Dividend Portfolio Sector Allocation September 2016

About once a quarter 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. Not only can portfolio balances be thrown out of sync but dividend distributions can as well. Positions may grow over time because of fresh capital being added, the inevitable dividend cut may occur or recent stock sales can all affect the flow of our dividend distributions. As a dividend income portfolio matures I think it’s very important for one to see which stocks and which sectors are paying out their dividend distributions and see if the current flow matches ones investing risk tolerances. After all, these days who would want an energy heavy dividend income portfolio when potential cuts continue to loom ahead. Of course, this is all a matter of personal preference.

 

Below you will find my recent asset allocation for my dividend stocks which includes the new Global Industry Classification Standard for real estate stocks. I had mentioned in previous posts my desire to further level out my dividend income so as to not become too dependent on just a handful of dividend paying stocks for the majority of my passive income. This desire has caused me to stop adding to my Canadian banks in recent months in favor of current holdings in my portfolio from other sectors such as the consumer staples and health sector. Names like The Coca-Cola Company (KO), General Mills, Inc. (GIS), McDonald’s Corp. (MCD), V.F. Corporation (VFC), W.W. Grainger, Inc. (GWW) and more were added to. I even initiated two new positions this month to further diversify my dividend income stream by adding Cardinal Health, Inc. (CAH) and T. Rowe Price Group, Inc. (TROW) to my taxable account. In all, the end game remains the same for me… Continue to grow my passive income stream and make sure that no one stock or sector that I’m not comfortable with long term becomes too large and responsible for the majority of my dividend income.

 

I look at my portfolio diversity from a total perspective meaning that I look at my taxable, ROTH and IRA account as one. Some might question my beliefs in diversity seeing only REITs in my IRA.

 

Brokerage Account

SectorSector %Market Value
Consumer Defensive29.66%$43,232.58
Industrials26.36%$38,420.83
Healthcare13.51%$19,688.48
Financial Services11.15%$16,252.88
Consumer Cyclical8.26%$12,046.56
Utilities6.99%$10,190.76
Basic Materials4.08%$5,949.72

ROTH Account

SectorSector %Market Value
Financial Services44.54%$21,268.13
Consumer Defensive26.56%$12,683.17
Industrials20.74%$9,906.19
Consumer Cyclical5.92%$2,827.30
Healthcare2.24%$1,068.70

IRA Account

SectorSector %Market Value
Real Estate100.00%$11,370.83
Welltower Inc. (HCN)36.33%$4,131.13
HCP, Inc. (HCP)30.59%$3,478.10
Ventas, Inc. (VTR)27.85%$3,167.26
Care Capital Properties, Inc. (CCP)5.23%$594.34

 

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 KO, GIS, MCD, VFC, GWW, CAH, TROW

26 thoughts on “Dividend Portfolio Sector Allocation September 2016

  1. I’m in the process of revamping my portfolio spreadsheets and trying to consolidate them into one central source to make portfolio analysis easier. Although I do like having them separate too. But in the grand scheme of things portfolio allocation should be looked at across all accounts combined rather than each separate account. It looks like you have a good allocation to the consumer staples/defensive and I’d like to bump my own weighting up near the 25-30% level but it’s hard because the valuations are stretched right now. It’s one of those sectors where you only get good values when the markets are going haywire so keeping cash on the sidelines is important.
    JC @ Passive-Income-Pursuit recently posted…Recent Sell and Position TrimMy Profile

    • Hi JC,

      Like you, I also look at my separate accounts as one. After all, it’s the combination of all three accounts that will fund my ‘retirement’ years. After this quarterly review I think my only concern with my allocations is adding to my health stocks. The top sectors I’d like to own in order are, consumer staples, industrial, health then finance as my “big four.” Discretionary, REITs and other sectors will remain smaller for the foreseeable future. Thank you for stopping by and commenting.

