Dividend Portfolio Sector Allocation June 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. Even without any new money invested, sector allocations can shift dramatically. I’m sure our portfolios looked a lot different at the start of 2016 with the January and February swoon compared to today. Even with the recent market decline, oil prices and energy related stocks have come back dramatically. REITs turned around as well as other commodity sensitive stocks like Archer-Daniels-Midland Company (ADM), Caterpillar Inc. (CAT), Dover Corporation (DOV) and more.

 

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. As evidenced by my recent dividend income update, my past additions to my Canadian bank holdings have started to contribute to my overall dividend income in a more meaningful manner. All this shows is that my portfolio allocation to my Canadian banks are starting to become large relative to my other holdings. Something I need to keep in mind when considering adding to that sector. Another interesting point about my REIT sector allocation will come about this summer as REITs will become reclassified from being under the financial sector to a new separate real estate sector in the Global Industry Classification Standard. This no doubt will have profound effects on individual REITs and how the large money managers will trade this new sector. As you can see below, my REITs, in my IRA, are currently listed under the financial sector.

 

Brokerage Account

SectorSector %Market Value
Consumer Staples30.04%$41,756.83
Industrial Products20.47%$28,448.31
Medical11.88%$16,513.50
Finance10.69%$14,852.23
Utilities7.13%$9,914.39
Multi-Sector Conglomerates6.45%$8,964.07
Retail/Wholesale5.55%$7,709.74
Basic Materials4.12%$5,723.13
Auto/Tires/Trucks2.18%$3,026.17
Consumer Discretionary1.49%$2,076.74

ROTH Account

SectorSector %Market Value
Finance44.29%$20,183.24
Consumer Staples27.27%$12,426.08
Industrial Products16.61%$7,569.77
Retail/Wholesale6.01%$2,739.69
Multi-Sector Conglomerates3.53%$1,606.54
Medical2.29%$1,044.26

IRA Account

SectorSector %Market Value
Finance100.00%$10,698.50
Welltower Inc. (HCN)37.45%$4,006.48
HCP, Inc. (HCP)28.98%$3,100.11
Ventas, Inc. (VTR)28.70%$3,070.15
Care Capital Properties, Inc. (CCP)4.88%$521.74

 

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 ADM, CAT, DOV, HCP, VTR, HCN, CCP

21 thoughts on “Dividend Portfolio Sector Allocation June 2016

  1. Nice allocation Keith. Consumer staples are an above average sector, due to the defensible nature of dividends. I also have more energy exposure. Contrary to popular beliefs, integrated energy companies can deliver defensible dividend growth throughout the economic cycle.

    As a side note, do you view REITs as their own separate asset class? I would think that the finance sector is comprised of Banks for example, but not REITS. I do like the fact that you have your REITs in an IRA. When I sold most of my REITs at the beginning of the year, I went ahead and just bought a REIT fund in my retirement accounts. IT is much simpler come tax time!
    Dividend Growth Investor recently posted…How to select winning retail stocksMy Profile

    • Hi DGI,

      I think that for the foreseeable future I will always have my consumer staples as my largest sector among all my portfolios. Call me a defensive type of guy as I value sleeping well at night and that sector have proven to be as solid as they come in terms of maintaining and growing their dividends though some of the toughest economic climates. I always viewed REITs as a separate asset class even though they are currently reported under the financial sector. Come August of this year they will have their own designation which I think is more appropriate. The finance sector also includes many insurance dividend stalwarts like CB and AFL for example so it’s not just banks. I have thought about adding VNQ to my mix for “total” REIT exposure as I am also considering the apartment REITs, AVB and EQR in my IRA. Thank you for stopping by and commenting.

    • Hi IH,

      Good luck in trying to flatten out your stock allocations. It can take some time, especially if the stocks you want to buy are in “expensive” sectors. Consumer staples come to mind as most of those names rarely go on sale. I think I’ll always plan on being top heavy in the consumer staples, industrial, health and finance while having limited exposure to REITs and other sectors. As you know, I do not own one energy name nor tech and don’t plan to at this time. Retail is also absent from my portfolio too. Some might think my portfolio could use some “flattening” out as well. Thank you for commenting.

