Summary
- This is my personal portfolio. Its purpose is supplemental retirement income through a relatively safe, growing dividend stream.
- Q1 began with 21 holdings. No positions were closed and 3 new positions were added, ending the quarter with 24 companies.
- Additions: Home Depot, Healthcare Trust of America and Prudential Financial.
- The gain for the quarter was 7.7%. Cash is low at 3.0%. The portfolio dividend yield at quarter end is 3.32%, or 3.42% ex-cash.
- I continue to revise my “scoring” system. I’ve set a cap on income from any individual security. As of today, there’s just one company on my watchlist that I’m closely monitoring: Toronto-Dominion.
The purpose of this portfolio is to provide supplemental retirement income through a relatively safe, growing dividend stream.
Three New Positions
No positions were closed in Q1. Three were added:
- The Home Depot, Inc. (HD) at $257.51;
- Healthcare Trust of America (HTA) at $27.36; and
- Prudential Financial, Inc. (PRU) at $88.46.
Home Depot was added after considerable “seller’s remorse” when I took profits too early (May 2020), and after HD’s stellar full year 2020 and a 10% dividend increase. Sales surged during the pandemic, which will create some tough comparables for 2021.
Healthcare Trust was added after I wrote a review for MoSI. I’m impressed with management’s conservative strategy and their ability to accumulate high quality medical office buildings at good value. Their Annual Reports reveal an admirable consistency.
Prudential was added after a price pullback. This is another former holding that I regretted selling. PRU has a strong balance sheet and a relatively high 5% yield.
Scoring System
For many years, I listed the portfolio on my spreadsheet according to the company’s Standard & Poor’s credit rating. Now I rank them according to a score based on 8 factors:
- S&P credit rating
- Consecutive years of dividend increases
- Dividend yield
- Payout ratio
- 5-year dividend growth rate
- Seeking Alpha Quant Score
- Dividend safety score
- Long-term debt to total capital.
I’ll explain the scoring system in the comment section for those who are interested.
Portfolio Table
The portfolio’s 24 equities are listed in the table below. Price is the 3/31/21 closing price. %Port is each holding’s percentage of the portfolio’s market value as of 3/31/21. Div is the annual dividend per share. Yld is the dividend yield per share as of 3/31/21. %Inc is the percentage of the portfolio’s income contributed by each company. S&P is the S&P credit rating, where available. Yrs is the number of consecutive years of dividend/distribution increases, per Justin Law, the DRIP Investing Resource Center and the Canadian Dividend All-Star list. SSD is the Dividend Safety number assigned to each holding by Simply Safe Dividends.
| Company | Price | %Port | Div | Yld | %Inc | S&P | Yrs | SSD | Rank |
| Texas Inst (TXN) | 188.99 | 4.8% | 4.08 | 2.2% | 3.1% | A+ | 17 | 90 | 53.5 |
| Jnson & Jnson (JNJ) | 164.35 | 4.4% | 4.04 | 2.5% | 3.3% | AAA | 58 | 99 | 49.8 |
| PRU | 91.10 | 2.3% | 4.60 | 5.0% | 3.5% | A | 13 | 75 | 48.2 |
| Illinois Tool (ITW) | 221.52 | 4.5% | 4.56 | 2.1% | 2.8% | A+ | 46 | 81 | 47.9 |
| HD | 305.25 | 5.1% | 6.60 | 2.2% | 3.3% | A | 11 | 87 | 46.7 |
| Cisco (CSCO) | 51.71 | 5.2% | 1.48 | 2.9% | 4.5% | AA- | 10 | 91 | 46.6 |
| Procter & Gamb (PG) | 135.43 | 4.5% | 3.16 | 2.3% | 3.2% | AA- | 64 | 99 | 44.1 |
| Merck (MRK) | 77.09 | 5.2% | 2.60 | 3.4% | 5.3% | AA- | 10 | 99 | 43.1 |
| 3M (MMM) | 192.68 | 4.9% | 5.92 | 3.1% | 4.5% | A+ | 62 | 75 | 41.0 |
| PepsiCo (PEP) | 141.45 | 4.7% | 4.09 | 2.9% | 4.1% | A+ | 48 | 93 | 40.1 |
| Pfizer (PFE) | 36.23 | 4.3% | 1.56 | 4.3% | 5.5% | A+ | 11 | 75 | 39.4 |
| Unilever (UL) | 55.83 | 4.7% | 2.06 | 3.7% | 5.2% | A+ | 28 | 75 | 38.6 |
| Gen Parts (GPC) | 115.59 | 3.9% | 3.26 | 2.8% | 3.3% | NR | 64 | 72 | 38.2 |
| Bristol-Myers (BMY) | 63.13 | 4.2% | 1.96 | 3.1% | 4.0% | A+ | 12 | 79 | 36.2 |
| WEC Energy (WEC) | 93.59 | 4.7% | 2.71 | 2.9% | 4.1% | A- | 18 | 87 | 35.7 |
