15 Wonderful Blue-Chip Buys I Just Made For My Retirement Portfolio

(Source: Imgflip)

2020 will go down in history as a year of historic firsts. After the fastest bear market in history, the S&P 500 has recovered from March 23rd’s lows in record time as well.

On April 18th the market closed at 3,390, officially setting a new record high, and ending the bear market after 104 trading days.

According to Lipper Financial, the previous record for the fastest recovery to new highs from bear market lows was 310 days, set in 1966-1967.

That means we didn’t just break the old recovery record, we smashed it, thanks to stocks posting their strongest 100-day rally in history.

In 100 market days, the broader market soared 51%, which beat the previous record (+40% in 1983) by an impressive 10%.

The good news for investors is that historically, such strong rallies off correction lows tend to see stocks rise 9.4% over the following year. At least that’s been the case 94% of the time since 1950.

While 19 data points aren’t statistically significant (40+ points is), it still gives hope to many that this new bull market may have some legs over the coming months.

But what about valuations? Aren’t those stretched right now? Absolutely they are.

With the exception of the earnings yield risk premium, by every other valuation metric, stocks are trading at extremely rich levels right now.

S&P 500 Valuation Profile

Year EPS Consensus YOY Growth Forward PE Blended PE Overvaluation (Forward PE) Overvaluation (Blended PE)
2020 $129.88 -20% 26.1 24.2 59% 42%
2021 $165.59 27% 20.5 23.3 25% 37%
2022 $186.32 13% 18.2 19.3 11% 14%
12-month forward EPS 12 Month Forward PE Historical Overvaluation PEG 20-Year Average PEG S&P 500 Dividend Yield 25-Year Average Dividend Yield
$145.54 23.3 42% 2.74 2.35 1.76% 2.06%

(Sources: Dividend Kings S&P 500 Valuation & Total Return Tool, F.A.S.T Graphs, FactSet Research, JPMorgan, Ed Yardeni, Brian Gilmartin, Reuters’/IBES/Refinitiv/Lipper Financial)

Whether you look at PEG ratio, dividend yield, forward PE, or blended PE, the market is pricing in about three years of earnings growth right now.

Which means there is good and bad news for anyone buying the index today.

The good news is that over 12-month periods just 8% of stock returns are explained by fundamentals and valuations and over five years just 45%.

That means the market might indeed achieve some of the lofty forecasts analysts are now making, including up to S&P 4,000 by the end of the year (27 forward PE = 64% historical overvaluation).

Mind you a 27 forward PE would basically tie the tech bubble record of 66% historical overvaluation…and we know how that ended in tears for many investors.

The good news? Only over the long-term do fundamentals and valuations matter. The bad news? Over the long-term fundamentals and valuations are almost all that matters, being 10X as powerful as sentiment, momentum, and luck.

JPMorgan is now expecting flat to slightly negative returns for stocks over the next five years.

S&P 500 Total Return Profile

Year Upside Potential By End of That Year Consensus CAGR Return Potential By End of That Year

Probability-Weighted Return (CAGR)

2020 -35.7% -69.5% -52.1%
2021 -15.7% -11.7% -8.8%
2022 -1.4% -0.6% -0.4%
2025 25.1% 4.3% 3.2%

(Sources: Dividend Kings S&P 500 Valuation & Total Return Tool)

My version of the Gordon Dividend Growth Model (what most asset managers and the Dividend Kings all use) says that modest returns of about 40% the S&P 500’s historical norm are likely.

S&P Total Return Potential Profile If Corporate Taxes Go to 28%

Year Upside Potential By End of That Year Consensus CAGR Return Potential By End of That Year

Probability-Weighted Return (CAGR)

2020 -35.7% -69.5% -52.1%
2021 -25.5% -19.3% -14.5%
2022 -12.3% -5.4% -4.1%
2025 11.7% 2.1% 1.6%

(Sources: Dividend Kings S&P 500 Valuation & Total Return Tool)

Unless corporate taxes go up to 28% next year, which Goldman Sachs, Morningstar and FiveThirtyEight think is a 50% to 60% probability scenario.

