Collecting AT&T Dividends in Retirement

It seems there are never a short supply of articles and blog posts on whether or not AT&T (T) deserves a position in your portfolio and it is either a love it or hate it topic. From my perspective, whether you do or do not own T depends on each person’s portfolio, investment strategy or financial position in life as no two people are in the exact same situation.

However, I do know of one person that utilizes the ownership of T for generating income in his retirement in a way that is slightly unique from what I have seen amongst other investors. The person I am referring to is my father-in-law.

If you ask any investor what the dividend yield is today and most would say around 7.3%. Ask my father-in-law and he would say 6%. It does no good trying to correct him (I tried) because he has a different spin on it and once you hear his story 6% will make sense.

When banks started paying miserly interest on CDs and money markets my father-in-law needed a better yielding investment to better fund his retirement and so began his hunt for better yield. One of the investments he chose was to invest a portion of his retirement savings into T with their oversized yield. Instead of going through a brokerage he opened a T DRIP account that is administered through Computershare. His reasoning for this was very simple, he knew that T had little dividend growth and had potential for not increasing at all. To compensate he had one simple need; to find a way to automatically collect 80 to 85% of the dividend and reinvest the remaining 15-20%. Essentially he resolved himself to live off a 6% yield and that is where the DRIP program steps in.

Computershare allowed him to do exactly what he was looking for that no brokerage was able to do. When setting up his account the investment form ask how you would like your dividends reinvested; partial or full. It was simple math at this point he just calculated how many whole shares were 85% of his investment that would pay out cash dividends. From there he would adjust the number annually guaranteeing a bigger paycheck every year.

The only reason I am aware of this technique was due to my father-in-law’s age and the fact everything moved to being online that he had recently asked I take over adjusting his annual percentage mix which I have proudly been doing on his behalf since 2019. To this day, he refuses direct deposit , loves to receive the check and has my wife drive him to the bank to cash it. The man truly loves his dividend checks.

One could argue you could follow a similar strategy simply using a 4 or 5% rule for your portfolio but this is about how he is generating growing income with one stock and not an entire portfolio. I actually think this approach is brilliant for high yield/low growth dividend payers. If my brokerage ever allowed a % payout I just might embrace it during my retirement.

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