Dividend Portfolio Sector Allocation February 2015

Every few months like I like post updates regarding my taxable and ROTH account holdings and outline my sector diversification. I find these updates every few months to be vital in assessing my comfort level in owning stocks in specific sectors that I feel have the best chance for growth and dividend stability ten, twenty and thirty years out.

 

To many, and to my fault or not, you will notice no energy sector holdings nor tech names either. To be certain, I still find the energy sector to be quite attractive at current levels it’s just that the volatility of the entire sector concerns me. Of course, such is the nature of energy and I do not see this changing ever. I still may nibble on an energy sector name in the future as I have added several names to my watch list and, despite not having a position in the sector, be sure that I am monitoring those names. I know some have felt that I am dead against energy which is not the case.

 

Over the last six months or so I have been increasing my financial sector holdings, namely positions in the large Canadian banks, TD, BNS and RY. Finance is now the second largest sector in my ROTH account but as a whole still smaller than my consumer staples in both my accounts. In general, I am very comfortable making the consumer staples space my largest sector holding. Going forward, I am looking to continue to add to my financial names but also have an eye towards boosting another sector that I’d like to expand, health stocks. Currently names that I own in the sector include, ABT, ABBV, JNJ, BCR, BDX and HYH. Of course, like many of the consumer staples names a lot of the companies in the health sector are quite pricey. But I guess great stocks sometimes come with a price premium attached.

 

Brokerage Account

SectorSector %Market Value
Consumer Staples25.16%$29,559.58
Industrial Products19.97%$23,470.48
Medical13.14%$15,436.39
Finance11.86%$13,929.96
Utilities7.08%$8,316.74
Multi-Sector Conglomerates6.80%$7,990.30
Retail/Wholesale5.75%$6,759.14
Basic Materials5.17%$6,069.45
Auto/Tires/Trucks2.90%$3,404.55
Consumer Discretionary2.18%$2,565.13

 

ROTH Account

SectorSector %Market Value
Consumer Staples36.67%$10,613.56
Finance31.18%$9,023.33
Industrial Products15.54%$4,495.99
Retail/Wholesale8.14%$2,354.59
Multi-Sector Conglomerates5.41%$1,565.41
Medical3.07%$887.43

 

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.

33 thoughts on “Dividend Portfolio Sector Allocation February 2015

  1. DH,

    This is a great update. I look a little bit askance at your exposure to financials. The entire sector, especially the banking portion, goes bankrupt every 15 years or so. I’m more comfortable in your case as it looks like your banking allocation is mostly Canadian (much safer than US banks!)

    I see no insurance in your allocation. Is that by design?
    Financial Velociraptor recently posted…Fair Value of DEO – write covered callsMy Profile

    • Hi FV,

      The banking stocks that I own include three Canadian, TD, BNS and RY with one U.S. bank, WFC. I have to agree with your statement that the Canadian banks seem a lot safer and more conservative by nature than the large U.S. banks which is why I feel comfortable owning those names. I also own a couple insurance names and they are lumped in the finance sector as well. I have positions in AFL, my largest holding, and CB. Thank you for stopping by and commenting.

    • Hi Adam,

      I know, I know. I get heat from other dividend bloggers because of my lack of exposure to the sector and as I mentioned in the post it’s to my fault that I do not have any of those names yet. I always state that I’m not against the space and I do have several names on my watch list, unlike tech which I have zero names, but have been gun shy to buy any of those names. I appreciate the comment and time will tell if I ultimately get some energy exposure to either of my portfolios.

    • Hi TGE,

      Your point is well taken. I guess my distaste for volatility should be tempered with at least a small exposure to the sector along with a longer term outlook. I know that the lack of energy in my portfolio, especially after the dramatic price declines, irks some in the dividend blogging community but I have to buy what I ultimately feel comfortable owning. Thank you for stopping by and sharing your thoughts.

    • Hi R2R,

      I definitely think the health care sector, and all its sub categories, including pharmaceuticals, medical devices, health REITs, consumer, etc. have long term tailwinds attached as our population is only getting grayer and requiring more of those products and services. It’s those types of sectors that attract me as a long term investor as volatility is more muted in the space, unlike energy. Thank you for stopping by and commenting.

