Dividend stocks in retiree's IRA

[curiousgeorge]

A newbie here - please be nice!
One year away from retirement - totally ignorant about investing. Past 1-2 years, have bought in IRA account some divi stocks that are known to be standard core holdings in most retiree accounts. ABT, K, JNJ, MO, PEP, T, WMT, VZ - capital appreciation from cost ranges from 8-28%.

Is it a good idea to sell and capture the gains now; then re-buy when prices are lower, which are supposedly expected soon?

Thanks much!

[yclept]

ABT: P/E too high; I don't know why so many common price ratios are not reported. It's at a 52 week high; not something I would own.
P/E 18.22
PEG NA
Price/Revenue 2.23
Price/Cash Flow NA
Price/Book (MRQ) NA
ROA NA%
ROE NA%
Current Ratio (MRQ) NA
Total Debt/Equity (MRQ) NA

K: P/E too high; D/E awful; most other price ratios too high; not something I would own.
P/E 17.92
PEG NA
Price/Revenue 1.65
Price/Cash Flow 13.11
Price/Book (MRQ) 8.87
ROA 10.08%
ROE 50.34%
Current Ratio (MRQ) 0.89
Total Debt/Equity (MRQ) 259.12

JNJ: too many missing price ratios; it's near a 52 week high. If I were inclined to spend time ferreting out why so many ratios are not reported, I would probably still reject it based on the price level and P/E. This P/E is more reasonable than the ones above, but still higher than many others one can find.
P/E 14.74
PEG NA
Price/Revenue 2.87
Price/Cash Flow NA
Price/Book (MRQ) NA
ROA NA%
ROE NA%
Current Ratio (MRQ) NA
Total Debt/Equity (MRQ) NA

MO: D/E is awful; I would avoid because of business; another poster here, Beerfan, will give you the other side of the story if he happens by.
P/E 13.82
PEG NA
Price/Revenue 2.30
Price/Cash Flow 12.97
Price/Book (MRQ) 10.24
ROA 10.53%
ROE 82.69%
Current Ratio (MRQ) 0.89
Total Debt/Equity (MRQ) 223.62

PEP: P/E too high, D/E too high; a "no" vote from me; trading at near 52 week high.
P/E 18.43
PEG NA
Price/Revenue 1.80
Price/Cash Flow 12.78
Price/Book (MRQ) 4.92
ROA 8.81%
ROE 27.53%
Current Ratio (MRQ) 0.98
Total Debt/Equity (MRQ) 123.71

T: Ratios are all pretty reasonable (though I prefer lower D/E); trading near 52 week high; in my opinion this is the first one worthy of deeper investigation that we've had so far.
P/E 9.25
PEG NA
Price/Revenue 1.48
Price/Cash Flow 4.67
Price/Book (MRQ) 1.64
ROA 7.62%
ROE 18.68%
Current Ratio (MRQ) 0.59
Total Debt/Equity (MRQ) 57.78

WMT: another that doesn't look too bad to me; D/E is higher than I like to fool with.
P/E 13.12
PEG NA
Price/Revenue 0.46
Price/Cash Flow 8.14
Price/Book (MRQ) 2.82
ROA 9.09%
ROE 22.09%
Current Ratio (MRQ) 0.89
Total Debt/Equity (MRQ) 72.75

VZ: P/e too high; D/E too high; near 52 week high; not something I would explore further.
P/E 29.66
PEG NA
Price/Revenue 0.98
Price/Cash Flow 3.70
Price/Book (MRQ) 2.69
ROA 4.90%
ROE 8.92%
Current Ratio (MRQ) 0.91
Total Debt/Equity (MRQ) 156.96

I'm not trying to be mean, I just don't like most of your holdings and if they were mine, I'd them all, just based on fundamental overvaluation.

"Is it a good idea to sell and capture the gains now; then re-buy when prices are lower, which are supposedly expected soon?"

Who is expecting this? I know I am, but I'm nobody. It's probably good to keep in mind that everybody is nobody and it is perilous to pay too much heed to anyone. This is a completely different question, regarding market timing. Some believe timing is impossible. I believe it is possible. There are some links on another thread here that another new investor started. I'll try to find it and revise this post to include a link to that thread.