In that case, about 2% CAGR five-year total returns for stocks could be expected about 75% lower returns than is historically normal.

So why am I still buying stocks in what I consider to be a clear bubble? Because as Chuck Carnevale, Seeking Alpha’s “Mr. Valuation” likes to say, “it’s a market of stocks, not a stock market.”

Something great is always on sale, and so that’s what I have been buying via the Dividend Kings’ Daily Blue-Chip Deal Videos.

(Source: Dividend Kings Daily Blue-Chip Deal Video Library)

Of the 46 videos I’ve made since June 22nd, into which I’ve invested $500 into each, their average fundamental stats are a testament to our strategy of:

  • Making reasonable and prudent buys: average Investment Decision Score 95% A excellent
  • Buying only the safest dividend payers: 4.6/5 average safety score vs 4.5 average dividend aristocrat
  • Buying only the highest quality companies: average quality 9.7/11 blue-chip vs 9.6 average aristocrat

The dividend aristocrats are the gold standard among income growth investors, due to their proven ability to deliver market-beating returns and with lower volatility over time.

They combine several proven alpha factors in one, quality, dividend growth, lower volatility, and smaller-than-average size (market cap about half the S&P 500).

Basically, my strategy during this bubble is to focus on aristocrat quality potentially excellent buys, thus avoiding paying the 11% premium that the aristocrats themselves currently demand of investors.

This is why, in the past few weeks, I’ve made these reasonable to attractive blue-chip dividend deals for my retirement portfolio.

15 Amazing Retirement Portfolio Blue-Chip Buys Despite The Market Hitting Record Highs

(Sources: Dividend Kings Daily Blue-Chip Deal Video Library, Dividend Kings Research Terminal)

CSCO and ADP were purchased as core holdings with limits set at the good buy price. After earnings consensus estimates declined, reducing fair value so I ended paying a reasonable price rather than a good price.

  • Core holding = a company so wonderful I want to own a piece of it for the long term…as long as I can get a reasonable price or better

What Makes Cisco A Great Core Holding

(Source: GuruFocus)

  • S&P credit rating: AA- stable = 0.55% 30-year bankruptcy risk (the probability of losing all your money with this company)

What Makes ADP A Great Core Holding

(Source: GuruFocus)

  • S&P credit rating: AA stable = 0.51% 30-year bankruptcy risk (the probability of losing all your money with this company)

I’m not worried about merely getting a reasonable price for CSCO and ADP, because the overall quality and value that I locked in over the last three weeks would be sensational in a normal market, but is superb given our current bubble.

Company Safety Score (Out of 5) Quality Score (Out of 11) Investment Decision Score Current Price Fair Value Discount To Fair Value DK Rating (Today’s Price)
SNA 5 11 97% $151.15 $171 12% Potentially Good Buy
EPD 5 11 97% $18.39 $34 46% Potentially Ultra-Value/Anti-Bubble Buy
ADP 5 11 90% $139.55 $135 -3% Hold
MO 4 9 94% $43.97 $62 29% Potentially Strong Buy
BNS 4 9 100% $43.08 $60 28% Potentially Strong Buy
INTC 5 10 90% $48.62 $55 12% Potentially Good Buy
BTI 4 9 97% $33.84 $67 49% Potentially Ultra-Value/Anti-Bubble Buy
SEIC 5 11 100% $52.43 $60 13% Potentially Good Buy
PM 4 10 100% $79.12 $90 12% Potentially Good Buy
OMC 5 10 97% $54.05 $71 24% Potentially Strong Buy
CM 4 9 100% $74.24 $87 15% Potentially Good Buy
ABBV 4 10 97% $97.11 $137 29% Potentially Strong Buy
SNA 5 11 97% $151.15 $171 12% Potentially Good Buy
CSCO 5 10 90% $42.13 $46 8% Potentially Reasonable Buy
PM 4 10 100% $79.12 $90 12% Potentially Good Buy
Average 4.5 very safe (2.5% dividend cut risk in this recession) 10.1 (SWAN) 96.4% A excellent 19.8% Potentially Strong Buy

(Sources: Dividend Kings Daily Blue-Chip Deal Video Library, Dividend Kings Research Terminal)

But I don’t merely buy reasonably to attractively priced blue-chips just because of their quality and dividend safety. Just take a look at these overall fundamentals.

