Having a disciplined approach to creating a functional dividend portfolio often comes with the need to stringently diversify. With proper balance, the key to creating an income flow with a steady return of capital comes from offsetting the possibility of unacceptable losses by seeking stability, strength and support in one's holdings. Spreading risk throughout various sectors of the economy that are relied upon by society for the function of everyday life allows for a form of consistency that is so often lacking in the stock market. Such balance can keep an investor worry-free and safe from one's own overreactions during the market downturns. The following five companies (when combined together) offer a balanced approach for the income investor. They have also often proved to be stable forces in the midst of turbulent volatility.
| Company Name | Market Cap. | Beta | Fwd. Div% | Industry |
|---|---|---|---|---|
| Bristol Myers Squibb Co. (BMY) | $55.89 B | 0.24 | 4.2% | Drug Manufacturer |
| At&T (T) | $197.52 B | 0.48 | 5.2% | Telecom |
| Consolidated Energy (ED) | $17.46 B | 0.14 | 4.1% | Utilities |
| Unilever (UL) | $89.91 B | 0.83 | 4.0% | Consumer Staples |
| Waste Management (WM) | $15.26 B | 0.65 | 4.3% | Waste Services |
All Values were taken as of May 26, 2012.
Bristol-Myers Squibb Company. Having a wide-reaching biopharmaceutical specialist captures a steady and vital sector of the economy. This is becoming ever more so as the population demographics grows older. Bistol offers growth to this portfolio as an aging population's demand for drugs continues to expand. The company's product portfolio covers drugs that deal with everything from hypertension, to schizophrenia, to diabetes, to cancer, and even to organ transplant rejection. With an increasing dividend covered under a sustainable payout ratio of 45%, Bristol-Myers offers a steadily growing income source as witnessed in the below dividend history chart.
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AT&T, Inc. As a fundamental holding for any high-yield dividend portfolio, telecommunications giant AT&T offers a robust business in an industry with high barriers of entry. The developing demand for increased interconnectedness maintains a comfortable growth factor for the company. Likewise, as a leading company based in the United States, the company remains less vulnerable to uncertainty derived from international exposure. With a consistent yield that continues to grow, AT&T stands as a foundational company when it comes to income seekers.
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Consolidated Edison Inc. With a history that expands over 180 years, Consolidated Edison's service to New York City stands as a testament to its overall stability. The company's principal business segments provide electricity, gas, and steam to the greater New York area. Consolidated Edison is a utility company with a growing dividend stream and a reliable client base. Utilities tend to serve as the most essential aspect to every living situation, and are therefore among the last services to be cut even in the most difficult of times.
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Unilever plc. Access to a wide range of consumer product markets allows Unilever to be almost everywhere through its multiple branding endeavors. Unilever has a strong presence when comes to skin care and hair care products with names such as "Dove," "Lux," and "Vaseline" to name a few. But the company has grown so large that it naturally expanded into a wide arrange of food products. Some popular brands include everything from "Bertolli", to Lipton," and even to "Slim Fast." Based in London, the company has a very large multinational presence. Yet its essential products for consumers provides for a smooth ride even as the times get rough.
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Waste Management, Inc. One of the last services to ever get cut in a cash-strapped environment is the trash and waste disposal business. As one of the largest disposal companies publicly traded, Waste Management has rewarded its investors with a steadily growing yield and a simple business model. Combined with a growing pursuit of innovative methods to find value in one man's trash, Waste Management has also sought to develop new ways to recycle and collect methane gas from landfills.
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Conclusion
When combined together, this stable portfolio expands across five unique sectors of the economy, each deemed to be relatively safe from a possible market downturn. Each investment currently yields a least a 4% dividend, but many are committed to growing their yields over time. Most importantly, every one of these companies operate under a beta less than 1. It's with this statistic that we can tell that this portfolio is built around companies that are less vulnerable to market shocks.
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