Dividend Portfolio Sector Allocation

Several dividend investing bloggers have been asking me to highlight my sector diversification from my brokerage account and ROTH account. For those who are regular visitors to DivHut and have seen my portfolio, you already know that I do not own any REITs or MLPs. Not that I’m against those investment vehicles I just followed a more “traditional” portfolio building process that was not focused on current yield as much as dividend growth. I am actually very interested in the healthcare REIT space and am considering initiating a new position in a few such as HCP, VTR and OHI.

 

Below you will find my asset allocation for my dividend stocks. Clearly, I favor the consumer staples and industrial sectors the most. However, the past several months have seen me add to my financial holdings in WFC, AFL, CB and new positions in TD, BNS and RY. I am looking to continue boosting my financial exposure going forward and eventually increase my medical/health holdings as well.

 

Brokerage Account

SectorSector %Market Value
Consumer Staples21.18%$24,195.41
Industrial Products18.31%$20,923.04
Cash13.00%$14,852.54
Medical12.03%$13,746.04
Finance9.51%$10,868.12
Utilities6.64%$7,590.05
Retail/Wholesale5.36%$6,124.35
Multi-Sector Conglomerates4.89%$5,581.16
Basic Materials4.45%$5,080.19
Auto/Tires/Trucks2.77%$3,169.87
Consumer Discretionary1.85%$2,114.76

 

ROTH Account

SectorSector %Market Value
Consumer Staples31.90%$8,138.60
Cash20.39%$5,202.74
Industrial Products20.12%$5,132.71
Finance10.68%$2,724.21
Retail/Wholesale8.39%$2,141.40
Multi-Sector Conglomerates5.17%$1,318.11
Medical3.36%$857.13

 

Another point you’ll notice is my cash holding which is probably higher than most dividend bloggers as I know the desire to always be fully invested trumps having a cash reserve for potential future buying opportunities.

 

How are your stocks allocated? What is your largest sector holding(s) and how do you feel about having a relatively high cash balance or not? Please let me know below.

27 thoughts on “Dividend Portfolio Sector Allocation

  1. Have you though about investing in ETFs? Wondering what your opinion is of them.

    I see that the Healthcare ETF HCN has a decent current yield at 4.7%.

    Even if you don’t invest in ETFs, might be a good benchmark for your picks in the sector.

    My forward looking forecast does show that the Health REIT sector is looking at a dip however, down to about 4.2% pa in the next 6 months or so

    http://www.idivs.org/ticker/HCN/year/2014/month/9/day/3/preliminary/false
    john recently posted…Learning QuantLib with Python – Implied VolatilityMy Profile

    • Hi john,

      I prefer to invest in individual stocks and have enough names in my portfolio for diversification. I’m not against ETFs in general, I just feel I can create my own “customized ETF” with my own stock portfolio and save on fund fees. ETFs have definitely come on strong in the last couple of decades and I feel that the traditional mutual fund days are numbered as investors move towards ETFs instead of actively managed mutual funds.

      HCN was also a consideration of mine from the big three HCP, HCN and VTR but on a valuation basis seemed too expensive. The healthcare REITs are on my mind but I may have to wait before I actually pull the trigger on any. Thanks for sharing your insight.

  2. Hey DivHut,
    I like how diversified your portfolio is. I am still missing a financial stock in my portfolio. I thought about adding BRK.B but this is a growth stock. However I would consider more like an index fund because of how many companies are attached to BRK.B. Maybe someday I’ll pull the trigger on this one before the price gets even higher.Thanks for sharing!
    Brian Mota recently posted…Recent Buys (KRFT, VIAB, and DIS) and KRFT is now offered on LOYAL3My Profile

    • Hi Brian,

      I feel diversified enough even though I have no tech or energy in my portfolio. I think sticking with consumer staples gives my portfolio a very conservative balance which is why I have been looking to add more financial names and larger investments to my portfolio. There are many great financial names that offer great relative values such as AFL and WFC in the U.S. and some large Canadian banks as well. It’s always good to have your feet in several sectors, of course, during the meltdown about five years ago there really was no where to hide unless you had short positions. I appreciate your comment.

    • Brian,

      I actually own 10 shares of Berk.B. Why not spend the money on a dividend stock? Because there’s a reason why we spend our money on the market instead of hiding it in banks, we are all crazy speculators. Will BerkB fall? I expect it to fall when 1) Buffet retires or 2) dies. But reading the portfolio on his right hand man, we have little to concern ourselves with.