Fundamental Stats On These 13 Phoenix Portfolio SWANs

  • Average quality score: 10.0/11 SWAN quality vs. 9.6 average dividend aristocrat
  • Average dividend safety score: 4.5/5 very safe vs. 4.5 average dividend aristocrat (about 2.5% dividend cut risk in this recession)
  • Average FCF payout ratio: 57% vs. 64% industry safety guideline
  • Average debt/capital: 48% vs. 46% industry safety guideline vs. 37% S&P 500
  • Average yield: 5.1% vs. 1.8% S&P 500 and 2.1% aristocrats
  • Average discount to fair value: 21% vs. 42% overvalued S&P 500
  • Average dividend growth streak: 19.8 years vs. 41.8 aristocrats, 20+ Graham Standard of Excellence
  • Average five-year dividend growth rate: 9.2% CAGR vs. 8.3% CAGR average aristocrat
  • Average long-term analyst growth consensus: 6.8% CAGR vs. 6.4% CAGR S&P 500
  • Average forward P/E: 13.1 vs 16.6 historical vs. 23.3 S&P 500
  • Average earnings yield (Chuck Carnevale’s “essence of valuation”: 7.6% vs. 4.3%% S&P 500)
  • Average PEG ratio: 1.93 vs. 2.44 historical vs. 2.74 S&P 500
  • The average return on capital: 210% (88% Industry Percentile, High Quality/Wide Moat according to Joel Greenblatt)
  • Average 13-year median ROC: 221% (relatively stable moat/quality)
  • Average four-year ROC trend: +4% CAGR (relatively stable moat/quality)
  • Average S&P credit rating: A- vs. A- average aristocrat (7.5% 30-year bankruptcy risk)
  • Average annual volatility: 24.4% vs. 22.5% average aristocrat (and 26.3% average Master List company)
  • Average market cap: $81 billion large-cap
  • Average four-year total return potential: 5.1% yield + 6.8% CAGR long-term growth +4.8% CAGR valuation boost = 16.7% CAGR (8% to 26% CAGR with an appropriate margin of error)
  • Average probability-weighted expected average four-year total return: 5% to 21% CAGR vs. 1% to 6% S&P 500
  • Average Mid-Range Probability-Weighted Expected 5-Year Total Return: 12.5% CAGR vs. 3.2% S&P 500 (288% more than S&P 500)

How smart would it be to buy all 13 of these companies in equal amounts today?

Investment Decision Score On These 13 Phoenix Portfolio SWANs

I never recommend or buy any company without first seeing how reasonable and prudent it is relative to the S&P 500 from the perspective of valuation and the three core priorities of all successful long-term investors.

  • Valuation: 21% undervalued = potentially strong buy = 4/4
  • Preservation of capital: A- stable credit rating = 2.5% long-term bankruptcy risk = 7/7
  • Dividend return potential: 5.1% yield + 6.8% CAGR long-term growth rate = 30.5% five-year dividend return vs. 10.5% S&P 500 (191% more) = 10/10
  • Total return potential: 12.5% CAGR probability-weighted expected return vs. 3.2% CAGR S&P 500 (288% more) = 10/10
  • Relative Investment Score: 100% vs 73% S&P 500
  • Letter Grade: A+ exceptional vs C market-average

Investment Decision Score On These 13 Phoenix Portfolio SWANs

Goal 13 Phoenix Portfolio SWANs Why Score
Valuation Potentially Strong Buy 21% undervalued 4/4
Preservation Of Capital Excellent A- stable outlook credit rating, 2.5% long-term bankruptcy risk 7/7
Return Of Capital Exceptional 30.5% of capital returned over the next 5 year via dividends vs 10.4% S&P 500 10/10
Return On Capital Exceptional 12.5% PWR vs 3.2% S&P 500 10/10
Relative Investment Score 100%
Letter Grade A+ exceptional
S&P 73% = C (market-average)

(Sources: Dividend Kings Investment Decision Tool)

An equally weighted portfolio of these 13 world-class SWANs is as close to a perfect collection of dividend growth stocks as exists in today’s extremely overvalued market.

