Creating a balanced portfolio through equities is a task that requires a diversified blend of fixed income positions with stocks that are more commonly oriented with a growth focus. Yet unlike a balanced fund that may concentrate on diversifying between bonds and equities, we can attempt to accomplish a similar result entirely through stocks.
When combined, the following companies offer a stable, high-yielding portfolio that is diversified through multiple fundamental industries. The following portfolio offers an average dividend yield of 6.37%. It remains relatively stable with an average beta of 0.83. Above all, it remains fully diversified between industries that are more growth-focused and those that are more defensive. All values were taken as of March 8, 2012.
|Company Name||Market Capitalization||Beta||Fwd Div %||Qtr. Earnings Growth %||Industry|
|Bristol-Myers Squibb (BMY)||$55.34 B||0.21||4.2%||76.4%||Biopharm.|
|Chevron (CVX)||$217.53 B||0.9||3%||(3.2%)||Major Oil|
|Verizon (VZ)||$111.21 B||0.41||5.2%||n/a||Telecom|
|Seagate Technology (STX)||$12.56 B||2.8||3.7%||275.3%||Data Storage|
|Kraft (KFT)||$67.03 B||0.37||3.0%||53.7%||Food Products|
|American Capital Agency Corp (AGNC)||$6.58 B||0.34||16.8%||51.2%||Mortgage REIT|
|Terra Nitrogen (TNH)||$4.17 B||0.78||8.7%||48.8%||Fertilizer Products|
Bristol-Myers Squibb Co.: The company offers exposure to a booming aging population that is sure to provide a growing demand for drugs. With an increasing dividend covered under a sustainable payout ratio of 61%, Bristol-Myers offers a stable income play in a growing sector.
Chevron: As one of the largest major oil plays based in the United states, the company stands to directly benefit from rising oil prices and the stability of the domestic markets. Chevron continues to offer a steadily growing dividend that has continued to increase year after year for more than 15 years.
Verizon: As a foundational play for any high yield dividend portfolio, telecommunications giant Verizon offers a steadily growing dividend in a very stable sector. The growing demand for interconnectedness maintains a growth factor for the company. As a leader based in the United States, the company remains less vulnerable to international exposure.
Seagate Technology: As a growth stock, the company stands to directly benefit from the ongoing technology boom. The company recently announced a 39% increase to its dividend along with an additional $1 billion share buyback which will help to continue lift its share price. With increasing demand across the industry, the company sports a surprising forward price-to-earnings ratio of 3.3 based on 21 analysts. Based on the high dividend and likely growth in store, the company is a good addition to this portfolio.
Kraft: Used as another defensive play, the company offers a decent 3% dividend while dominating the stable packaged food product industry. Growing through acquisitions, the company boasted a healthy cash flow of $4.5 billion from operating activities in the last year alone.
American Capital Agency Corp.: As interest rates are set low by the Federal Reserve in order to boost economic production, mortgage real estate investment trusts continue to prosper from larger spreads on borrowed money. In effect, such companies can thrive in a recessionary environment such as what is currently being experienced. As a REIT, the company is mandated to disburse 90% of its taxable income to investors in order to maintain its tax advantages.
Terra Nitrogen Company: As a partnership that prospers on the production and sale of nitrogen fertilizer products, the company continues to thrive in the agricultural boom that is currently underway. With facilities located across North America, Terra continues to gain the innate comparative advantage of cheap natural gas prices. With natural gas serving as one of the largest input costs in the manufacturing process, Terra continues to prosper in such an environment. The company adds both growth and income factors to this portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.