  2. Thanks for sharing your allocation. As I am now building my DGI portfolio it is a hard balancing act on purchasing sectors. Some are up some are down so right now I am trying to buy the sectors on the down and wait for the high valuations to drop to gain more diversity in my portfolio. Analyzing your portfolio takes a lot of time and re balancing can be costly. I look forward to continuing learning about DGI through your blog as you make many successful decisions.
    Stefan – The Millennial Budget recently posted…Robinhood App Review: Commission Free TradesMy Profile

    • Hi TMB,

      When I first decided to become a dividend growth investor I did not focus on specific sector allocations, rather, I simply bought stocks in sectors that I thought to be very defensive. Consumer staples come to mind. Of course, over time, I added industrial, health, financial, REITs and other sectors to better diversify my portfolio. I think the key is not to get fixated on a certain percentage of allocation per sector. This can drive you crazy as you create the “perfect” portfolio only to have allocations skew way out of proportion because of stock price gains or declines. The bottom line comes down to your own risk tolerance towards your investments. Feeling overexposed in a shaky sector? It may be time to trim holdings there or leave it as is and add to other sectors to better balance things out. It all comes down to your comfort level. Thank you for sharing your thoughts.

    • Hi MD,

      I like to do these informal audits four or five times a year. I think it’s important to see how your stocks are allocated from time to time as price changes can skew asset allocations dramatically. Of course, adding fresh capital to one sector in earnest can have the same effect. When oil started its decline in mid 2014 many dividend investors bought into the sector heavily only to watch prices decline further and have their own portfolios become top heavy in the energy sector. While one can never achieve a perfect asset allocation as stock prices are dynamic, doing these reviews can help you decide where you want to deploy your future fresh capital. I appreciate your comment.

      • These are very good points that you are making. I know for myself it will be important for me moving forward to keep a grasp on how my portfolio is allocated because I have elected to participate in an ESPP offered through my work and I do not want to allow myself to get over weighted in company stock.

        I think in the future I will include a portfolio allocation section into my monthly updates post so that I can stay aware of where I’m at.
        More Dividends recently posted…Banks take aim at consumers with credit cards!My Profile

        • Hi MD,

          That’s good thinking about your company stock. In the past, many have been burned by putting all their retirement in the stock of the companies they work for. There’s no need to stress about your portfolio allocation as stock prices are always dynamic and allocations will naturally change. These updates are the best at just showing you where you currently stand and can impact your future investments.

  3. I like your allocation Keith. A very strong focus on consumer staples is good in volatile times like these. It looks like you and I are similar in terms of having an underweight exposure on consumer discretionary stocks.

    My portfolio on the other hand is highly exposed to energy stocks. One of the reasons for this is due to the time I started investing. I have only started putting money in the markets over the past year and from my point of view, energy stocks provided the best value during this time. I bought heavily in RDSB and BP in December and January at great valuations and this is one of the reasons I am not worried about my overallocation to energy stocks. Having said this, I am looking to diversify more. I have just recently bought shares in AstaZeneca which is my first healthcare play.
    Money Grower UK recently posted…AstraZeneca (AZN) Stock Purchase – The perfect Brexit stockMy Profile

    • Hi MGUK,

      I always favored the consumer staples from day one. Call it my conservative nature but I just like to sleep well at night and really like the defensive nature of many of those companies. It served me well during the financial collapse in 2008/09 and I plan to keep it as my largest overall sector. From your comment I can tell you that you are not alone in being overweight in energy. Many of the dividend bloggers you read about are also overweight for the same reason as you. Value. At the time, the energy stocks provided the best value and current yield than any other sector so many jumped on board. As you stated, in time your stock allocations will smooth out and become more balanced as you add more names in various sectors. AZN is not a bad place to start πŸ™‚ Thank you for stopping by and commenting.

