Dividend Portfolio Sector Allocation April 2016

Every few months I like to take a look at my portfolio holdings and examine my overall sector allocations to see if they meet my comfort level as to how my capital is distributed. As we all know, market forces affect certain sectors at different times throughout business cycles which can often throw many portfolio balances out of sync. I think we are all familiar with this phenomenon after witnessing the collapse of oil prices and the entire energy sector, and more, with it. At the time it seemed every dividend income investor was buying an oil major, oil driller or oil services company. With attractive valuations and higher yields being offered many dividend growth portfolios began to skew heavily to energy related stocks. This is why it’s vital to assess your holdings from time to time, if nothing else, to simply decide if your allocations are meeting your needs and comfort level. After all I’m a big proponent of ‘sleeping well at night’ which is why I perform these informal audits of my portfolio holdings every few months.

 

In general, without seeking to achieve a specific percentage goal in mind, consumer staples will be my largest sector overall among my three portfolios as a whole. Industrial and health stocks should follow with finance next. I don’t plan to ever hold any tech names in my portfolio and would make energy a very, very small part if I ever decide to pull the trigger within that sector.

 

Below you will find my asset allocation for my dividend stocks. I still may be adding to my Canadian banks going forward but not as aggressively as in months past as valuations and yields are slightly less attractive than earlier this year. I still am looking to increase my health exposure via my REIT holdings in my IRA as well as other names already in my portfolio such as JNJ, ABT, BDX, BCR among others.

 

Brokerage Account

SectorSector %Market Value
Consumer Staples29.70%$40,872.81
Industrial Products20.90%$28,764.39
Medical11.82%$16,270.38
Finance10.63%$14,633.38
Utilities6.98%$9,611.64
Multi-Sector Conglomerates6.57%$9,045.05
Retail/Wholesale5.69%$7,826.05
Basic Materials4.20%$5,775.08
Auto/Tires/Trucks1.93%$2,662.35
Consumer Discretionary1.58%$2,169.07

ROTH Account

SectorSector %Market Value
Finance44.48%$19,883.19
Consumer Staples27.66%$12,365.71
Industrial Products15.79%$7,057.27
Retail/Wholesale6.26%$2,799.34
Multi-Sector Conglomerates3.61%$1,614.23
Medical2.20%$984.08

IRA Account

SectorSector %Market Value
Finance100.00%$9,783.90
Welltower Inc. (HCN)38.99%$3,815.10
Ventas, Inc. (VTR)29.04%$2,841.49
HCP, Inc. (HCP)26.48%$2,591.19
Care Capital Properties, Inc. (CCP)5.48%$536.12

 

And since many of you are following along with baby DivHut since birth here is his portfolio allocation below.

 

Baby DivHut

SectorSector %Market Value
Industrial Products51.28%$3,828.27
Retail/Wholesale15.66%$1,168.99
Consumer Discretionary12.78%$953.72
Medical12.18%$909.61
Consumer Staples8.10%$604.52

How are your stocks allocated? What is your largest sector holding(s) and how do you feel about having a relatively high overweight sector in your portfolio? Please let me know below.

 

Disclosure: Long HCP, VTR, HCN, CCP

32 thoughts on “Dividend Portfolio Sector Allocation April 2016

    • Hi R2R,

      I think you are one of the few who skew towards the financial sector. From what I see most are still heavy in energy but I do agree with you that many financial names still look quite attractive. The Canadian banks are looking good despite their strong come back from their February lows and even WFC still sports some good value. Thank you for sharing your portfolio makeup.

    • Hi SAD,

      Thank you for your kind words regarding my diversification. I feel I have sufficient exposure to the sectors I want despite having no tech nor energy names currently. Like you, I would love to add more health stocks to my portfolio with JNJ, ABT, ABBV and BDX being my top choices. Of course, these days they all look quite expensive which is why I may add to my health REITs in the interim. Thank you for commenting.

    • Hi Dividendsdownunder,

      Not a bad thing to be weighted towards health and financial stocks. Think of the many portfolios out there that are heavy in energy these days. I still favor the consumer staples sector the most and think I’ll always have that as my overall largest sector among all portfolios combined. I just value the resilience and defensive nature of that sector the most. Thank you for stopping by and commenting.