Ok, so the math looks great on these companies, and a very safe 5.1% yield and 12.5% CAGR probability-weighted expected returns sound awesome.

But what actual evidence do we have that these companies can deliver such returns?

Historical Market Returns On These 13 Phoenix Portfolio SWANs

We can look back as far as January 2000 to see how this portfolio would have performed in the past.

In January 2000:

  • Most of these companies were undervalued (most value stocks were) just like today
  • The market was tech crazed (as it is today)
  • S&P 500 valuation was irrationally high (just like today)

What happened to these 13 companies the last time market fundamentals and valuations were similar to today?

Exactly what Howard Marks predicted would happen.

(Source: Imgflip)

Howard Marks (and every other legendary value investor) would have predicted strong mean reversion as long as fundamentals remained intact (which they did). So not surprisingly this happened.

Total Returns On These 13 Phoenix Portfolio SWANs Since 2000 (Annual Rebalancing)

(Source: Portfolio Visualizer)

  • Over 20 years 91% of returns are determined by fundamentals and valuation
  • 12.5% CAGR expected long-term returns today vs. 11.1% CAGR over the last 20 years
  • 3.7% yield in 2000
  • 50% yield on cost today
  • 13.9% CAGR dividend growth

Do you know what happens when you pay insane valuations for stocks? 10 years of negative returns.

Do you know what happens when you buy great blue-chips at significant discounts to fair value?

(Source: Imgflip)

You earn double-digit returns, which is precisely what the Gordon Dividend Growth Model says is likely with these 13 companies over the coming five years.

Gordon Dividend Growth Model: The Physics Of Finance

(Source: Ploutos)

Keep in mind that in January 2000

  • CSCO was in an epic bubble
  • INTC was in an epic bubble
  • ADP was in an epic bubble
  • SEIC was in a bubble

Yet these 13 companies still managed to deliver almost double the S&P 500’s returns.

Today none of these companies are in a bubble and ADP is just 4% overvalued.

Volatility Risk Analysis

All my recommendations should be owned within a well-diversified and prudently risk-managed portfolio.

Owning just 13 companies, even SWANs like these, isn’t prudent for most people.

  • 7.7% in each company is slightly above my risk management guidelines
  • 23% exposure to finance and tech is also slightly above the guidelines

And let me be very clear that SWAN does NOT mean “won’t fall significantly at times”.

SWAN = sleep well at night = 100% pure fundamental quality, absolutely nothing to do with volatility

Volatility is not a measure of risk…. Risk comes from the nature of certain kinds of businesses. It can be risky to be in some businesses just by the simple economics of the type of business you’re in, and it comes from not knowing what you’re doing.

And if you understand the economics of the business in which you are engaged, and you know the people with whom you’re doing business, and you know the price you pay is sensible, you don’t run any real risk.Warren Buffett (emphasis added)

SWAN quality is an assessment of fundamental risk, the only kind that can ultimately cost you 100% of your capital.

What kind of volatility did investors have to deal with to earn 11% CAGR returns over 20 years?

(Source: Portfolio Visualizer)

  • Fell 17% less during tech crash (including dividends) but still fell
  • Fell 5% less during Great Recession but still fell…a lot
  • Fell 6% more during March Crash (which is why they are on sale today and I recently bought them)
  • Recovered record highs 58 months (4 years and 10 months) earlier after the tech crash
  • Recovered record highs 22 months earlier after Great Recession

Good long-term investors learn to accept volatility as the cost of owning risk-assets and earning superior returns over time.

Great long-term investors learn to embrace and harness volatility to earn returns that speculators and gamblers can only dream of over time.

