(FORTUNE Magazine) – DON'T JUST DO something, sit there. That's been my style of portfolio management since the late Seventies, when I began investing for retirement. I wanted a collection of stocks I could treat with benign neglect in the twilight years, the investor's equivalent of a zero-maintenance sailboat with a fiberglass hull. Compulsive types who pore over Wall Street research and ceaselessly trade in the quest for capital gains might well characterize my approach as ignorance and sloth. All I have done is buy and hold blue chips, many of them consumer stocks with household names, selected according to one overriding principle. I insist on strong companies that regularly raise their dividends fast enough to offset inflation. The idea is to safeguard my living standard when I'm swinging in a hammock in the decades ahead and spare myself the fate of those who put it all in bonds. ( If you had hired a professional to manage your money, you would sack him for making the number of investing moves I have made since 1987, namely none. Yet the results suggest that ignorance and sloth can work. From the end of 1981 through August of this year, the market value of my holdings grew 325%, outdistancing a 278% rise in Standard & Poor's 500-stock index. That's no match for the superstars, but it puts this hobby investor cumulatively ahead of most equity mutual funds. The rabbit I really chase, however, is the consumer price index, which I've left in the dust. Since 1982 my dividends have risen more than twice as fast as inflation, and the portfolio's 3.5% yield in early September exceeded the market's 2.8%.

Powerful reasons, it might appear, for continued passivity. But several developments have jolted me into a reassessment. For one, the battering of brand-name stocks has helped shrink my holdings 3% in a year when the S&P 500 is up by 5%. Meanwhile, deregulation has undermined the premise on which I loaded up with ''safe'' electric utility and telephone stocks. I long assumed that when I retired and received a large lump sum from my employer's savings and pension plans, I could invest the fresh money with no further research. I'd simply expand my holdings of the same list of companies that has served me well. But in the unforgiving competitive climate of the Nineties, even a laid- back investor has to do a little work. I would have postponed the exercise but for the urging of John Curran, editor of this issue. Curran suggested that for the first time I seek advice from the pros. Many of my stocks don't elicit screaming buys from the 20-odd market strategists and security analysts I talked to, but they get a strong nod of approval. Since I'm striving to maximize dividend income rather than beat the market in the next 12 months, that's good enough for me. ON THE BASIS of these interviews, I have decided to leave virtually unchanged the money I've already invested. I'll reactivate my lapsed brokerage account and sell only two of the 14 stocks that I now own, which represent less than 2% of the value. It's a different story with the lump sum that will fall into my lap upon retirement. If I were making my moves today, I would put two-thirds of this fresh money into only eight of the stocks I now own. I would spread the rest among four new companies turned up while preparing this article. The table on a subsequent page summarizes my experience with the stocks I own and shows how I'd invest an extra $500,000. I could, of course, avoid a lot of fuss by putting the new money in the no- load Vanguard Value Index portfolio, an index fund made up of the higher- yielding two-thirds of the S&P 500 and recently delivering 3.1% in dividend income after all fees and expenses. The managed Vanguard Equity Income fund was paying an even better 4.3%, and the USAA Mutual Income Stock fund -- a no- load based in San Antonio that rates five stars from Morningstar -- topped this with 4.9%. But yields like these don't deter me from my do-it-yourself approach. Such mutual funds require constant vigilance by their managers, and you can't be sure how long they will be around. Besides, it's fun to be the direct owner of elite companies like mine, which require little vigilance. I like getting quarterly reports from mighty CEOs who quake at the notion that folks like me might sell out. In my search for companies that produce dependable dividend income, I have inevitably been attracted to classic defensive stocks, such as consumer nondurables and drugs. In good times and bad, people eat, wash, and get sick. The quest for above-average yields also prompted me to look at regional banks and major oil companies, as well as regulated monopolies such as electric and local telephone companies. Though computer wonks might tap into on-line databases to hunt for stocks, I'm hooked on the good old reliable Value Line Investment Survey, available in many public libraries, which gives a company's dividend history going back a decade. Fine-tuning my stock holdings has forced me to reappraise each of the categories I own. Here are my decisions concerning each category, in ascending order of the intellectual effort expended:

-- THE NO-BRAINER. In the Nineties, there's no such thing as a worry-free company. But 3M, so dedicated to innovation that it hires researchers right out of college at an undiminished pace in a soft economy, comes closest. Says security analyst Eugene Glazer of Dean Witter, who recommends the stock: ''The product line is so diversified that you don't get caught by a catastrophe in any one product.'' In a new portfolio of 12 stocks bought with a retirement lump sum, I'd put more than a tenth of the money here.

-- REGIONAL BANKS. Asked about opportunities for dividend growth, Michael Sherman, vice chairman of Omega Advisors, an investing partnership, answers in a single word: ''Banks.'' Why? ''Nobody wants to buy them. But their balance sheets have been cleaned up, their capital ratios have never been higher, and their dividend payout ratios are low.'' Which banks? ''All the regionals,'' says Sherman. On the strength of such advice, I'd use some retirement money to fatten my holdings of Philadelphia's CoreStates Financial, which has lifted its dividend 167% since 1982 and recently yielded a comforting 4.2%. To add diversity I'd take on a second regional. I found several that combine financial strength with good yields, among them National City Corp. in Cleveland, Boatmen's Bancshares in St. Louis, and First of America Bank in Kalamazoo, Michigan. I've picked PNC Bank, a Pittsburgh outfit with $51 billion in assets, partly because it operates in my part of the country and I've heard good things about it. Bank analyst John Leonard of Salomon Brothers calls PNC a ''very solid situation.''

-- OIL COMPANIES. Crude prices are weak, and the stocks are close to their highs. A poor time to buy -- unless you're in for the long term like me and crave the 4.4% dividend yield currently available from Exxon, which has mailed me ever bigger checks throughout the past 15 years. Bernard Picchi, a security analyst at Kidder Peabody, has a ''hold'' on Exxon for the crowd seeking superior price performance in the near future, but sees ''no problem whatever'' in recommending it for those who plan to stay in. I would pump additional Exxon stock into the lump-sum portfolio. But to broaden my petroleum exposure and get an even higher 4.9% yield, I'd move for the first time into a foreign stock, Royal Dutch Petroleum. Owning the larger partner in the Anglo-Dutch Shell group provides a hedge by putting me in a company that's playing a very different game. Exxon, which has allowed its crude production to slip behind Royal Dutch/Shell's, puts its priority on profits -- ''delivering the goods to the shareholder,'' as Picchi admiringly puts it. I have no fears that Exxon is fading away. ''They'll probably exist forever,'' says oil analyst Frederick Leuffer Jr. of Bear Stearns. But Leuffer, who rates Exxon only a hold, considers Royal Dutch a strong buy. Over the next three years, he says, recent discoveries will give it ''the fastest production growth of the large international oil companies.''