    • Hi DT,

      No tech for me. Not yet, at least. There’s no energy either if you have noticed. When I first decided to be a long term dividend growth investor I wanted to focus my attention on the most solid stocks in the most solid sectors. I like dependability, reliability and predictability with my dividend stocks which is why you see the consumer staples as my largest sector overall. While I don’t ever plan to add any energy to my long term portfolio, I am open to adding some tech. Regarding diversification by individual companies I have very loose rules about that so I do not stick to strict allocation guidelines for those. Thank you for commenting.

  2. Hi Divhut,

    I note that you have no allocation to the energy sector; have you had in the past? I have a modest allocation to RDSB, BP. and XOM, as I feel that the global economy will not get rid of its dependency on fossil fuels any time soon.

    Best,

    Financial Monkey

    • Hi FM,

      That’s correct. No energy and no tech. I just commented above to Dividend Ten that when I first decided to be a long term dividend growth investor I wanted to focus my attention on the most solid stocks in the most solid sectors. I like dependability, reliability and predictability with my dividend stocks which is why you see the consumer staples as my largest sector overall. I do have a few energy names on my watch list but it’s doubtful I’ll be adding those names to my portfolio any time soon. I have owned energy in the past so I am not totally against the sector. I just do not like the extreme volatility of the sector. Energy names I have owned in the past include, BP, TOT, KMP (now KMI), EPD, ETP and APU. So as you can see I have held oil majors, pipelines and natural gas stocks. I tend to agree with you that fossil fuels are here for the foreseeable future and part of the reason oil is so low these days is because the world economy is really not all that hot. Asia (China) has slowed, all of Europe is a mess and so is most of South America. When things turn, I do expect oil to climb higher but it may still be a while. Thank you for sharing your thoughts.

    • Hi DDU,

      The keyword you mention is “safe.” That’s the type of portfolio that I wanted to put together. I want to sleep well at night and not think of my stocks at all while at the same time enjoy dividends from some of the safest and longest payers in the world. My portfolio may not be highest yielding when compared to others you see online but it does allow me to step away from the computer for days and even weeks at a time and not have me feeling concerned. Thanks for sharing your largest allocations. It will definitely change over time as it grows. The only thing you have to do is make sure that your allocations meet your own risk tolerance profile. As always, I appreciate your comment.

    • Hi Doug,

      I feel it’s a good idea to see how your money is allocated from time to time. I don’t fret over the exact percentages of my allocations rather just do these exercises to get a general view of where I stand. Thank you for commenting.

  3. You’re portfolio is nicely divided over several sectors. Currently our biggest sectors are healthcare and tech. Consumer staples are still a bit low in our portfolio, but this sector is something we still want to make bigger looking at the long term. For now we keep an eye open that some sectors are not becoming too large. But because we still want to welcome lots of new additions, the balance is changing constantly.

    • Hi Divnomics,

      As your comment mentions, “the balance is changing constantly.” That’s why I feel it’s important to look at your portfolio allocations several times a year just to make sure you are happy with how your money is diversified. Sometimes without even realizing it one sector may become way too large for your comfort level. Thank you for stopping by and commenting.

    • Hi DD,

      I think it’s a healthy spread, though some might say it’s not spread enough as I do not hold any tech nor energy stocks in my portfolio. Again, this is why personal finance is personal. I do not feel comfortable holding any tech nor energy at this time in my long term portfolio. I became a dedicated dividend growth investor late 2007. My overall focus is the growth of my passive income stream and not necessarily capital appreciation. Thank you for sharing your thoughts.

    • Hi Charlie,

      That’s true about my proxy energy exposure. Don’t forget DOV too. Still, I do not hold any pure play energy companies in my portfolio and DOV would be one of my first ‘sell’ considerations going forward. As always, I appreciate your comment.

    • Hi DFG,

      I plan to keep my consumer staples (defensive) as my largest overall sector holding for the foreseeable future. I just like the stability of that sector the most which is why I feel comfortable continuing to add to that sector as values and yields look attractive. Thank you for sharing a bit about how your portfolio is allocated. I think it’s an important thing to check every few months or so. I appreciate your comment.