Future Volatility Risk Analysis

JPMorgan’s economists are considered one of the 16 most accurate out of 45 tracked by MarketWatch.

And these blue-chip economists have compiled various stress tests that forecast how companies and portfolios will react during the various risk factors facing us today, both in the short and long term.

(Source: JPMorgan Asset Management)

If financial stress increases such that junk bond credit spreads increase 7.5%, that would be bad for stocks, including these 13 SWANs.

If 10-year Treasury yields rise 1.5% quickly (to 2% 10-year yield) that likely means the economy is recovering quickly and that’s good for stocks, more so for these 13 SWANs.

(Source: JPMorgan Asset Management)

If the pandemic goes better than expected, that’s good for stocks, and these 13 are expected to outperform by about 1%.

If a vaccine is delayed until 2022 and a second wave triggers a double-dip recession, stocks are expected to fall about 22%, and these 13 about 2.5% more.

If the GOP takes back control of every branch of government that’s expected to be marginally good for stocks, and these 13 are expected to enjoy the same 3% gains.

If Sanders or Warren were to become President, the Democrats took over the Senate and hiked corporate taxes to 35% (now impossible since Biden is the nominee and proposing 28% corporate taxes), stocks would be expected to dip about 4% and the same with these 13 SWANs.

If the trade deal collapsed and the US imposed 25% tariffs on 100% of Chinese imports and Beijing retaliated, then JPMorgan expects stocks to fall about 8%, and these Phoenix SWANs 9%.

If inflation were to rise above 2.5% and stay there, then JPMorgan thinks the Fed could hike short-term rates too fast and too far, triggering a mild recession.

Which would cause stocks to fall by about 8% and these 13 about 7%.

Not even the bear market scenario should scare any prudent long-term investor from owning any equities because such downturns are historically normal, healthy, and great buying opportunities.

(Source: Guggenheim Partners, Ned Davis Research)

If You Can’t Stomach 50% Declines in Your Investment You Will Get the Mediocre Returns You Deserve – Charlie Munger

Fortunately, there is a way to turn any collection of SWAN stocks into an ultra-SWAN retirement portfolio.

Ultra SWAN Version Of This Portfolio

Due to these companies’ superior expected returns, those with a large enough portfolio have the luxury of weighting their portfolios with more bonds and cash. Here is an example of an Ultra-SWAN retirement portfolio made up of these 13 SWANs.

  • 25% bonds
  • 25% cash
  • 50% equally allocated to each of these 13 Phoenix SWANs

Superior Yield Despite 17% More Bond Allocation

(Source: JPMorgan Asset Management)

Why bother building your own portfolio? Because cookie-cutter indexes are never tailored to your specific needs.

Adding 13 SWANs with an average yield of 5.1% allows even a 50/50 stock/bond portfolio to yield 0.8% more than a 60/40 balanced portfolio.

It also allows you to earn superior total returns, potentially with less volatility.

50/50 13 Phoenix SWAN Portfolio Total Returns Since 2000 (Annual Rebalancing)

(Source: Portfolio Visualizer)

Will bonds deliver lower returns than in the past? Absolutely. Will this Ultra-SWAN portfolio likely still beat a 60/40 portfolio? Very possibly, given the superior expected returns of its equity allocation.

This portfolio achieved 27% higher annual returns with 10% lower volatility compared to a more aggressive 60/40 portfolio.

It delivered far smoother returns and 58% superior excess total returns/negative volatility (Sortino ratio = reward/risk ratio).

Sleeping Like A Baby No Matter What The Economy Or Stock Market Does

(Source: Portfolio Visualizer)

How does suffering a 50% smaller decline than the S&P 500 during the Great Recession, the second worst market crash in US history sound? Like a bunker SWAN retirement portfolio? It does to me.

How does recovering record highs seven months faster after the Great Recession, despite owning 17% fewer equities, which naturally roar higher following economic downturns sound? To me, it sounds like the kind of superior volatility-adjusted returns that only smart active management can deliver.