-- CONSUMER BRANDS. This year's plunge in Kellogg, one of my mainstays, plus lesser declines in Heinz and Procter & Gamble, produces mixed emotions. I feel a pang of nostalgia at yesterday's lofty prices but a leap of anticipation at the chance to load up on more for less. That's my intent despite talk that the brand-name bonanza is over. Analyzing my past investing performance from an office overlooking New York City's Battery Park, G. Graydon Curtis of the Brundage Story & Rose investment counseling firm observes: ''You had a tail wind from the fact that companies with pricing power outpaced the market. But you eventually run out of pricing power.'' That may already be happening with ready-to-eat breakfast cereal, which accounts for most of Kellogg's revenues. But I'd be content if future cereal prices merely moved in step with general inflation. Decent dividend increases might keep coming anyway if my companies, which deploy dominant brands in their fields, gain market share in the general consolidation that is widely predicted. Security analyst John McMillin of Prudential Securities says that both Kellogg and Heinz have ''solid international growth prospects that should keep dividends rising.'' Of the two companies, Heinz is the weaker and I'd put less additional money into it. I'd bet more heavily on Kellogg, king of the cereal bowl, which Nomi Ghez, food analyst at Goldman Sachs, considers a ''good buy long term.'' Ghez notes that the world outside the U.S., where Kellogg has half the market, is just beginning to discover cereal. The only cloud is that for four years Kellogg's market share in the U.S. has been eroding. To cover my bets -- and snare more buyers in the cereal aisle -- I would add a company, General Mills, that's been nibbling Kellogg's market share. Vice president William Leach of Donaldson Lufkin & Jenrette has a buy recommendation on the No. 2 cereal maker, which he considers ''one of the highest-quality companies'' in the food group. The rest of the world is also discovering disposable diapers. That's just one reason I would boost my holdings of Procter & Gamble, the colossus of consumer brands that gets half its $30 billion a year in revenues abroad. I'm a bit mystified at the way CEO Ed Artzt is axing brands, and analyst Andrew Shore of Paine Webber says, ''It's too early to declare victory'' in P&G's campaign for everyday low pricing. But Shore, who notes that P&G is No. 1 or No. 2 in three-quarters of its product categories, is bullish. Says he: ''It's one of the most well-positioned companies in the consumer industry for the 1990s and beyond.''

-- DRUG COMPANIES. Buying in this category takes true contrarianism these days. Many of the big names were overbought even before Hillary Clinton blasted the industry's ''unconscionable'' profits, and talk of price control, since disavowed by Clintonites, sent drug stocks into a free fall. But a beaten-down stock in a superb company spells opportunity to Kent Simons, co- manager of the Neuberger & Berman Guardian Fund, which has been scooping up one of my most treasured stocks, Johnson & Johnson. Simons admires Johnson & Johnson's great diversity -- prescription drugs represent only a third of sales and half the profits. In addition to using lump-sum money to lift my stake in this company, I would pick up another drugmaker to take advantage of today's irresistible prices. Which stock you buy depends on how much dividend income you think you'll need after you've drawn your last paycheck. Bristol-Myers/Squibb yields a stunning 5.1%, but James Gipson, manager of Clipper Fund in Beverly Hills, California, has avoided it because of ''patent expiration problems.'' I've picked Pfizer, which yields only 2.7% but has a shelf crammed with new drugs.

-- REGULATED INDUSTRIES. Extreme selectivity is the watchword here. In varying degrees, utilities whose rich dividends once fed widows and orphans are caught up in the maelstrom of deregulation and technological change. I would drop one of the five companies I own (Centerior Energy), add to only one (Southern Indiana Gas & Electric), and sit with my holdings of the other three in the hope that some of them will turn out winners. It's already looking that way for Enron, which has been transforming itself into a one-stop supermarket for natural gas -- producer, marketer, pipeline. This year's 48% stock-price run-up, which cuts the dividend yield to 2%, deters me from further buying. The same goes for AT&T, now at a slim yield. The most tempting stock to add to is Bell Atlantic, which has also roared ahead this year but still yields 4.2%. With favorable treatment from state regulators, this Baby Bell has big plans to string optical fiber, and it's mounting a broad offensive against cable TV companies. Says security analyst William Deatherage of S.G. Warburg: ''If you want a local carrier well positioned in relation to the others, I'd pick Bell Atlantic.'' But it's far from certain that Bell Atlantic will triumph in the unfolding telecommunications and entertainment wars, or that it will prosper even then. ) Bruce Ventimiglia, senior vice president of Quest for Value Advisors, the mutual fund wing of Oppenheimer Capital Group, cites another negative on the Baby Bells. Their stock prices are historically high and are sensitive to interest rates. Hence, they are likely to fall if rates rebound. Ventimiglia would sell Bell Atlantic. My compromise solution is to keep what I have but add no more. Electric utilities look a little safer, provided you pick the right ones. Nobody has figured out a way for interlopers to beam kilowatts through thin air, thereby bypassing the local power company's transmission lines. But under last year's National Energy Policy Act, the government can force a utility to deliver power from a competitor to a municipality that wants to desert the system. There are few defections yet, but a high-cost producer like Ohio's Centerior Energy, still trying to recoup its investment in nuclear plants, is at risk of losing customers. The dividend, cut several years ago, is not safe, and I will have to sell this stock. But deregulation prompts me to buy more of Southern Indiana Gas & Electric. This low-cost producer, which generates virtually all its power from low-cost local coal, is hanging on to its customers. It also serves one of the few metropolitan areas -- Evansville, Indiana -- that gained manufacturing jobs in the past five years. Driving a visitor past a plant where Whirlpool has consolidated some of its refrigerator production, power company CEO Ronald Reherman proudly observes, ''You can see that the parking lot is loaded up.'' The local coal contains lots of sulfur, but a scrubber now under construction at a plant overlooking the Ohio River will put Sigeco, as the company calls itself, in compliance with the Clean Air Act ahead of schedule and at a cost that won't make rates noncompetitive.

