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Dave,

I will tell you what we do and you can see if pieces of it might help you decide.

Our dividend core, companies we hold for dividends, currently yields 3.67%. Our dividend core is 29.76% of portfolio and includes ABBV, CAT, EMR, JNJ, KMB, KO, MO, NLY, O, PAYX, PLOW, SAFT, SYY, UTX and VZ. It more than covers the short-fall between our expenses and our income.

During the 2007 to 2009 market slide, we held most of these companies plus 9 others. Only one of the companies we held reduced their dividend during the down-turn, Pfizer (PFE).

Our dividend income has risen every year since we retired in 2005 including during the down-turn.

The only mutual funds we own are 2 bond funds which are only 3.37% of our portfolio.

We tried having "professional management" twice: in the mid-1990's and in 2011. Both times were for a portion of our portfolio. In 1996, the "pro" wanted me to sell all our stock like Intel (INTC), Microsoft (MSFT), Paychex (PAYX), etc. During the one year I let this run, our portfolio trounced the mutual funds. The 2011 experiment was about the same. It simply did not pan out at all.

My thought on the 2011 try was to have things managed for DW if/when I check-out. I decided that a list of instructions on what to do/sell and what to buy (S&P 500) will take care of 100% of her decisions.

If you do decide to create a dividend portfolio, do not chase yield. It too many cases, higher than normal yields are emblematic of internal company problems.

Look first for companies that have a long track record of increasing their dividend every year, have plenty of cash flow to cover their dividend and have solid businesses.

A $300K portfolio should be able to reliably provide $9,000 to $10,500 of cash per year. Divide by 12 and you get $750 to $875 per month. It should increase each year.

Since many of these companies pay quarterly dividends, the payments per month will be "lumpy."

As a retiree, you should have a cash cushion outside of your portfolio. This should be 3 to 5 years of the short-fall between your expenses and your income. We keep ours in passbook savings and in a Roth IRA.

The cash cushion allows you to live without being concern about market gyrations or lumpy dividend payments.

Does that help you?

Gene
All holdings and some statistics on my profile page
http://my.fool.com/profile/gdett2/info.aspx
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