      • Hi TBDI,

        It’s true that to some extent we are all speculators and as such we expect to take on some amount of risk. I know many people see an investment in BRK as a “dividend growth” investment even though dividends technically aren’t paid out to shareholders. I never was interested in BRK despite its amazing growth. There’s something about dividend cash being paid out that simply makes investing in that manner more tangible. Thanks for sharing your ownership and thoughts on BRK with us.

  3. My sectors are pretty heavy on Energy and Financials. My largest holding used to be Healthcare until a few months, which was held in a mutual fund and we decided to liquidate that to finance the home purchase. The financials is the largest sector in my portfolio currently due to the REITs held.

    Healthcare REITs are a great space to be and I own OHI…been very pleased with the performance. I am tempted to pick up more in either HCP or VTR.

    My allocation is available here
    Roadmap2Retire recently posted…Outlook for September 2014My Profile

    • Hi R2R,

      It’s always interesting to see what others are heavily invested in. As much as you try to achieve a balanced portfolio, over time a sector or two become more heavily weighted like you with energy and financial and myself with consumer stapes and industrial. I am still waiting to see how the healthcare REITs perform in the near term. They seem a little pricey to me at this point. Thanks for sharing your picks.

  4. I think you touched on it in one of your comment responses, and that is while asset allocation is important, it can often times ‘get out of wack’ when an investor is in the accumulation phase of the journey. I know for myself, I am heaviest in Financials, Energy, Staples, and Discretionary (declining order). My heavy weight in Financials is primarily the result of picking up REITS last year when they were pretty well valued, so I have positions in ARCP, OHI, and DLR. At this point in the game diversification is important, but not at the cost of investing in positions I don’t view as a fair value.

    As for the cash, I think keeping some on the sideline is important, but it shouldn’t get too large that your returns are experiencing significant drag or you are waiting for the “right move” when there are plenty of good options out there.
    writing2reality recently posted…Rapid Fire Passive Income Monthly Updates: May, June, and July 2014My Profile

    • Hi w2r,

      You hit on many good points with your comment. Sometimes when an investor is in the accumulation phase of building a dividend portfolio it does throw balances off. But other times there are unintentional re-balances that occur when a stock or sector you are invested in rises or falls dramatically. In that case, steering your ship back on track requires a lot more investigating as you try to figure out why certain stocks rose or fell sharply and if it’s worth re-balancing if the sector or stock is suffering from a negative macro condition or perhaps sell out a whole sector and collect on your capital appreciation.

      I can see why you are heavy in the financial and energy sectors. To me they seem to have the best relative values in the market for a while. Currently, the consumer and industrial space have very expensive stocks in general which is why I’m looking to add more to my financial holdings.

      And with regard to cash holdings I agree that waiting for the “right move” as you put it essentially boils down to a market timing strategy which in the long run is a difficult one to master. Thank you for your insightful comment.

  5. Keith,
    Here is my breakdown using S&P sectors:
    Cash 33.1%
    Consumer Discretionary 10.2%
    Consumer Staples 19.2%
    Energy 8.0%
    Financials 5.3%
    Healthcare 7.7%
    Industrials 1.8%
    Information Technology 10.7% (note that this includes MA and V which are 4.0%)
    Telecommunication Services 3.3%
    Utilities 0.7%

    Yeah I know, it’s very overweight in Consumer Staples (and cash if you favor being fully invested). If you put MA and V in Financials, it brings them up to 9.3% and takes Technology down to 6.7%. I am nervous that we will see another down market in October, and am not finding anything to be a must have value at this time, so I am content to hold a high amount of cash. I will probably add some Utilities when I retire and current income becomes a goal, but that won’t be for a few years. In the meantime, I would rather hold stocks with higher dividend and earnings growth that should do better over the long haul.
    KeithX

    • Hi KeithX,

      Like you I am heavy in the consumer staples as well. Nothing wrong with that as it is generally considered a defensive sector to be in. Part of the reason I chose to be heavy in it. Regarding your cash reserve there is no shame in holding such a large percentage in cash. In fact, you’ll be in an excellent position to buy certain stocks or whole sectors when others will be scrambling to raise cash to pick up shares if there is a major decline. Just look at BP today how it lost about 6% in one trading session. For those interested in that stock with little or no cash have only two options… sell current stock and buy BP or make no move at all. As always thanks for stopping by.

    • Hi rickrack,

      You are like many dividend investors that desire to be fully invested all the time. While on the surface it’s not a bad idea as you have all your cash working for you, you do miss out on buying opportunities when they inevitably arise. As I mentioned to KeithX, look at BP today falling 6%. For those who are interested in that stock and are fully invested they cannot purchase any new shares. I feel there must be some balance maintained and one cannot always be fully invested. Thank you for commenting.