How about matching a 60/40 portfolio for March crash performance (-12% vs -34% for S&P 500) sound despite owning blue-chips that have been harder hit in this unprecedented recession?

That’s not luck, its pure safe portfolio construction, and SWAN quality company selection.

Or to put another way, it’s not magic, it’s just math.

Future Volatility Risk Analysis

(Source: JPMorgan Asset Management)

If financial stress rises, your extra bond/cash allocation will insulate you to the point where you’ll hardly notice the dip.

If interest rates surge, then JPMorgan still expects the 50% SWAN allocation to deliver decent returns.

(Source: JPMorgan Asset Management)

If the pandemic goes better than expected, this portfolio is expected to still deliver decent gains.

If the pandemic goes poorly, it’s expected to fall less than half as much as being 100% invested in these 13 SWANs.

If the Republicans sweep the November elections, the portfolio is expected to post tiny gains.

If President Sanders and a Democrat Congress had jacked up corporate taxes to 35%, the losses would likely have been hardly noticeable.

If the trade deal falls apart, JPMorgan expects this portfolio to suffer a modest 4% dip.

If inflation soars and the Fed triggers a mild recession, then the heavier exposure to rate-sensitive bonds would be expected to result in a minor 4% loss, less than half the 100% stock version of this portfolio.

The point is that proper diversification and asset allocation, not market timing, is the solution to the risks facing us today, as well as all the unknowable risks of tomorrow.

My Entire Phoenix Retirement Portfolio

Here are all the blue-chips I’ve bought along with the Dividend Kings Phoenix Portfolio since April 4th. That’s when I was able to get money into my broker and start buying again after running out of funds in early March.

(Source: Morningstar) 21% cash/bond allocation not shown

Is owning so many companies (48 in this portfolio) ideal for most people? No. 15 to 30 companies works best for most investors.

Is this basically constructing a smart-beta ETF? Absolutely.

Am I likely to outperform the lower-yielding, slower-growing, and more overvalued S&P 500? My benchmark is actually NOBL, but yes, very likely.

Why? Because of fundamentals like this.

Fundamental Stats On My Phoenix Retirement Portfolio

  • Average quality score: 9.9/11 SWAN quality vs. 9.6 average dividend aristocrat
  • Average dividend safety score: 4.6/5 very safe vs. 4.5 average dividend aristocrat (about 2.5% dividend cut risk in this recession)
  • Average FCF payout ratio: 54% vs. 64% industry safety guideline
  • Average debt/capital: 40% vs. 44% industry safety guideline vs. 37% S&P 500
  • Average yield: 3.6% vs. 1.8% S&P 500 and 2.1% aristocrats
  • Average discount to fair value: 10% vs. 41% overvalued S&P 500
  • Average dividend growth streak: 19.3 years vs. 41.8 aristocrats, 20+ Graham Standard of Excellence
  • Average five-year dividend growth rate: 10.4% CAGR vs. 8.3% CAGR average aristocrat
  • Average long-term analyst growth consensus: 10.1% CAGR vs. 6.4% CAGR S&P 500
  • Average forward P/E: 18.0 vs 20.0 historical vs. 23.2 S&P 500
  • Average earnings yield (Chuck Carnevale’s “essence of valuation”: 5.6% vs. 4.3%% S&P 500)
  • Average PEG ratio: 1.78 vs 1.98 historical vs. 2.74 S&P 500
  • The average return on capital: 95% (84% Industry Percentile, High Quality/Wide Moat according to Joel Greenblatt)
  • Average 13-year median ROC: 122% (recession impact)
  • Average four-year ROC trend: +3% CAGR (relatively stable moat/quality)
  • Average S&P credit rating: A- vs. A- average aristocrat (7.5% 30-year bankruptcy risk)
  • Average annual volatility: 26.6% vs. 22.5% average aristocrat (and 26.3% average Master List company)
  • Average market cap: $246 billion mega-cap
  • Average four-year total return potential: 3.6% yield + 10.1% CAGR long-term growth + 2.1% CAGR valuation boost = 15.8% CAGR (7% to 24% CAGR with an appropriate margin of error)
  • Average probability-weighted expected average four-year total return: 4% to 19% CAGR vs. 1% to 6% S&P 500
  • Average Mid-Range Probability-Weighted Expected 5-Year Total Return: 11.9% CAGR vs. 3.2% S&P 500 (267% more than S&P 500)