Edit: this is the thread I was referring to above: notmsnmoney.proboards.com/index.cgi?board=startinvesting&action=display&thread=7453

[curiousgeorge]

Thanks yclept.
See your point on the data. Am perplexed - please remember that I am not an "investor" per se. Just have these divi stocks that, according to a lot of 'nobodys' in the web, are supposed to be standard ‘hold forever’ core holdings in most retiree accounts. Instead of these stocks, what low/moderate risk investments would a retiree put a modest retirement fund.

[yclept]

Here are some stocks that pay high dividends and that should be relatively safe (there is no such thing as "safe"): EVN NLY MFA CMO FTE LPHI CLCT

I do not believe in "buy and hold". We have some of those types of people around here. One of them will surely see this thread and offer you some suggestions. If I believed in that strategy, I would use ETFs, not individual stocks, and I would forget about trying to capture high dividend returns.
For the portion of the portfolio designated as stock holdings, I would start with a couple of general index funds: SPY and QQQ and would probably have about 30% of the stock money positioned there. I would then put a few commodity and sector ETFs into the mix for the other 70% of the stock allocation, things like: XLF, XLE, SMH, XLU, IYR, XLI, GDX, PHO, DBA -- those last two are just a sadistic play on my part, making a bet that the world will always be willing to pay-up rather than starve to death or die of thirst.
A portfolio like that should get you average market returns; it'll go up when the market goes up and down when down. Hopefully it will beat inflation most of the time. In my opinion, it's a piss-poor use of assets, but if one doesn't want to learn to trade, it's probably about as well as one can do. I believe it to be much better than using mutual funds, many of which will put you in the same stuff and will charge you higher fees for the privilege of being under their wing.

[2kids10horses]

wxyz,

Just because someone is about to retire does not mean they should not be in stocks. My father lived to be 97. If he had stopped owning stocks at 65, he would have been out of the market for 32 years.

Maybe you take one or two year's worth of living expenses out and put that in CDs or something, but everyone needs growth.

As a dividend paying stock, SO has a good history of consistent dividends.

[2kids10horses]

Well,

how did he happen to have a portfolio of "blue chip" stocks with absolutely no knowledge? And he knew they were dividend payers. Sounds like he has SOME knowledge.

[yclept]

Um, er, ah, well, I hate to suggest it, but one doesn't have to learn (and in fact shouldn't learn) with real money. The web abounds with free sites where one can track model portfolios -- I use Clearstation.etrade.com and have since long before etrade bought them. They allow tracking of unlimited (so far as I can tell, I mean, I've had hundreds at one time or another, mostly because I was too lazy to go in and delete ones I was no longer investigating). I have a couple of them that date back to 1998 (not the same stocks all that time, but rather updated to follow additions and deletions as screens change). Retirement might be just the time to start learning about trading and investing -- might be the first time in many folks' lives that they have enough time to devote to it. One fault with e-trade is that it doesn't include dividends, which for me isn't a big deal, since I'm not a dividend type of guy! Sometimes I'll buy a stock to capture a dividend (usually a futile exercise as the stock generally reflects the value of the dividend, being overvalued by that much for weeks in advance and drops by the amount of the dividend as soon as the x-d date comes). But generally I don't position assets just to capture dividends, even with big payers like I outlined in my post early this morning.
At any given time I'm usually tracking 20 or 30 portfolios containing probably 10 times the number of stocks I actually own (which right now is 14 since overall I'm trying to get out, but my screens keep dragging me back in). So far being dragged back in is proving to be a good thing, so maybe I'm wrong in trying to get out.

