Retirement Portfolio Update: Utilize Cash Or Wait

by: Stephen J Melnykevich

Back in late January I wrote an article regarding 6 Core Dividend Stocks: Building A Foundation For Financial Success that can be found here in which I discussed my plan to take control of my Roth IRA and how to allocated the transfer of funds into my own Sharebuilder account. During the first week of February, the funds were transferred to my account from a brokerage account where I became unhappy with both the fees as well as the poor performance. With $21,636.00 as my disposal I went to work building my portfolio. I will first lay out my cost basis for each of the 8 stocks that I currently hold in my account. Next, I will lay out the dividend yield I achieved for 7 of my 8 stocks. My purchase of Apple does not currently pay a dividend and therefor will not be included. Lastly, I will suggest an open question to SA readers as how to allocated the cash balance that I currently hold.

Symbol Last price Shares Cost basis Mkt value Gain Gain % Overall Return
AAPL 493.42 10 $469.20 4934.2 232.25 4.94 4.94
JNJ 64.6 30 $65.36 1938 -32.75 -1.66 -1.66
LMT 87.51 23 $85.58 2012.73 34.44 1.74 1.74
CVX 105.28 18 $106.55 1895.04 -32.81 -1.7 -1.7
AFL 48.33 40 $49.71 1933.2 -65.15 -3.26 -3.26
PM 80.44 25 $77.76 2011 57.05 2.92 2.92
INTC 26.69 75 $26.68 2001.75 -9.2 -0.46 -0.46
KO 67.94 50 $67.66 3397 14 0.41 0.41

As you can see from my holdings, Apple (non-dividend) and Coca Cola make up a large percentage of my total portfolio at 22% and 16% respectively. My other holdings average just over or just less than 9% each. I have 2K or 8% in cash that will be discussed later.

I now want to share a table that explains the dividend yield for the 7 stocks which have dividends. The cumulative average is roughly %3 which is a great starting point for an investor like me in his late 20's. With more than 40 years before retirement, these stocks will have an enormous amount of time to compound. Since I am just starting to build an income stream, I have decided to reinvest dividends from each stock back into that particular stock. Once I have a larger holding I may decide to utilize the dividends either into a completely new stock or into one of my current holdings. That will not likely be started for several years. Now let's take a look at the yield for each of the holdings.

Symbol Description Last Div DivYld %
AFL Aflac Inc $0.33 2.73
CVX Chevron Texaco Corp $0.81 3.08
INTC Intel Corp $0.21 3.15
JNJ Johnson & Johnson $0.57 3.25
KO Cocoa Cola Co $0.47 2.77
LMT Lockheed Martin Corp $1.00 4.57
PM Philip Morris Intl Com $0.77 3.83
AAPL Apple $0.00 0

When looking at that table, some stocks like LMT, and PM have great yields that present a great investment at current prices. It will be interesting to see what comes out of AAPL this year, if a dividend is introduced or if they chose to split the shares. I obviously would prefer a dividend, but if that does not occur I will hold this company for several years until fundamentals suggest otherwise. Going forward, I will be purchasing only dividend stocks.

How to utilize the cash balance is the last topic I will be discussing. Each month I will be contributing $416.00 so that I can fully fund the Roth Ira. At the present time, I am leaning towards allowing funds to grow to pick up potential bargains this summer. I am interested to see what my fellow SA readers suggest. Perhaps another purchase in a stock may be worthwhile due to current valuations, or even two stocks. Yet others may suggest allowing cash to build in order to apply later in the year.

Disclosure: I am long AAPL, CVX, KO, LMT, JNJ, INTC, PM, AFL.