  1. I have the same top 3 with a higher weight in Medical. However, I’ve got a large chunk of energy names and they come in 4th. I’ve been shy of the financial sector after the great depression but I would like to bring up the weight just a little. Thanks again for sharing.

    I just took a peak at mine. The top 4 are:

    Consumer Staples – 25%
    Healthcare – 18.1%
    Industrials – 17.7%
    Energy – 12.2%
    Finance is only 7%.

    • Hi AAI,

      Always love to see how others are weighted. Like you, I plan to keep my consumer staples the largest sector among my portfolios indefinitely. I really value the defensive nature of that sector and it really helps me sleep well at night. Regarding finance, I think there is room for several high quality banks and/or insurance companies. As you know, I think the large Canadian banks are still quite resilient and in the U.S. I like WFC and USB. In the insurance game AFL and CB are two high quality names. Sure, it can all drop like dead weight at any time, but among the many, many names in the financial sector the ones mentioned appear to be as solid as they come. As always, I appreciate your comment.

  2. Thanks for the post! I want to purchase more in the consumer staples category. I like that you are weighted heavy in that sector. Its sort of a toss up in my portfolio between consumer staples, financials/REITs and energy. All are about equal.
    Keep in touch
    LOMD

    • Hi LOMD,

      I think every long term dividend growth investor favors the consumer staples sector. It’s really one of the only sectors that can offer a true defensive position for any portfolio. Sure, stocks can drop dramatically within the space too, but the resilience and very predictable dividend distributions give it that steady and reliable income element we all seek. Thank you for sharing your sector weights.

      • Hi TCF,

        I just decided to show my holdings broken down per individual portfolio but as I answered TDM above if you look at the combined sector weights my aim for maintaining the consumer staples as the largest overall sector remains despite being smaller within the ROTH for example. Perhaps in a few months when I do another update I’ll just combine all the portfolios into one overall distribution as you mentioned. Thank you for commenting.

    • Hi TDM,

      I look at all my portfolio holdings as one big portfolio. As you can see within my ROTH account the finance sector is the largest by far but overall my consumer staples are still the largest holding among all three portfolios combined which is what I am aiming for. Thank you for your question.

  3. Hey DH,

    Nice article man. Reminded me I should really be looking to spread some capital out to other sectors with my huge allocation to financials, especially since they’ve run uo a lot since I bought. Sometimes it seems to be more rewarding to be buying whichever stocks are trading on sale despite all this though. Look forward to reading more.

    DB

    • Hi DB,

      Glad you enjoyed this update. I write these posts every three or four months as I feel it’s important to review your sector weighting to make sure that you are comfortable with your allocations. In the last two years we have seen far too many dividend portfolios skew too heavily into energy as oil kept dropping and individuals kept buying into the sector only to become very overweight and uncomfortable with their positions. I think a quarterly audit is more than enough to see if you are comfortable with your holdings. If nothing else, it forces to you to look at other sectors to equalize your weighting. Thank you for stopping by and commenting.

  4. HCP, I now call it a Financial. Its a Medical first and then REIT. But I”m accumulating it. I like SUN, F, O, owned BA but sold it all. $MO is a good stock to own with medical stocks. Sort of feeding the medical folks. New ones I’m considering OHI, LIke $MAIN, which is Financial.

    • Hi #scrooge,

      I also consider all REITs to be financial stocks. That is why I list them all in one (finance) category on my IRA table. I like MO and OHI from the names you mention in your comment. Of all the REITs that exist I prefer the health REITs the most followed by the apartment REITs such as AVB. There are a lot of great names to invest in but these days it seems that finding good value is harder to come by. I appreciate your comment.

    • Hi Matty,

      Glad you enjoyed this overview. If you are a regular follower of DivHut you’ll see that I conduct these informal audits every three or four months just to make sure that I’m happy with my allocations. Looks like many portfolios we see online are skewed towards financial stocks and energy too. This is why it’s important to check portfolio diversifications to make sure you are comfortable with your current holdings. Thank you for stopping by and commenting.

