SAMPLE INCOME PORTFOLIO.

Sorry I Missed Last Week's Post. Trying to tie up loose ends and traveling from Colorado to Texas kept me relatively busy last week so I missed that post. I will post at least once more before Christmas and another before January 1 to wind up the year.

Investing For Income A few weeks ago I blogged about the difficulty of trying to eliminate all risk from your investment portfolio. I talked about a couple with a modest $200,000 portfolio who had confined their investment activity to certificates of deposit and how their income from those CD's had dropped from $20,000 per year to virtually zero over a 20 year span. At this point they are often forced to withdraw principal in order to survive. This means they are in danger of running out of money before they run out of life. This is one of the reasons why the 65-70 age group is the fastest growing bankruptcy group in the country. I promised you that I would soon post a sample portfolio that produced spendable income without excessive risk. To produce this sample portfolio, I used the screener provided by the organization I use to buy stocks for my own portfolio (Options Express). There are numerous others since virtually all online companies have a program for screening stocks. I entered the following perameters. 1. Dividend yield, at least 4%. 2. Daily Sales Volume, at least 250,000. 3. Price/Earnings Ratio, Not to exceed 20. The search returned 65 companies. From this list I selected 10 properties. They are listed as follows in no particular order:

1. Ameron Corporation (AEE). A utility company selling at 28.55 paying 1.54/year dividend. 600 shares would cost $17130 and pay a dividend of $924 per year.

2. Bristol Myers Squibb (BMY). A well known drug company, selling at 26.26 and paying 1.28. 700 shares would cost $18380 and pay $896 per year.

3. Duke Energy (DUK). A well-known utility company selling at 17.54 per share and paying .98 per share 1100 shares would cost $19300 and pay $1098 per year.

4. Lockheed Martin Company (LMT). A company that makes aircraft and defense items. It sells at 68.22 per share and pays a $3.00 dividend. 300 Shares would cost $20460 and pay $900 per year.

5, Medical Properties Trust (MPW). A company investing in properties for lease to the medical industry. It sells at 10.12 per share and pays .8 dividend. 2000 shares would cost $20240 and pay $1600 dividend.

6. AT&T (T). A very well known company in the communications industry. it costs 29.21 and pays 1.68 dividend. 600 shares would cost $17526 and pay a dividend of $1176.

7. Health Care Properties (HCP) A company that invests in nursing homes, assisted living centers, rehabilitation centers and conventional medical use properties. It sells for 32.52 and pays a dividend of 1.86. 600 shares would cost $19512 and produce income of $1116.

8. Kinder Morgan Energy Partners (KMP) A company that owns pipelines for the transportation of petroleum and natural gas properties. It sells for 69.25 per share and pays a dividend of 4.44. 300 shares would cost $20,775 and produce income of $1332.

9, Fidelity National Financial (FNF). A title insurance company operating nation wide. It sells for 13.98 and produces a dividend of .72. 1400 shares would cost $19,570 and produce income of $1008.

10. Windstream Corp. A wireless communications corporation selling for 14.14 per share and paying a dividend of 1.00 per share. 1900 shares would cost $26860 and produce income of $1900 per year.

Summary: The total investment would be $199,755 and the income would be $11950. This portfolio has the following advantages: 1. A much higher income than a bank CD or an annuity. 2. You can sell all or a fraction and have your money in 4 days with no penalty or surrender charge like a CD or annuity. 3. Often these companies may increase the dividend so there is upside in the income. 4. Potential for increase in share prices. 5. A preferential tax rate on income and capital gains. There are disadvantages such as 1. Potential for losses if you have to sell at a time when prices are low. 2. Dividends are subject to elimination or reduction if the company does poorly. 3. You need to check on prices, earnings, and company news at least twice a month.

A Word of Caution. This represents a cursory evaluation. In order to select one of these stocks for my portfolio or one of my clients, I would need to spend 20 to 30 minutes finding out more about the company including factors like book value, earnings, potential for earnings growth, cash flow, and growth trends. Perhaps I can do a later post to describe the due diligence process in selecting a company for investment. I will continue to monitor this portfolio on a monthly basis and report the results. At the end of the year, we can compare portfolio performance to the overall market, CD, and annuity returns. Should prove interesting.