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The typical HILA (high income, low assets) investor will be quite reasonably drawn to a strategy of “growth now, dividends later.” My only suggestion would be to begin a gradual transition toward dividend stocks well in advance of retirement in case Mr. Market decides not to go along with your well-laid plans.
The Income Method is one solution to ensure that you never need to sell a share to pay your bills. There are certainly other possible solutions. Yet, every investor needs to consider the possibility that share prices will fall across the market and that they will be low for many years. When you’re looking at your favorite charting software, so much of it fails to account for what your returns will look like if you withdraw money. Yet, the reality is that if you are retired, you will be withdrawing money.
Generally speaking, the goal is to find income and income growth opportunities that justify the risks we’re taking. In general, the market isn’t offering many opportunities anymore, which makes sense if we look into credit spreads and the general yield vs. risk picture.
While CSWC has fairly tight dividend coverage and therefore is far from being risk-free, and MLPI is a variable-pay monthly dividend ETF, both investments have very attractive yields backed by strong underlying fundamentals and appear to have no imminent risk of a material reduction in their profits.
From my perspective, higher yields have been one of the few constants this year, making it difficult for investors to find income stocks that pay more than U.S. Treasuries. With markets now pricing in real costs to capital outlays, investors should be prioritizing companies with strong fundamentals and healthy cash flows to weather this market uncertainty.
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