How I Would Invest $1,000,000 And Live Of Dividends Forever

Core Insights - The article emphasizes the importance of strategic financial planning for retirement, focusing on capital allocation to businesses with strong financials and reliable earnings to ensure a comfortable retirement [7][8] - It highlights the need for a balanced approach that includes both stable income and moderate growth to combat inflation and maintain purchasing power over an extended retirement period [7][8] Retirement Planning - The average life expectancy in the country is 81.2 years, indicating that retirees may need to plan for potentially two decades of retirement [2] - A stable income from investments is essential, but there is also a need for growth in the portfolio to keep pace with inflation [2] Investment Characteristics - Key characteristics of a retirement portfolio should include durable businesses, strong balance sheets, high-quality non-cyclical earnings, and safe, growing dividends [2] - Retirees often make the mistake of chasing high dividend yields without considering the associated risks, as seen in companies like Altria and British American Tobacco [2][3] Portfolio Construction - A sample retirement portfolio is constructed with a projected yield of 5%, generating an annual income of $50,133 before taxes [6] - The portfolio includes a mix of individual stocks and one ETF for diversification, focusing on companies with strong dividend growth and capital appreciation potential [4][6] Individual Stock Analysis - Schwab US Dividend Equity ETF is highlighted for its sustainable and high-quality dividends, with a return on equity of 37.3% [6] - Enterprise Products Partners offers a stable business model with a distribution yield of 7.85% and expected EPS growth of 5% annually [6] - Realty Income is noted for its stable business model and diversified tenant base, providing a 5.8% dividend yield [6] - Allianz, the only European stock in the portfolio, has a solid dividend yield of 4.7% and is expected to grow its EPS by 6.3% over the next three years [6] - AbbVie, despite facing challenges, has a diversified portfolio and a 3.6% dividend yield with expected growth of 6.5% [6] - NextEra Energy is recognized for its commitment to clean energy and a well-covered dividend yield of 3.32% [6] - Ares Capital, as a Business Development Company, offers a high dividend yield of 9.6% but has seen a decrease in distribution [6] - Texas Instruments is noted for its strong dividend growth of 12.8% over the past five years [6] - PepsiCo and McDonald's are highlighted as defensive picks, with steady growth and reliable dividends [6] Conclusion - The article concludes that achieving financial freedom and a comfortable retirement is possible through careful planning and strategic investment in quality businesses [8]