  4. Just a though, I get the high allocation to industrial and consumer defensive stocks. Smart move I would say, but they do you have fairly limited amounts in utilities and healthcare? Is it because of the available stock, their metrics? These two sectors also are a corner stone in human needs and should provide a solid basis for a dividend portfolio? Please correct me if you think otherwise.
    Team CF recently posted…How Much Do You Need To Become Financially Independent in the Netherlands (Part 3)My Profile

    • Hi TCF,

      I think that I’ll be keeping the consumer staples as my largest sector holding for the foreseeable future but you are correct about my health allocation. It is something that I would like to add to in the future. At current levels it’s difficult to find some good buys. Believe me, I’d love to add to my JNJ, BDX, CAH and more. Thank you for stopping by and commenting.

  5. You assets allocations show that you don’t have energy or tech sectors in your portfolios. I think it is a good move as your income doesn’t need to depend on short term economic cycle or OPEC decision about oil.

    I stopped adding energy producers in my portfolio, but I do have around 12% of oil & gas infrastructure stocks, they don’t depend on oil or gas price.

    But you do have basic materials stocks. They are cyclic stocks. Any particular reason to own them?

    Best Regards,
    FJ recently posted…Start a successful website – what to write in your blog?My Profile

    • Hi FJ,

      It’s not that I’m against tech or energy companies, it’s just that I want stable defensive sectors to be the cornerstones of my long term dividend growth portfolio. I don’t like a lot of volatility as I value my sleep 🙂 Just for reference, I have owned energy in the past so I am not totally against the sector. Energy names I have owned in the past include, BP, TOT, KMP (now KMI), EPD, ETP and APU. So as you can see I have held oil majors, pipelines and natural gas stocks. The basic materials consists of just one stock, APD. APD is a solid long term dividend growth stock which is why I’ll continue to hold this name for the foreseeable future. Thank you for sharing your thoughts.

  6. Hey Keith, like the others above, I too noticed that you don’t have tech or energy stocks. Given that pretty much every sector is experiencing a high right now, energy stocks seem like one of the only things that’s at a discount. Wouldn’t now be a good a time to get in?

    I like your reasoning for getting into consumer staples. Problem for me is being Canadian, there aren’t a lot of these stocks available on the TSX. I’ll be looking at your list more closely, even the American ones.
    Andre recently posted…Automation of Work – Should Dividend Investors be Afraid?My Profile

    • Hi Andre,

      It all comes down to a comfort thing for me. When I decided to become a dedicated, long term dividend growth investor, I wanted to create a very safe, relatively conservative portfolio that was not hinged upon any commodity, like oil, or the potential fickleness of technology that can go from boom to bust in a very short period of time. As I have commented to others I am not totally against energy. I just do not like the extreme volatility of the sector. Energy names I have owned in the past include, BP, TOT, KMP (now KMI), EPD, ETP and APU. So as you can see I have held oil majors, pipelines and natural gas stocks, just not any in recent years. To be fair, I could always find a place for energy and tech in my portfolio but it would never constitute a significant portion ever. Thank you for stopping by and commenting.

  7. Thanks for sharing your allocation. It looks well suited to survive any potential market downturn. Consumer defensive is a great one to have at the top of the list because, well, they’re staples, especially in our consumer driven economy! 🙂

    Energy has become a smaller part of my portfolio, especially after the last round of dividend cuts. But, I’m not out completely as energy in many forms will continue to be a huge part of the global economy. Many of the companies on the speculative side of the account are in the resource/energy sectors.

    Scott
    Two Investing recently posted…September 2016 IncomeMy Profile

    • Hi TI,

      The consumer staples will always be my largest holding. I need that stability in my life and want to sleep at night 🙂 You are not alone in trimming energy exposure. The last two years have been very tough for anything energy related and many of our fellow dividend bloggers have reduced their exposure even though the sector still looks cheap from a value perspective. Thank you for sharing a bit of your allocation. As always, I appreciate your comment.

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