  4. Love the allocation report. Such a smart idea reviewing this to see if there is anything out of whack. I usually do this once a year and put some goals for the next year to help reduce a sector I am overweight in. My last review I was over allocated in oil, which is why I was smacked so hard with the KMI cut. Never a good idea to be too over weight in one area or the others. Looks like you are pretty well balanced in your portfolio and there aren’t any major holes to plug! What is your next target???

    Bert
    Dividend Diplomats recently posted…Bert’s June Stock Watch ListMy Profile

    • Hi DD,

      I think it’s important to review stock allocations a little more than once a year. A lot can happen in that time and your portfolio can really become unbalanced simply because of price fluctuations. Ideally, my next target is to increase my health sector more. It’s the one sector I’d like to get close to my consumer staples allocation. I won’t rush into buying names in that space just yet as some of the stocks are still a little rich in my opinion. It’s important to realize that stock allocations as well as looking at where your dividend income comes from in order to avoid potential dividend cuts and loss of income. It doesn’t matter if you hold 50 stocks in a portfolio if 90% of your dividend income comes from just one or two stocks. As always, I appreciate your comment.

    • Hi Dividendsdownunder,

      It’s always interesting to see how others are allocated and why certain portfolios are the way the are as we mostly invest in all the same companies (at least the U.S. bloggers). Yes, I value my sleep at night which is why I do not have any volatile energy or tech names in my portfolio. Though sleep is a relative term with baby DivHut in the house πŸ™‚ these days. Thank you for commenting.

  5. You’re pretty well diversified. I would ask if you were comfortable having 30% of your main account in one sector, but hey, it’s consumer staples. It really is that safe.

    If I didn’t know that you were bearish on energy, I would suggest putting some money there to diversify a bit more. Roadmap2Retire got me thinking about the green energy sector lately.

    Is there a program you use that allows you to easily see your sector allocation? I really need to do mine.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…A Quick Word On Christina Grimmie And The Orlando ShootingMy Profile

    • Hi ARB,

      To answer your question, I am quite content having a high allocation of my portfolio in the consumer staples space. In fact, I forever intend on making the consumer staples my largest sector as long as I’m a dividend growth investor. I just love the very defensive nature of the sector. I’m still not keen on energy though oil prices and many stocks have come up quite a bit from the earlier lows we saw this year. It’s just too volatile a sector for my long term liking. If I was more of a trader I could see myself jumping into the oil patch. Green energy is definitely the future but long term I do not see any names currently that I can feel safe buying. All my stock allocations come direct from my Sharebuilder account. There is a section where you can look at individual stock allocations as well as by sector. As always, I appreciate your comment.

  6. DH,

    Would like to know why your number 1 $$ holding is AFL buy a large amount. It has been basically almost non-performing for a number of years. Low yield and low CAGR for dividends, Chowder number is 9.1, well below the 12 norm for investment. Fell you could make better use of these funds with allocation to other stocks you already own..

    My only complaint about your approach for me is, way to many stocks to manage….. I narrow my down to less stocks with more $$ in each.

    • Hi Grant,

      Part of the reason my AFL holding has grown to its size is because of capital appreciation and automatic dividend reinvestments. With each dividend distribution whole shares are being added as well, causing the position to grow further. I’d like to point out that my overall portfolio is not complete by any means and while AFL is my single largest holding other positions will be increasing in size thereby “smoothing” out my portfolio. If you look at my ROTH account you will see my BNS and TD positions are almost as large as my AFL based on my cost. I’m sure once I have stopped accumulating shares I will balance my overweight positions and reassess which stocks meet my dividend growth standards. While it’s true AFL has slowed its DGR in recent years it still offers growth and has a safe and sustainable yield based on current cash flow. I have been with this portfolio since 2007, going through some ugly times in 2008/09 and I have found it easy to manage. Since I’m not a trader by any means I don’t feel the necessity to examine every holding I have each day. I would love to know what’s in your own portfolio if you wish to share. You can always email it to me. Thank you for stopping by and sharing your thoughts.

Leave a Comment

CommentLuv badge