There is no question that the companies I’ve been buying during this recession are some of the highest quality on earth, as seen by their

  • The average quality score is slightly higher than the dividend aristocrats
  • The average safety score is slightly above the dividend aristocrats’
  • Impressive dividend streaks (one year away from matching Graham’s standard of excellence)
  • Safe payout ratios
  • Safe debt levels
  • Superior returns on capital (top 16% of their respective industries)
  • Stable profitability over time (actually improving 3% CAGR over the past five years even with this recession)
  • A- average credit rating = 2.5% 30-year bankruptcy risk and equal to that of the dividend aristocrats

What’s more, the average yield of 3.6%, even including several pure growth stocks, is double that of the S&P 500 and 1.5% above the dividend aristocrats.

Show me an index fund with 3.6% yield, 10.1% CAGR analyst long-term growth consensus and that’s 10% undervalued in this bubble?

Such a fund doesn’t exist. Show me an ETF that has a probability-weighted expected five-year return of about 12% CAGR? Such a fund doesn’t exist.

Show me a fund that can match all the important core priorities of a prudent long-term income investor including

  • Equal or better safe yield
  • From equal or better quality companies
  • With equal or better long-term growth expectations from analysts
  • That is at least 10% collectively undervalued right now

By all means, if you know of such an ETF or mutual fund, then invest in it. But as far as I know, the only way to achieve such fundamentals is by building your own portfolio.

Dividend Sensei’s Retirement Phoenix Portfolio Weighted Fundamentals

The above fundamental stats are for an equally weighted portfolio, and my portfolio isn’t equally weighted.

Dividend Kings Portfolios

Portfolio Yield Weighted LT Growth Estimate (Morningstar) Weighted Discount To Fair Value (Morningstar) LT Return Potential (Ignoring Valuation) 5-Year Valuation Boost 5-Year Total Return Potential Probability-Weighted Expected Return
DK Phoenix 2.7% 12.0% 6% 14.7% 1.3% 16.0% 12.0%
DS Phoenix 3.4% 13.0% 9% 16.4% 1.9% 18.3% 13.7%
Daily Video Phoenix 4.7% 6.4% 14% 11.1% 3.1% 14.2% 10.7%
Fortress 3.0% 10.6% 4% 13.6% 0.8% 14.4% 10.8%
Deep Value Blue-Chip 5.6% 9.8% 25% 15.4% 5.9% 21.3% 16.0%
High-Yield Blue-Chip 6.5% 5.9% 23% 12.4% 5.4% 17.8% 13.4%
$1 Million Retirement Portfolio 4.6% 5.6% 12% 10.2% 2.4% 12.6% 9.5%
Average 4.4% 9.0% 13% 13.4% 3.0% 16.4% 12.5%

My personal Phoenix retirement portfolio is slightly more heavily weighted to growth, thus the 13.0% CAGR long-term growth forecast from Morningstar.

The yield is still 3.4% which is extremely generous, but more importantly very safe.

Safety Score Out of 5 Approximate Dividend Cut Risk (Average Recession) Approximate Dividend Cut Risk This Recession
1 (unsafe) over 4% over 24%
2 (below average) over 2% over 12%
3 (average) 2% 8% to 12%
4 (above-average) 1% 4% to 6%
5 (very safe) 0.5% 2% to 3%

Dividend Sensei Phoenix Retirement Portfolio Investment Decision Score

Goal DS Phoenix Retirement Portfolio Why Score
Valuation Potentially Reasonable Buy 9% undervalued 3/4
Preservation Of Capital Excellent A- stable outlook credit rating, 2.5% long-term bankruptcy risk 7/7
Return Of Capital Exceptional 24.2% of capital returned over the next 5 year via dividends vs 10.4% S&P 500 10/10
Return On Capital Exceptional 13.7% PWR vs 3.2% S&P 500 10/10
Relative Investment Score 97%
Letter Grade A excellent
S&P 73% = C (market-average)

(Sources: Dividend Kings Investment Decision Tool)

Even if I were to buy everything I own today, including the overvalued companies, this portfolio would still represent one of the most reasonable and prudent decisions a conservative income investor can make in this overvalued market.

