A High-Yielding Income Portfolio Based On 6 Stocks With An Average Yield Of 6.5%

Oct. 02, 2015 12:28 PM ETBHP, PM, NTR, SHEL, RIO, T, NTR:CA30 Comments

Summary

  • A simple income and dividend reinvestment portfolio for not too fearful investors.
  • 50% of the portfolio is based on 2 safe dividend stocks from the telecom and tobacco sector.
  • A diversified mix of 4 stocks from the beaten commodity sector boosts yield.
  • The overall starting yield stands at 6.5%.

The good thing about declining share prices is that dividend yields go up. It has become easier to find stocks that offer more than 5% yield, although most of the higher yields are associated with a certain risk. The idea here is to put together a simple portfolio beyond the beaten tracks, more risky than a the classical dividend growth approach based on conservative stocks such as Procter & Gamble (PG), Coca Cola (KO), Microsoft (MSFT), or Johnson & Johnson (JNJ) and the likes, but with a dividend yield that is almost twice as high.

Particularly in the in the beaten commodity sector more than 6% or even 7% yield can be found, and this includes large caps which are among the leaders in their industry. The oil sector is one obvious area to look for, but also mining is good for exceptional yields.

Obviously, these yields are associated with a certain risk, namely the fear that depressed commodity markets will sooner or later force companies to cut their dividends. Therefore, if you are looking for fool-proof income investment with almost zero risk you may as well stop reading. The investment horizon for the portfolio is long-term, and the primary focus is to benefit from dividends, although in the long run capital appreciation for the currently low priced stocks should add to that.

I have developed a small portfolio consisting of only six stocks with an average starting yield of 6.5% for not too fearful investors. 50% of the portfolio is based on two rather fool-proof dividend growers with a minimum risk for dividend cuts anytime soon ("Safe Income Providers"). The other half comprises four stocks from the commodity sector ("Dividend Yield Boosters"). Each one yields close to or more than 7% which signals a certain risk that the market does not consider the dividends to be super-safe. The

This article was written by

My job has nothing to do with the financial world, on the contrary - I have a college education and a Ph.D. in science and I work for a large cooperation in the German industry. I bought my first stocks almost 20 years ago, starting with investments in DAX companies (the German large cap index) and have continuously broadened my horizon geographically and to other equity classes since then. My main ambition is to obtain financial independence and the admittedly challenging ultimate goal is to retire at the age of 50 (or at least in the mid-fifties). Let’s see how this turns out…

Disclosure: I am/we are long T, BBL, RIO, RDS.A. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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