This interest-sensitive stock is close to its high, and Barry Abramson of Prudential Securities rates Sigeco only a hold. But he adds, ''It's one of our stronger holds and a very good company.'' Sigeco pays out only two-thirds of its profits in dividends, Abramson notes. That's low by electric company standards, he says, and leaves room for continued dividend growth. Sigeco's 4.7% yield looks like a good way to fatten my portfolio's overall yield. If this means paper losses in the years just ahead, so be it.

-- ODDS AND ENDS. Whoever thought that mighty IBM would wind up in this category? Among the stocks I own, it's the only other one that has cut its ! dividend. It's a technology stock I should never have bought in the first place, but when I got onboard in the late Seventies, the company's invincibility made it a special case. I'm going to sell, but since IBM is now down to less than 1% of my present portfolio, I see no point in hurrying to exit. The time to get out is when investors first become optimistic that IBM is turning around, and my plans won't change even if it restores the dividend. What matters is that IBM's days of guaranteed growth are over. Cigna, the insurer, makes up 2% of my portfolio and has gone almost nowhere price-wise. The dividend has climbed a subpar 34% since 1982, far below my portfolio's average 112% rise. Call it inertia, but I don't want to rat on a company making big commitments to managed health care and starting to make money at it. Since some of my stocks have been falling, it's a good time to ponder the worst that could happen. The prospect of below-market performance from now on doesn't scare me. Since my ultimate aim is to pass these companies on to my heirs, I care little about year-to-year fluctuations in what the fickle market thinks they are worth -- as long as the dividends keep arriving. But what if the dividends stopped? Take my word, holding a diversified portfolio guarantees that they won't. Even at the pit of the Great Depression in 1933, when the S&P 500 had lost seven-eighths of its 1929 value, companies in the index kept paying dividends at nearly half the pre-Crash rate. Meanwhile the cost of living had fallen 24%, which is why the rich could still afford limousines. For a stockholder preparing to become a full-time hammock passenger, that's mighty reassuring.

BOX:

A funny thing can happen when you seek dividends instead of appreciation: You get appreciation anyway.

BOX: MINEFIELDS I'VE STAYED AWAY FROM

If you're like me, you've sworn off the fast-trading pursuit of capital gains as retirement approaches. What you want now is dependable, growing dividend income from what I call ''decaf'' stocks -- those that let you sleep, with no unpleasant surprises as the money rolls in year after year. To winnow such stocks from the thousands that trade publicly, here's what I avoid:

-- Cyclical companies, whose earnings fluctuate from year to year -- Companies in the fast-changing and overbuilt retail sector -- Manufacturing companies vulnerable to Asian competition -- Technology companies, which can look like paragons today and pariahs tomorrow (I learned my lesson with IBM) -- Any company heavily dependent on a single product -- Companies paying unsustainably high dividends that may be due for a cut

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: MY RETIREMENT STOCK PORTFOLIO