Our Dividend Portfolio
As a prelude to this coming Thursday’s guest post from Joseph Hogue on building a better portfolio that meets your needs, I’m sharing here today the stock dividend portfolio I’ve built over the past decade or more.
As Joe will note in his article, I’m an advocate of much more caution about stock investing than seems to prevail today (thanks, in my opinion, to Wall Street marketing), and I hold what many would consider heretical views on equity investing. (Explore articles I’ve written under the Investing category link on Money Counselor’s homepage to learn more.) I also think bogus the mantra that building a fund large enough to finance a secure retirement is nearly impossible without turning over the lion’s share of your savings to Wall Street. People like us ignore investment opportunities other than stocks at our financial peril.
That said, and without spoiling the good ideas Joe will share with you Thursday, I’ve always said equity investing can play a constructive role in most people’s retirement plan. The issue is that many small investors do not understand stocks’ true risks, and that’s because they get their advice solely from people and media whose livelihood depends on small investors sinking their nest eggs into stocks.
Our Equity Investing Philosophy
First, and this is really important: None of what follows is a recommendation for what you should do with your investments. Anyone who gives you financial advice absent thorough knowledge of your situation and goals is a crook. I’m not a crook. I am sharing in what follows the details of most of our stock investments and why we’ve invested as we have because 1) some Money Counselor readers are interested in this sort of thing, and 2) I think we learn from other’s mistakes and triumphs as they work to build a retirement nest egg, even if their circumstances differ from our own.
Second, a bit of background: I’m age 59 and most people would consider Ms. Money Counselor and I retired. I’ll let Ms. Money Counselor speak for herself in the comments if she’d like, but I don’t feel retired, at all. No, I’m not punching a clock anywhere or collecting a regular paycheck, but I do earn money and am very busy helping run as a volunteer the local carshare cooperative, teaching Tai Chi, learning how to garden, managing our money, and other endeavors. Also, keep in mind that we live in Canada when you have a look at our dividend portfolio.
Approximately 15% of our financial assets are invested in equities. And most of that 15% is invested in dividend-paying stocks I have hand-picked over the past dozen years as we approached our “post-career years”. I like dividends because, to me, nothing’s as attractive as cash coming in. It’s the classic bird-in-the-hand vs. in-the-bush phenomenon I suppose. I invested more for capital gain when we were younger. But without big incomes from employment, there’s no substitute for cash to pay the electric bill and fill the gas tank. Very little of our stock investments today are purely in anticipation of a hoped-for capital gain. What is invested for capital gain I consider highly speculative and subject to loss. On the other hand, a home run is also possible with these investments.
Our Dividend Portfolio
Here’s our dividend portfolio today. The % of Portfolio is based on today’s market value. But the dividend yields are based on the original investment (purchase price), not today’s value of the stock, which to me is what matters.
I choose dividend stocks based on 1) the likelihood that the dividend will at least persist and ideally rise, and 2) the stability of the company’s business and industry. Though these investments are for dividend income not capital gain, naturally I’d prefer my principal be preserved and I wouldn’t squawk if I notched a big gain. If I sold today I would have a capital gain on each of these except Vodafone—a recent buy which has declined by over 5% since the U.S. election. But I had in mind when I bought and still have in mind today to keep these investments until we die, if financially possible.
A couple of comments:
- After a million years of never cutting its dividend, GE did so during the 2008-09 meltdown. That slashed my dividend yield, and it’s never fully recovered. Still, a 2.8% yield ain’t chickenfeed. I’ve hung in there with the stock, right or wrong. Probably just stubbornness.
- I would like to add more Valener, GlaxoSmithKline, and Vodafone, mainly because they’ve each dropped quite a lot over the past week, ratcheting up their dividend yields and improving the odds for principal preservation.
- My best investment has been Bristol-Myers Squibb. We’ve banked many thousands in steadily rising dividends, and the stock price has appreciated 160% since we’ve held it.
- One of my principles is that I do not buy stock of U.S. financial services industry companies, even though many pay big dividends. (I’m comfortable with Bank of Nova Scotia because Canada believes in financial regulation and Canadian banks are far more conservative than U.S. banks, in general.) After witnessing the stunning and abrupt Lehman Bros. demise and other carnage during the 2008 meltdown, I would not touch U.S. financials with the proverbial ten-foot pole. Way too risky for me, at my age.
Don’t forget to check out Joe’s post on Thursday for tips on building a better portfolio!