| Consol Ed (ED) | 74.80 | 5.0% | 3.10 | 4.1% | 6.3% | A- | 46 | 90 | 35.7 |
| Can Util (OTCPK:CDUAF) | 26.89 | 2.3% | 1.40 | 5.2% | 3.5% | A- | 49 | 50 | 34.6 |
| Prologis (PLD) | 106.00 | 1.8% | 2.52 | 2.4% | 1.3% | A- | 7 | 61 | 34.1 |
| AT&T (T) | 30.27 | 2.5% | 2.08 | 6.9% | 5.3% | BBB | 36 | 60 | 31.7 |
| Camden Prop (CPT) | 109.91 | 3.7% | 3.32 | 3.0% | 3.4% | A- | 10 | 80 | 31.6 |
| Verizon (VZ) | 58.15 | 3.9% | 2.51 | 4.3% | 5.1% | BBB+ | 16 | 87 | 31.4 |
| Fed Realty (FRT) | 101.45 | 3.4% | 4.24 | 4.2% | 4.3% | A- | 53 | 60 | 31.0 |
| WP Carey (WPC) | 70.76 | 3.6% | 4.19 | 5.9% | 6.4% | BBB | 24 | 73 | 27.8 |
| HTA | 27.58 | 3.5% | 1.28 | 4.6% | 4.9% | BBB | 9 | 70 | 26.9 |
| Cash | 3.0% | ||||||||
| Total/Average | 100% | 3.32% | 100% | A | 30.0 | 80 | 39.0 |
Some Trimming for Income Diversification
During Q1, I trimmed several positions because they had become outsized contributors to the portfolio’s income. AT&T was contributing almost 9% of the income, so I reduced it to 5.3%. WP Carey was providing 8.5% of the income, so I cut it back to 6.2%. Canadian Utilities represented almost 7% of the income, so I reduced it to 3.5%.
Portfolio Sectors
The table below indicates each sector’s representation in the portfolio. Mkt Wt is each sector’s 3/31/21 market weight–the sum of the market cap of the companies in the applicable S&P 500 GICS sector index as a percentage of the total S&P 500 Index market capitalization, per Fidelity.
# is the number of portfolio companies in each sector. %Val is each sector’s percentage of the market value of the portfolio. %Inc is each sector’s percentage of the income contributed to the portfolio. Companies indicates the ticker symbols for the portfolio companies in each sector.
| Sector | Mkt Wt | # | %Val | %Inc | Companies |
| Info Tech | 26.65% | 1 | 4.76% | 3.10% | TXN |
| Health Care | 13.00% | 4 | 18.09% | 18.03% | MRK JNJ PFE BMY |
| Consumer Discre | 12.45% | 2 | 9.00% | 6.64% | HD GPC |
| Financials | 11.32% | 1 | 2.29% | 3.49% | PRU |
| Communications | 10.93% | 3 | 11.65% | 14.84% | CSCO T VZ |
| Industrials | 8.87% | 2 | 9.31% | 7.26% | ITW MMM |
| Consumer Staples | 6.15% | 3 | 13.98% | 12.55% | PG PEP UL |
| Energy | 2.80% | 0 | 0 | 0 | |
| Materials | 2.70% | 0 | 0 | 0 | |
| Utilities | 2.67% | 3 | 11.99% | 13.93% | WEC ED CDUAF |
| Real Estate | 2.46% | 5 | 15.91% | 20.15% | PLD CPT FRT WPC HTA |
| Cash | 3.00% | ||||
| Total | 100% | 24 | 100% | 100% |
Performance
The portfolio gained 7.7% during Q1. The current portfolio yield is 3.32%. Monthly distributions are occurring at a rate of 3.02% of the portfolio’s value. Dividends equal 110% of distributions.
Q2 Goals
I would consider adding near these prices: PRU $79; PLD $92; CPT $76; CDUAF $19; BMY $55; PG $120; JNJ $150; TXN $150.
I would consider trimming near these prices: TXN $280; CSCO $54; MRK $90; UL $67; WEC $108; ED $90.
The only company that I’m watching closely for possible inclusion in the portfolio is Toronto-Dominion (TD). The 3/31/21 price was US $65.21, the annual dividend is US $2.52 (CAD $3.16), for a dividend yield of 3.86%. The dividend has been raised for 10 consecutive years. The 5-year dividend growth rate is 9.2%. The S&P credit rating is AA-. TD would rank between CSCO and PG, with a score of 45.4.
Disclosure: I am/we are long TXN, JNJ, PRU, ITW, HD, CSCO, PG, MRK, MMM, PEP, PFE, UL, GPC, BMY, WEC, ED, CDUAF, PLD, T, CPT, VZ, FRT, WPC, HTA, MSFT, AAPL, WMT, NKE.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article is for informational purposes only (not a solicitation to buy or sell stocks). Ted is not a registered investment adviser. Kirk Spano is an RIA. Investors should do their own research or consult a financial adviser to determine what investments are appropriate for individual selection. This article expresses my opinions and I cannot guarantee that the information/results will be accurate. Investing in stocks involves risk and could result in losses.