    • Hi DH,

      Your point illustrates, that while investing deals with cold hard numbers, such as revenue, profit, sales, gains and losses, there are aspects that are part art rather than science. If you ask me, I place any REIT as a financial sector stock and JNJ as a healthcare stock. Of course, these classifications do not really matter when investing for the long haul and seeking rising dividends. Thanks for stopping by.

  6. Hi DV,

    I’m heavily concentrated in oil/gas (KMI, PNY, COP) and medical (BAX).

    The only healthcare I have is LTC (if you want to call it that). I’m very interested in OHI and might add it to my flip. The only problem I have with REITs is its accounting. Some are capital gains, some are ordinary dividends, some are return on interest. I don’t know which belongs to which but Scottrade normally calculates all that for me

    • Hi TBDI,

      Thanks for sharing some of your holdings and sector concentrations. REITs like MLPs seem to be very popular among the dividend bloggers, no doubt because of their high current yields. Regarding REIT accounting, you might want to consider placing them in retirement accounts such as an IRA or ROTH and have all dividends and return of capital reinvested without tax consequences. In general, REITs and MLPs are more tax efficient in retirement accounts. Thanks for commenting.

  7. DivHut,

    I am definitely heavy in telecom, tobacco, and energy. It seems like this is where most of the bargains have been and continue to be. I did buy HCP twice last year when REITs fell hard. I also bought DLR in the low 40’s last year but it has since run up (to the mid 60’s), along with a lot of interest rate sensitive stocks. HCP still looks pretty good though in the low 40’s.

    MDP
    My Dividend Pipeline recently posted…August 2014 Passive IncomeMy Profile

    • Hi MDP,

      I appreciate you sharing your sector concentrations. The energy sector seems to be a common thread among many of the dividend bloggers as the REIT space continues to be quite popular as well. I favor the healthcare REITs as long term investments and will be watching them now that they caught my attention. I’d likely add them to my ROTH account. For now I am looking at HCP, VTR and OHI to start. I have been looking at LTC as well and NHI in that space. Thank you for stopping by and commenting.

  8. DivHut,

    Nice that you published your sector allocation right as I was writing my post about the same topic 🙂 I’m a bit more diversified sector wise but agree that consumer stables is the sector I would be the most comfortable being overweight in. At the accumulation phase I’m going after the best possible values without concerning sector weightings too much. Energy and REITs are actually my bigger weightings and I see you are not invested in either of them. Don’t you see long term potential in energy sector or why are you avoiding them?

    Thank you for sharing!
    Leveraged DGI recently posted…My Sector AllocationMy Profile

    • Hi LDGI,

      When I set out to build my dividend growth portfolio I wanted to take a very conservative approach which is why I am very heavy in the consumer staple sector which tends to be very defensive. I also own three utilities which are not popular among many of the dividend investors as well. I feel like this is my “retirement money” and as such don’t want to gamble with a heavy exposure to REIT, MLP or high yield investments in my portfolio. Slow and steady helps me sleep well at night.

      That being said, I’m not against those investments. I actually want to get into the REIT space a bit as I am looking at the healthcare REIT space specifically. Names such as HCP, VTR, OHI, NHI, LTC and others. I’m not against REITs or energy as you point out it’s just that those sectors seem more volatile to me and I’m looking to decrease volatility in my portfolio as much as possible. Some REIT or energy exposure will be OK with me. I don’t want to give you the impression that I’m totally avoiding them. You might also notice that I have no tech in my portfolio either for the same volatility reason I mentioned earlier. Thanks for asking your question. I appreciate your comment.

  9. How did you get the sector divided information? This seems to be very sophisticated. 😛 Are you going to even out all the sector? I saw people doing Mortif, I’m not that sophisticated yet. What are your thoughts?

    • Hi Vivianne,

      The sector information comes directly form my Sharebuilder site. For an updated version you can visit Dividend Portfolio Sector Allocation Update. I do not plan to even out my sector allocation for the time being. I like to be heavier in consumer staples and industrial stocks for now with a growing emphasis on health and financial moving forward. I do not plan to own any tech sector stocks and own very little to no energy sector stocks as well. This is just my personal preference. If I was just starting out as a dividend growth investor I would be using Loyal3 instead of Motif. Nothing bad or wrong going with Motif, I just like the simplicity and free nature of Loyal3 that allows for very small investment increments in many solid long term dividend payers. With minimums at $10 a pop you can easily build out a high quality portfolio without even feeling the investment dollars being allocated. Just my opinion. Thank you for stopping by and commenting.

Leave a Comment

CommentLuv badge