Setting Up A Laid-Back, High-Yield Portfolio

by: Giancarlo Nicoli

I'm going to set up a demonstration portfolio with Seeking Alpha.

I recently wrote two articles (here and here) where I outlined five high-yield dividend paying companies: American Capital Agency Corp. (NASDAQ:AGNC), Fifth Street Finance Corp. (NYSE:FSC), Sabra Health Care REIT, Inc. (NASDAQ:SBRA), Medical Properties Trust, Inc. (NYSE:MPW), New York Community Bancorp Inc. (NYB).
While doing research to find more companies to cover, I thought it would be nice to keep track of them and find out how they would do in time.


I believe that it would be interesting - as time passes - to see whether they do well or not, and examine the reasons they do so. It is my opinion it would be a teaching experience, as well as an entertaining one.
I'll buy the laid-back portfolio (LBP) as an example. The LBP will not reinvest the dividends. It will be a portfolio geared towards income to sustain retirement.

The goal is to keep it simple to manage, conserve capital (while possibly increasing it) and beat inflation with a starting dividend yield which is above inflation and a dividend growth rate above the inflation rate.

A few rules

Obviously there have to be some rules to follow.
I thought of the following:

  • I want to own easy-to-understand, easy-to-follow companies. This is the basis of my laid-back dividend investing strategy. If a company is too difficult to understand, then I leave it alone.
  • Companies have to have a high dividend yield.
  • Dividend has to be sustainable.
  • Companies have to operate in different sectors.
  • Trading has to be infrequent. After all, it is the laid-back portfolio.

Operational Method

  • I'll (fictitiously) buy the shares one day after publication on Seeking Alpha, at mid-day prices, so I don't have an unfair advantage over you, the reader (not that I think I will be able to move a stock!).
  • I will also apply a $20 commission, which I think is a reasonable compromise between online brokers' fees and traditional, old-fashioned, broker-assisted fees.
  • On the same day I will buy the DJ, S&P and Nasdaq indices as well, so we'll have a comparison.
  • LBP will have around 20 different stocks. At $10,000 per position, this translates into a starting value of $200,000.

Tomorrow, a couple of hours before market close, I will thus buy $10,000 (give or take) apiece of AGNC, FSC, MPW, NYB, SBRA.PK. At the end of each month, I will publish portfolio performance, dividends received, comparison with major indices. From time to time I will also add new companies, as to fulfill the 20-odd Laid-Back Portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for teaching and entertainment purposes only. It is not intended to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above. Investing includes risks, including loss of principal.

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