(Source: Imgflip)

The goal of the prudent investor isn’t brilliance, but as Charlie Munger says to be “consistently not stupid” with your hard-earned money.

By avoiding stupid mistakes, the “unforced errors” that can cost us not just a permanent loss of capital, but sleepless nights during market downturns, we turn the casino of Wall Street into our personal long-term ATM.

Yes, Wall Street is indeed a casino, but not because it’s rigged against the average investor.

Wall Street is a place where anything can happen in the short term. But in the long term, probability, statistics, and math always rule.

Or to put another way, in Vegas, over time, the house ALWAYS wins, because the odds are stacked in its favor. So too is it for the disciplined long-term investor, who treats his/her portfolio like a business rather than as short-term speculation.

(Source: Imgflip)

Bottom Line: Bubbles Be Darned, Prudent Long-Term Income Investors Can Always Find A Good To Great Blue-Chip Dividend Deal

(Source: Imgflip)

Rather than attempt marketing timing, which numerous studies show is virtually impossible for even billion-dollar hedge funds to pull off consistently, I choose the easy/lazy man’s road to riches.

(Source: AZ quotes)

Rather than pray for luck and fear every market downturn, I choose to make my own luck by harnessing normal and healthy market volatility.

Rather than accept the average market returns on offer from cookie-cutter index funds, I choose to take the time to construct a SWAN retirement portfolio suited to my personal needs, goals, and risk profile.

Does it take more time to actively manage your portfolio? You bet, though not as much time as you’d think. I construct these portfolios in a matter of about one hour because I have the experience and the proper tools.

Is passive investing the best default alternative? For most people? Who have neither the experience, interest, nor time to follow individual companies? Absolutely.

76% of long-term retirement goal achievement is a function of savings rates over time, not stock selection.

But for those who seek bunker SWAN portfolios that can achieve superior absolute and risk-adjusted results relative to indexes, that’s where the power of efficient tools and sound strategy comes in.

  • The right watchlist will let you see all the best blue-chip bargains at any given time
  • The right approach focused on quality first and prudent valuation & risk management always will keep you from making stupid and potentially very costly mistakes
  • The right risk management for your needs will allow you to sleep well at night no matter what happens next with the pandemic, economy, current events, or stock market

It doesn’t take magic, luck, or market timing to achieve your financial goals. It just takes:

  • A sound strategy,
  • based on quality companies,
  • bought at sensible valuations, and
  • the discipline to ignore the market noise and let competent and trustworthy management work hard for us so one day we don’t have to.

—————————————————————————————-Dividend Kings helps you determine the best safe dividend stocks to buy via our Valuation Tool, Research Terminal, Phoenix Watchlist, and Daily Blue-Chip Deal Videos.

Membership also includes

  • Access to our five model portfolios
  • Daily Blue-Chip Deal Videos 
  • 50 exclusive articles per month
  • Our weekly podcast
  • 20% discount to F.A.S.T Graphs
  • real-time chatroom support
  • exclusive daily updates to all my retirement portfolio trades 
  • Our “Learn How To Invest Better” Library
  • numerous powerful investing tools

Click here for a two-week free trial so we can help you achieve better long-term total returns and your financial dreams, no matter what the stock market or economy is doing. 

Disclosure: I am/we are long SNA, EPD, ADP, MO, BNS, INTC, BTI, SEIC, PM, OMC, CM, ABBV, CSCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Dividend Kings owns SNA, EPD, ADP, MO, BNS, INTC, BTI, SEIC, PM, OMC, CM, ABBV, and CSCO in our portfolios.

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