Core Retirement Portfolio For The 57 Year Old

Includes: BBL, SPY, UL, VOD
by: Norman Tweed

<< Go back to the retirement portfolio for the 56 year old, 55 year old.

What does the English lion have to do with a retirement portfolio? Diversification! Once you have several U.S. stocks in your portfolio, it is time to look overseas to diversify (time waits for no one). A good place to start is England, due to the tax treaty which allows American investors to escape foreign withholding tax on English companies. Many English companies, such as Vodophone (NASDAQ:VOD), Unilever (NYSE:UL), and BHP Billiton (NYSE:BHP) have well known products in the United States such as VZ Wireless (45% owned by Vodaphone), Dove Soap & Lipton Tea, and natural resources such as metals, oil and gas.

In last week's article I discussed three U.S. companies to build the portfolio. In this week's article, I will recommend three foreign stocks for diversification. These stocks have a large moat, good dividends, and provide safety of capital. Data is from Market Edge, Zacks, Yahoo Finance, Fidelity and David Fish's CCC charts.

  1. Vodaphone (VOD)--Telecommunications sector. Vodafone Group Public Limited Company provides mobile telecommunication services worldwide. It offers mobile voice services to approximately 370 million customers; messaging services; mobile data services; fixed broadband services to approximately 6 million customers; and whole sale carrier services to approximately 40 African countries. This company has paid dividends (usually twice per year) for more than 20 years and has significantly raised them since 2000. The current yield is 5.14%. The 5-year dividend growth rate is 10.42%. (It should be noted that a special dividend + regular dividend will be announced around November 16, 2011) The current p/e is 11.57. The projected earnings per share growth rate for next year is 12.71% and 5.63% for the next 5 years.

  2. Unilever (UL)--Consumer staples sector. Unilever PLC provides fast-moving consumer goods in Asia, Africa, Europe, and the Americas. The company offers savory, dressings, and spreads products, including soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines, and spreads, as well as cooking products comprising liquid margarines and frozen foods under the Knorr, Hellmann's, Becel/Flora, Rama/Blue Band, Calve, Wish-Bone, Amora, Ragu, and Bertolli brand names. This Dividend Contender has 11 years of consecutive dividend increases. The current yield is 3.9%. The 5 year annual average dividend growth rate is 6.8%. The current p/e is 15.82. The projected earnings per share growth rate for next year is 7.93% and 8.25% for the next 5 years.

  3. BHP Billiton (NYSE:BBL)--Basic Materials sector. BHP Billiton Plc, together with its subsidiaries, operates as a diversified natural resources company. The company engages in the exploration, development, production, and marketing of oil and gas properties. It also involves in mining of bauxite, refining of bauxite into alumina, and smelting of alumina into aluminum metal; and mining of copper, silver, lead, zinc, molybdenum, uranium, gold, diamond, titanium, nickel, iron ore, metallurgical coal, and thermal or steaming coal. This Dividend Challenger has nine years of consecutive dividend increases. The current yield is 3.6%. The 5 year annual average dividend growth rate is 25.5%. The current p/e is 7.52. The projected earnings per share growth rate for next year is 8.4% and 13% for the next 5 years.

A chart comparing these three stocks over the last five years shows the cyclical nature of all three stocks, when compared to SPY (S&P500 Index ETF).

(Click to enlarge)

We will now look at the dividend income stream for these three stocks. With equal positions of $10k each purchased 1 year ago, these stocks produced a yearly income stream as shown in the following table:


Yearly Dividend Rate

Number of Shares

Yearly Income













In order to investigate the growth of the portfolio, due to dividend reinvestment, I will once again create a spreadsheet for only the last year (November 2010-November 2011).

Stock Date of reinvest Div Rate # Shares Dividend Drip price # Shares pur Total Value
Totals 398.03 $551.16 20.82
VOD 09/10/11 398.03 $25.77 $10,257.17
06/01/11 $0.98 383.81 $376.14 $26.46 14.22 $10,531.81
02/09/11 383.81 $29.17 $11,195.80
11/17/10 $0.46 377.21 $175.03 $26.51 6.60 $10,174.86
Totals 344.79 $412.42 13.45
UL 09/10/11 $0.32 341.23 $108.85 $30.53 3.57 $10,526.50
05/11/11 $0.33 337.79 $111.13 $32.34 3.44 $11,035.27
02/09/11 $0.29 334.55 $95.68 $29.49 3.24 $9,961.44
11/09/10 $0.29 331.34 $96.75 $30.18 3.21 $10,096.59
Totals 139.03 $274.73 3.90
BBL 09/07/11 $1.10 136.74 $150.41 $65.79 2.29 $9,146.48
05/11/11 136.74 $78.20 $10,693.00
03/09/11 $0.92 135.13 $124.32 $77.26 1.61 $10,564.46
11/03/10 135.13 $74.00 $9,999.62

At this point, I will add a table to illustrate the growth of dividends received and the steadily growing income over time.

















In addition, I will illustrate the total value of this portfolio by quarter in the following graph: (Click to enlarge)

It can be seen from the table that the income for the year was $271.78+$220+$487.27+$259.26=$1238.31. On the initial $30k investment, this was 4.12% yield, which meets my minimum 4% yield for a core dividend growth stock portfolio. In addition, it can be seen from the Total Portfolio Value chart that the ending portfolio value was $29,930.15. This computed out to a capital loss of $69.85 or -0.23%.

There are several points that need to be made at this point.

  • Note that Vodafone and BHP pay semi-annual dividends with varying amounts, usually a preliminary dividend and a final payment, based on the year's profit.

  • Note the highly cyclical nature of BHP's share price. This is typical for mining stocks and other basic materials sector stocks.

  • Note the smoothing effect of Unilever, especially with the quarterly dividend payments.

  • Note the foreign exchange rate effects on the dividend rate, especially Unilever.

  • Note that Europe has been in debt crisis mode during this past year, with countries such as Greece on the brink of insolvency. Thus, international diversification of these three companies has made a tolerable situation out of what could have been disaster for investors in European stocks.

Conclusion: As one gets closer to the home stretch of retirement, diversification becomes more important to the portfolio. It is difficult to look at foreign turmoil and invest. However, the United States has problems similar to Europe, due to an aging population and lack of demand. I had extreme difficulty with the decision to invest in Europe and Asia in 2003, after the dot com bubble burst, but went ahead and did it anyway. I placed 20% of my portfolio at that time in foreign stocks. These stocks act more like mid-cap stocks and are volatile. When the Great Recession hit the United States, the diversification of these foreign stocks helped stabilize my crashing portfolio. It is critical that one does their own due diligence on any investment.

Disclosure: I am long VOD, UL, BBL.