    • Hi Tawcan,

      It’s a great first world problem to have. Just the fact that you have uncovered numerous quality names in the space and want to add to it shows how ahead of the investing curve you are. I think with many of the recent buys in JNJ among the dividend blogging community I have been awakened to the sector once again. I still have a hard time adding to a few of those health names as valuations seem just a little too rich for my liking which is why I tend to shift to the Canadian banks. As always, I appreciate your comment.

  2. You have such a great looking portfolio, Keith. Love your attention to the Canadian banks lately, it was awesome to see dividend raises there this month. I’m severely lacking in consumer stocks of any kind at the moment myself. I remember you bringing GWW to my attention in a comment a long time ago and it’s finally starting to come down a bit, are you still a fan? Seems like a fantastic fast growing business that typically trades at a premium for a reason. I hope you have a great weekend!
    Ryan @ My Dividend Growth recently posted…Guest Post by Sure Dividend: Deere & Company Stock AnalysisMy Profile

    • Hi MDG,

      Thank you for the kind words. I have to say that I am pleased with the performance of the Canadian banks despite all the current headwinds they are facing. They seem to have bounced from their recent lows and the dividends still seem quite safe with room for future growth.

      The consumer staples still remain my favorite long term sector to invest in I just have a hard time adding to those names as valuations always seem to be sky high. Regarding GWW, I still love it and plan to keep it for a long time. The valuation of GWW has come down a bit and is in line with its five year average. Forward PE looks a lot more attractive. As I mentioned in other posts or comments I have a laundry list of names I’d love to dump a bunch of money but am waiting for better pricing/valuation. Names include, BMS (which I added to in December), VFC, BDX, BCR, GWW and JCI. Appreciate you stopping by and commenting.

  3. Nice sector allocation… I think having a higher weight in consumer staples will help you sleep better at night. They are a lot less volatile and more stable in my opinion. I wouldn’t let other investors sweat you when it comes to not having exposure to the energy or tech sector. As long as you’re comfortable with your investing style and it’s working for you, that’s all that matters.
    A Christian Investor recently posted…Bought On Loyal3: K, MATMy Profile

    • Hi ACI,

      Point well taken. That’s the ‘personal’ part of personal finance. Each must be fully comfortable with what they own no matter the sector or volatility. For my long term money I very much prefer the consumer staple route as opposed to tech. Energy might still have a small space in my portfolio but definitely not for a multi-decade stay. I appreciate you stopping by and commenting.

    • Hi DD,

      Thank you for the kind words. Sometimes I feel like others think I’m dead set against energy and that my portfolio is somehow less effective in generating a good return unless I load up on some names. Neither is true. I still like a lot of energy names as quite a few are on my watch list I just don’t fully feel comfortable pulling the trigger on such a volatile sector. I’ll admit, I probably should have some exposure and $1k – $2k won’t kill my portfolio either. Time will tell if I do take the energy plunge. Thank you for stopping by and commenting.

        • Hi DH,

          Thank for sharing your energy sector holdings. I know many that feel more comfortable owning the pipelines rather than the oil exploration/refining energy names. I used to own APU a long, long time ago. Worked out great. Collected dividends and sold for a nice gain too. That yield seems just a little too high for my liking but I know that APU always had a higher yield. Appreciate the comment.

  4. Wow your allocation looks really awesome especially on consumer staples which I always think it as higher yield fixed bond investment due to it being relatively stable throughout the year. I want to own so many great companies but not enough money to invest. That’s my problem….Haha

    BeSmartRich
    BeSmartRich recently posted…How to simply invest for dummiesMy Profile

    • Hi BSR,

      Well, your problem is a first world problem. I’d love to add a lot more to my consumer staples holdings but not at current prices/valuations. I plan to keep my consumer staples as my largest sector allocation in both my taxable and ROTH accounts for the foreseeable future. Keep an eye on the sector and start nibbling on names as they become better values. Thank you for stopping by and commenting.

    • Hi Vivianne,

      I think the most important thing about portfolio diversity is seeking a balance that you are most comfortable with and not some prescribed asset allocation that a financial planner or any other person would recommend. The bottom line is that you need to able to sleep at night and feel at peace with your personal diversification. Thank you for sharing your thoughts.

