Sleep Well At Night Stocks

Years ago I started planning my retirement, I tend to become almost obsessive over these things. I calculated that after I started receiving my Social Security at age 70 and a few small pensions that I would need about $30,000/yr. to fill my “income gap”. The “income gap” is the difference each year between my guaranteed income and my life-style income.

I also decided that I only wanted to use my IRA and never touch my taxable account that would someday go to my loved-ones. My taxable account is the result of years savings, good investment choices and the sale of a business.

As I got closer to retirement I wanted to make sure that my IRA could easily generate my “fill the gap” income AND let me “Sleep Well At Night”. I wanted to invest in SWAT stocks and ETF’s.

Here is a great example of one of my long time holdings, Reality Income, ticket symbol “O”. Reality is a commercial REIT, it pays about $2.54 per share in annual dividends.  This represents a dividend yield of 4.67%, a fair bit above the average dividend yield of 3.27% in the general financial sector.

The company just announced its 568th consecutive monthly dividend! Even during the Great Recession, the company paid its dividend! Furthermore, it has increased its dividend 93 times since going public in 1994. Pretty good track record.

This is what I call a SWAT stock.

Reality Income has about 5,000 freestanding, single-tenant properties located in 49 states and Puerto Rico, leased to 251 different commercial tenants, and doing business across 47 industries. I would say that this is pretty well diversified. These properties are leased under very long-term, net lease agreements with the average remaining lease term of 9.6 years.

Here is how Reality Income has done as compared to the S&P 500, see the chart below. It has outperformed the market for at least the last 10 years, and that Does NOT include the dividend!

This stock represents about 2.5% of my well diversified IRA portfolio. The portfolio generates about $38,000 a year in dividends and about 6% in total annual returns (dividends and price growth). I’ll publish more of my SWAT stocks in my IRA later.