does volatility matter? Because most people can't stomach the normal volatility of the market.

The average investor probably was trying to beat the S&P in the last 20 years. But through terrible market timing they achieved half the returns of a 60/40 portfolio.

In a roaring bull market, the average investor, again thanks to terrible market timing created by normal market volatility, also lost to the 60/40 by a significant amount. Why?

Because even in a raging bull market, stocks don't go straight up.

In other words, by owning a diversified high-yield hedge fund like ZEUS or even a 60/40, the average investor ends up richer because the lower volatility lets them sleep well at night and thus buy and hold.

It's better to be 80% perfect 100% of the time than 100% perfect 80% of the time.

Why? Because the 20% of the time when investors try to time the market is when market timing is most costly.

Miss just the best market day of each year; you might as well not invest in stocks.

Guess when the market's best days happen? 80% of them occur within two weeks of the market's worst days.

Good luck if you think you can time the market's best intra-day swings.

When the greatest trader in history can't time market bottoms, and even almost shorts the exact bottom, it's useless for the rest of us even to try.

10,000 75-Year Monte Carlo Simulations: Stress Testing The Future With Statistics

By simulating 10,000 75-year future periods using historical returns, we can get a statistically significant idea of what kinds of returns are most likely and what kind of volatility we must be prepared for.

The base-case (most common) long-term return was 8.8% vs. 7.2% for a 60/40.

Adjusted for inflation, 6% real returns turn $1,000 into $82,000 over 75 years.

The most common safe withdrawal rate was 6%, far more than the 60/40's 2.7%.

The probability of beating a 60/40's consensus of 7.2% in the next 50 years is over 78%.

In fact, this portfolio has a 22% probability of even beating the S&P in the long-term.

• Analyst consensus 9.8% vs. 10.2% S&P 500

Almost the same returns as the market, a 22% chance of better returns, and 73% smaller peak declines in bear markets.

Speaking of bear markets.

This portfolio has such high quality and low volatility that it fell to a peak of 19% when the market crashed 57% in the 2nd worst market crash in US history, the Great Recession.

The probability of it suffering a 20+% bear market in the next 75 years is just 1.92%.

The probability of a 40+% market crash, which the 60/40 suffered in the GFC, is 0.02%.

Probability Of Future Bear Markets

(Source: Portfolio Visualizer)

This is a portfolio with such low volatility that you should expect a bear market once every 3,906 years.

• The S&P 500 is 651X more likely to suffer a bear market in any given year

A 40% crash, like the 60/40 suffered in the Great Recession, is expected once every 375,000 years.

• The S&P is 7,500X more likely to suffer a bear market in any given year

Bottom Line: High-Yield Aristocrats Can Be Just What You Need To Survive And Thrive What's Coming

I can't tell you when the market bottom is coming or even exactly where it will be. I can give you the latest facts, probabilities, and most likely ranges.

But here is what I can say with near certainty.

If the market leaves the ground and you haven't bought some blue-chip bargains, you'll regret it. Maybe not today, maybe not tomorrow, but soon and for the rest of your life." - Paraphrase of Casablanca

A face-ripping bull market is going to start when this bear market hits bottom. One of those years where if you're not in the market, you're giving up about 50% of the market's long-term gains.

A diversified recession-optimized high-yield portfolio like ZEUS High-Yield Aristocrats is potentially the best way for you to avoid the disastrous temptation to time the market and likely miss out on the 50% historical rally that is likely starting later this year.

Start with a core stock position consisting of the safest high-yield aristocrats you can buy today.

1. Altria
2. Enbridge
3. Arrow Financial
4. Philip Morris International
5. Community Trust Bancorp
6. Federal Realty Investment Trust
7. T. Rowe Price
8. Essex Property Trust
9. AbbVie
10. Chevron

These ten aristocrats offer potentially life-changing fundamentals and phenomenal safety and quality for this and any future recession.

Fundamental Summary

• Yield: 5.4%
• dividend safety: 93% (1.43% severe recession cut risk)
• dividend streak: 42 years (1981)
• quality: 92% (Ultra SWAN)
• credit rating: BBB+ stable (4.56% 30-year bankruptcy risk)
• S&P long-term risk management: 62% global percentile, low risk, good risk management
• discount to fair value: 24% (potential strong buy)
• growth consensus: 6.3%
• long-term return potential: 11.7%
• 5-year consensus total return potential: 17.1% CAGR = 120% vs. 50% S&P

70% return potential in the next 2.5 years and 120% in the next five years, 2.5X more than then S&P.

While you enjoy a yield that's 3X higher.

And if you can't stand the idea of 20+% portfolio drops, then turn these aristocrats into a ZEUS portfolio with long bonds like EDV and managed futures like KMLM.

ZEUS High-Yield Aristocrat Vs. 60/40

(Source: DK Research Terminal, FactSet)

Market-like returns, but a 6% safe yield and with 73% smaller peak declines in bear markets.

(Source: Portfolio Visualizer Premium)

A portfolio that has a 98% chance of never experiencing a bear market in the next 75 years.

Now this is what I call the ultimate 6% yielding dividend aristocrat Ultra Sleep-Well At Night retirement portfolio!

This is the power of always putting safety and quality first and prudent valuation and risk management.

This is the power of asset allocation and world-beater blue-chips.

This is the power of ZEUS, the king of sleep-well-at-night retirement portfolios.

Did you know that hedge funds charge an average of 5% per year to try to maximize volatility-adjusted returns?

They promise you good returns, and low volatility, and when the market is crashing hardest, that's when they shine brightest.

Do you know what the expense ratio is for ZEUS High-Yield aristocrat?

• 0.33% or 15X less than the average hedge fund

And here's how ZEUS High-Yield compares to David Swenson and Ray Dalio, two legendary hedge fund managers.

ZEUS High-Yield Aristocrat Vs. Hedge Funds

Better returns, much smaller peak declines in even the most ferocious bear markets, and superior volatility-adjusted returns (Sharpe and Sortino ratio).

Better than a 60/40, better than two of the world's most famous hedge fund managers.

And for 15X lower cost and with much higher yield to boot.

This is the power of trusting the world's highest quality and most dependable companies to work hard for you so that one day you won't have to.

Market trends are like the ocean's tides; they ebb and flow. The wise investor builds his castle on the rock, not the sand.

And there are few rocks studied in this coming recession than these 10 high-yield dividend aristocrats and the best hedging strategy of the last 53 years.

Money doesn't grow on trees, but patient investments can sow the seeds. A skilled investor is like a wise gardener, nurturing seeds into mighty dividend oaks.

With time and patience, these 10 high-yield aristocrats can turn modest savings into a safe and prosperous retirement.

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