For starters, I will give you the quick rundown on my position. I have divided my portfolio into two pieces. Two-thirds of my portfolio is in S&P 500 index funds. This is where my 401k sits and my contributions go twice a month. This will sit there for another 29 years. It is simple, cost effective, tax efficient and I do not even think about it or its price. It is truly set it and forget it. I have been doing this since I started working in 2005. I enjoyed the ride in 2008-2009 and have no problem doing that again another 5 or so times between now and retirement. My goal for this money is an 8.5% (including reinvested dividends) return with inflation running in the 3.3% range. This will get me to my desired retirement goal of around $2.6M (in today's dollars), which I will transition to a DGI portfolio when the government lets me have my money back without penalty! That may be 35 or 40 years with the way things are going. For now, I plan with what is known and I will take it out when I turn 60.
The other third is where I think it may look a bit strange. I am building a DGI portfolio and have been for the previous year. In doing so, I have attempted to be patient and wait for fair value offerings to happen in the marketplace. I am under the same timeline as this money sits within an IRA. My goal is to use the next 29 years to learn how to construct a quality DGI portfolio so when I transition my 401k to the DGI logic, I am not walking in blind without knowing the ins and outs of what makes a good holding. My goal for this portfolio is all around income. I want to get a starting yield of around 3% with a growth rate of 5%. Without further comment, here is my portfolio.
Ticker | Shares | Price | Total Value | Dividend | Yield |
25 | $128.42 | $3,211 | $2.68 | 2.09% | |
20 | $133.54 | $2,671 | $3.12 | 2.34% | |
COH | 44 | $36.12 | $1,589 | $1.36 | 3.77% |
40 | $98.60 | $3,944 | $4.28 | 4.34% | |
45 | $56.58 | $2,546 | $1.88 | 3.32% | |
150 | $15.40 | $2,310 | $0.60 | 3.90% | |
55 | $119.50 | $6,573 | $1.72 | 1.44% | |
176 | $34.38 | $6,051 | $1.44 | 4.19% | |
130 | $38.88 | $5,054 | $0.92 | 2.37% | |
50 | $88.55 | $4,428 | $2.16 | 2.44% | |
25 | $99.64 | $2,491 | $3.00 | 3.01% | |
75 | $68.95 | $5,171 | $1.76 | 2.55% | |
100 | $40.00 | $4,000 | $1.32 | 3.30% | |
140 | $39.50 | $5,530 | $0.60 | 1.52% | |
50 | $64.67 | $3,234 | $1.92 | 2.97% | |
50 | $63.56 | $3,178 | $3.08 | 4.85% | |
200 | $41.89 | $8,378 | $2.16 | 5.16% | |
89 | $36.12 | $3,215 | $1.88 | 5.20% | |
40 | $67.36 | $2,694 | $2.72 | 4.04% | |
50 | $47.62 | $2,381 | $2.20 | 4.62% | |
30 | $83.86 | $2,516 | $2.92 | 3.48% |
I have 21 holdings worth a little over $81k. The account also has around $40k in cash. It nets about $2700 in dividends with a yield of 3.3% (on invested capital). Over the past year, those companies have grown the dividend collectively at a rate of 8.5% (my portfolio is a bit lower as I did not hold all these companies for the last year). My expected growth in dividend over the next year is 5.5%. By this measure, I have met my goals for the portfolio. That being said, I have a collection of holdings for various reasons that I want to explain here.
First Group: Short-Term Holdings
The first group are holdings that I have invested for lack of better opportunity. This would be F, GM, SO, T, VZ. First, the auto companies are a play on pure return over the next year. In general, the forecasts going forward are positive and the yields are high. Without any better option to deploy the cash, I selected these two with intent of placing the money in the market waiting for another, long-term opportunity.
The other set is the utility/telecom group. These were selected as safer short-term locations to earn a yield. I don't expect a particularly good return from them, but I am aiming for inflation beating -- again until a better opportunity comes along.
This group makes up ~25% of my portfolio and it really exist as a place to put money to work until a better opportunity arises in longer-term holdings.
Second Group: Mid-Term Holdings
My mid-term holdings are: COH, GILD, GPS, JPM, MS, TUP. This group is made up of a mix of items. The banks do not hold the long records of success in DGI like my long-term holdings. They don't have the record of JNJ, KO or EMR. They do represent a good multi-year opportunity for above-average return. MS in particular has the ability to do some good growth to its dividend, which helps the overall portfolio.
GILD was what I will call a luck speculative holding. I bought in 14 months or so in the April dip. Buying in the mid-60s makes this a pretty solid total return for me. Now that they pay a dividend, it is getting a bit interesting for this portfolio. It could move into the long-term holdings. It is one I will need to keep an eye on as the company diversifies against its core product.
COH, GPS and TUP are the ones that do not sit the best with me right now. TUP is on a dividend freeze. COH is in a multi-year turnaround and a speculative position for me. The yield is decent, but the growth prospects are limited. I am also thinking that high priced, trend business is not where I want to put my risk. GPS is in a highly competitive market as well with the Gap brand in a downward decline here in the US. GPS is interesting with the recent growth in the Old Navy line as well as the potential for the Athleta brand to expand.
This group represents about ~30% of the portfolio and is the area where I have the most discomfort.
Last Group: True Long-Term Holdings
My long-term holdings are: AMP, CMI, CVX, EMR, HSY, JNJ, KO, QCOM, RY, XOM.
These are the holdings we all know and love. AMP, QCOM and CMI are a couple of new names to the old classics like HSY, JNJ, CVX, XOM and KO. The new names represent some of the lower yield, higher growth potential. Each is playing an important roll over the long term. I am comfortable with each of the names on the list, their relative sizes within the portfolio. This group represents ~40% of my portfolio.
Conclusion
As I mentioned, I do not love or hate my portfolio. With my stated goal of a 3% yielding portfolio growing around 6% per year I am there. I do think the portfolio is a bit weird. In the current environment, I have roughly half of my portfolio in cash or positions that I am sitting in with attempt to only beat inflation. I want to get invested in long-term holdings at fair value, but there are not many that exist. What do you think? I look forward to your comments.