  5. Hi DH,
    My biggest sectors are are Consumer Staples (26%) and Energy (18%). I have similar reservations with the financial sector (8%) as you do with energy. I am slowly wading in though and think I may add some non-bank financial companies to my portfolio (such as TROW). I would also like to add to healthcare (5%), I think I just forgot about it to be honest! That’s what happens when your only healthcare companies are quiet and prices of the others I watched have gotten out of hand!

    The important thing is that you can sleep at night with your allocation!

    Take care!
    ILG recently posted…February HighlightsMy Profile

    • Hi ILG,

      I guess the ‘personal’ aspect of personal finance comes through as each of us have our own sector that we feel a little uncomfortable owning. From what I have been seeing TROW does look like a great option to enter the finance sector without owing a traditional bank. Some insurance names might also give you some exposure to the sector. In my portfolio I have AFL and CB with an eye on TRV as well. The bottom line is that my comfort level with my portfolio is number one. If I can sleep at night and not have to think about my asset allocation nor individual stocks then I’ll be happy. Thank you for stopping by and sharing your thoughts.

  6. Great job Keith! I agree most of the points, I’ve been also gun shy about technology and financial space, only recently, I’ve started considering them. I also think that Canadian banks are a great buy and they play conservatively, so, tolerable risk.

    Also, I would like to add more Healthcare stocks in my portfolio as well, like I added JNJ recently when it went close to $100 mark.

    keep it going!

    Best,
    PIM
    Passive Income Mavericks recently posted…Recent BuyMy Profile

    • Hi PIM,

      As I have been reading comments from others it seems that everyone has their own prejudices with certain sectors. I find it interesting that a common theme seems to be emerging too. It looks like finance, energy and tech are the only sectors that keep coming up as areas that dividend growth investors feel uncomfortable with. Of course, everyone has their own reasoning for not liking those sectors. I just found it curious that a common theme has emerged. On the opposite end of the spectrum almost every dividend blogger seems to love consumer staples. Like you I’d love to be adding to my health sector names too just not at current prices/valuations for many of the stocks I’m considering. As always, I appreciate you stopping by and commenting.

    • Hi FtFF,

      Looks like many are liking the consumer staples as a large sector holding. The stability of that sector pretty much stands alone. You seem to be eyeing some of the names that I am considering as well going into March. The health names also present some good opportunities but with valuations so high we have to be more choosy. Thank you for stopping by and commenting.

  7. I have to adjust my allocations as I am a bit too heavy in REITs and Energy. I like the feeling of a high yield, but will be adding more to stable sectors like healthcare, consumer stables. I think you are very brave being so heavily into financials, I feel once times get tough they are the first ones to abandon dividends. So I am staying clear of them for the foreseeable future. Thanks for sharing.
    EL @ Moneywatch101 recently posted…Money TalkMy Profile

    • Hi EL,

      Sector allocation is a very personal matter and one person’s comfort in a particular sector most certainly will not match another. Overall, my financial sector is still quite small relative to my other holdings. Between my taxable and ROTH account, consumer staples and industrial names are my largest holding. The finance sector also includes two insurance names, AFL (my single largest holding) and CB. This way I feel diversified enough within the finance sector as I hold two insurance names, one, U.S. bank and three Canadian banks. As you feel uncomfortable with finance I too am not fond of most REITs (health care REITs I like). During the financial meltdown none of the large Canadian banks eliminated or even reduced dividend distributions. They simply maintained them. That might be a testament to their resilience relative to the American banks. As always, I appreciate you sharing your thoughts.

  8. Consumer and financials are about 60% of my portfolio. Energy is around 15% and techno 20% (including communications). So you could conclude that I’d encourage you to look in this sector more… but truth is you also have to trust it to be comfortable with your holdings in a long-term strategy. I’d like to add in health a little (6%), but in a way they can also be partially included in consumers because they produce a large variety of consumer products (simply think about JNJ).
    DivGuy recently posted…6 Days to Dividend Growth InvestingMy Profile

    • Hi DG,

      I see you already hold quite a bit in financial, energy and tech names. Three sectors that I own a relatively small amount and no amount in. I don’t think I’ll ever add any tech names to my long term portfolio but energy still might have a spot in some limited fashion. As you stated, I ultimately must feel comfortable with my holdings and as such my portfolio reflects that. Looking to see how March unfolds and the prospect of adding to my health sector as it is still too light for my liking. Thank you for stopping by and commenting.

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