  5. DH,

    I have similar allocations across all of my portfolios with Consumer Staples (31%) leading the pack followed by Industrials (19%) and Financials (15%) – not counting REITs who I keep separate. After that everyone drops off to 7% or below. I do plan on going after some Healthcare, either via REITs or directly this year. I feel like that sector compliments the other three very well as leading the pack in my portfolio.
    Thanks for the post,
    Gremlin
    Dividend Gremlin recently posted…Recent Buy, April 2016My Profile

    • Hi DG,

      I have to say that I really like your allocations. To have a third of your portfolio in consumer staples really makes it quite defensive should a severe pullback occur in the market. Like you, I plan to keep my top two sector allocations in the consumer staples and industrial stocks. My REIT holdings are still relatively new to my portfolio and I’m not sure how keen I am to hold those names “long term” as I see those businesses having slightly higher risk as they have to contend with business operations and the whims of the real estate market. As always, I appreciate your comment.

  6. It seems like you have a pretty balanced portfolio, DH. 🙂 The top sectors I currently have are finances, materials, and energy. But that’s no surprise since those 3 sectors make up the majority of the stock market in Canada, haha. It’s interesting how investors allocate money differently depending on which country they live in because of geographical ties and the tax incentive of investing in domestic companies.
    Liquid recently posted…Alternative Views on Debt and WealthMy Profile

    • Hi Liquid,

      Thank you for sharing your portfolio allocation. From my perspective it looks very aggressive with material and energy stocks being very volatile but, as you mentioned, it seems to be very in line with the Canadian stock market and overall economy. I guess we mostly invest with what we know and are comfortable with. I’m still liking the Canadian banks going forward though they have all experienced an incredible run up since February and I may want to wait before adding to my positions in TD, BNS and RY. As always I appreciate your comment.

  7. Interesting post, and pretty timely since I’m looking to make my next purchase and want to buy something different. Consumer staples is something I haven’t looked into that much and I’m curious if you have any stocks you consider corner stones to this segment? Unfortunately your list doesn’t list the actual stocks in each category. Thanks for the post.
    Andre @ GoGoAssets recently posted…Book Review: Walden on WheelsMy Profile

    • Hi GGA,

      As you can tell by my overall portfolio allocations I like the consumer staples the most. The reason for this is quite simple. It’s a very defensive sector with reliable growing dividends. Of course, the downside to such a strong sector is the fact that many names rarely go on sale and it seems that a premium is always attached to those stocks. The mantra of paying up for quality definitely holds true here. While there are many consumer staples overall, I currently own, ADM, KMB, GIS, KHC, KO, DEO, PM, PEP, CLX, PG, MDLZ, CL and UL. Thank you for commenting.

    • Hi EL,

      Your comment highlights why I like to do these informal audits every few months. Finding that right balance of stock allocation is a personal matter as it simply highlights ones preferences and risk tolerances. As you know, I hold no energy nor tech names because they are both sectors that are out of my comfort range for a long term portfolio. Like you, I also wish to add to my consumer staples but these days they all seem a bit too rich for my liking. Thank you for commenting.

  8. You can’t go wrong with a portfolio that has consumer staples as your biggest holdings.

    I’m getting burned with a couple of my oil stocks, but I’m not too worried. I have no doubts about its ability to bounce back in a world where everything runs on some form of energy. But I regret my timing, though, buying when oil was high. Now is probably one of the best times to get into the industry. I buy stocks with a lifetime holding period in mind, so I worry less about macroeconomic factors such as commodity prices than I do about the quality of the business.

    Still, macro factors that affect your businesses short term are why consumer staples truly are the best sector to invest in.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…How Do I Deposit A Check At An ATM?My Profile

    • Hi ARB,

      They way I have built my portfolio it looks like I’ll have the consumer staples as my largest sector holdings indefinitely. There’s just something about a sector that really allows you to sleep well at night no matter what the market or world economies are doing. Like you, my horizon for stock ownership is a “lifetime.” It’s not that I’ll never sell, it’s just that my sell orders will be far and few between. You may be sitting on some serious gains in the future as oil rebounds. Of course, it’s these short term fluctuations that can give you a headache in the meantime. As always, I appreciate your comment.

    • Hi IH,

      You are definitely not alone in reducing your energy exposure. Seems like more and more bloggers are posting “sell” articles as oil prices have rebounded. I still like the Canadian banks and insurance names like CB, AFL and TRV. I can totally understand position. Thank you for stopping by and commenting.

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