[safeharbor37]

Retirement is not a crucial factor. What is a factor is if you are counting on income from your investments. I've been retired for several years and am withdrawing from my tax deferred savings only because I have to to avoid the penalty. I have some individual stocks and have done better on them than anything else in my portfolio so I'll probably keep buying/selling stocks, but I'm not a trader, I've moved to dividend paying stocks which pay me more than my "fixed" income investments ~ although I keep some there also "just in case."
Every type of investment has advantages and disadvantages which are more or less important depending on ones financial condition. I think it's a mistake to depend on "investments" for income, but rather one should live on ones [more of less] guaranteed income for necessities and then spend the money one makes as it comes in. The big mistake is spending [or obligating] anticipated earnings which are not reliable ~ such as interest rates and profits from the sale of stocks, commodities, or other property which is unreliable.
There are those who don't advise dividend paying stocks in tax deferred accounts and there are reasons for that, but profits, whether from dividends or capital gains, are desirable whether the account is pre- or post-tax.
The general rule is, Don't spend money you don't have, particularly in excess of a reasonable assessment of your earning potential.
My personal ambition is to draw only mandatory withdrawals from my tax deferred accounts forever. The money will then be there in case I really need it. Thus far I have managed to live comfortably on my income without touching the principal, in fact allowing the principal to grow. But it's a personal choice. If you don't plan to live long, spend it as fast as you can ~ or give it away. If you plan to live forever, better make a budget.

[Bluerobin]

Safe, consider transferring the traditional IRA's into a Roth. That is what I did. You pay the tax on the withdrawal now, but transfer the balance to a tax free. Then you can take out if needed, not because you must. Any further earnings are tax free. I got all mine out before SS kicks in next month.

[safeharbor37]

br,
I decided not to go to a Roth because of personal circumstances. A Roth is advantageous if your taxable income is high. The way I figure it, I'll take minimum withdrawals and leave the balance in untouched. and therefore untaxed. If I get in a pinch I'll withdraw whatever I need, but hope to be able to live without that.
The difference is; Do you expect your income taxes to become higher or lower? Generally, I survive by frugality [don't spend a lot of money], so I don't need a lot of money. Now, I could assume that Obama and company is going to stick it to me and try to get the taxes over, assuming that they'll go higher, but I'm not really confident that that is what's going to happen.
My income has gone up since my retirement, but that's not my concern. My concern is if my income goes down, in which my tax burden will go down. If I hit the jackpot and get filthy rich, I'll gladly pay taxes on it.
What I'm trying to get across is that financial planning needs to take into account the circumstances of the person for whom the planning is done and be tailored for those circumstances. I never intended to use my tax deferred savings as income. If I had, I might very well have gone to an annuity. I'm single so I can live the lifestyle I choose [and can afford].
What's good for the goose in not, in every circumstance, good for the gander.

[Bluerobin]

Safe, my income goes up when I get SS. That is why I got it out of the IRA before then. I have no plans for the Roth at present. Sorta like an EF if I need it. However, whatever I get is tax free if needed.

[IPAfan]

I think you've got a decent little set of blue chip dividend payers, but think I agree with the others here that suggest looking into some mutual funds. I think you could keep a core portfolio of stocks that pay increasing dividends and then invest in some funds that also focus on dividend stocks.

Do you want a secret on a cheap and easy way to get a diversified dividend portfolio that will probably perform a tad bit better than the S&P? Look up the top holdings for VIG (Vanguard's dividend appreciation ETF) and just go equal weight with the top 20-30 stocks. That way you avoid paying management fees, you get the dividends paid straight to your account, and get the advantages of investing in individual stocks.

I think that the advice you're getting is a result of your statements that you have no knowledge of investing. The fact that you've focused on blue chips that raise their dividends and are trading at decent valuations compared to the indices shows that you have more investing knowledge than you let on.

I'd keep what you have, but possibly trim some of your holdings to diversify into some other dividend stocks as well. Again, look at the top holdings of VIG for ideas on blue chip, dividend raising companies (since that looks like your style).

EDIT:

Also, you should read the website www.seekingalpha.com. There are a lot of posters who write up dividend growth ideas, and I think many of these would be of interest. Develop a portfolio of 20-25 stocks yielding 3%+, with decent dividend growth rates, and trading at or below market multiples to earnings. You should get similar returns to the market with a bit less volatility and perhaps a tad bit more absolute return.