Dividend Growth Model Portfolio October Update

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Includes: AMT, BMY, CCI, DAL, DGX, EMN, HD, HON, MAA, SCHD, SWK, TRNO, TXN, WM
by: Brad Kenagy

Summary

This is my overview and update for my model dividend growth portfolio for August.

So far, my model portfolio has underperformed its benchmark but that should change.

Now that the model portfolio is nearly fully invested, I expect the performance gap with my benchmark to close.

This is my October update for my model dividend growth portfolio that I started at the end of May. If this is your first time viewing my model portfolio, you can find my portfolio selection process here. The month of October was a volatile month that provided the opportunity to add many quality names to the portfolio. The following chart shows the performance of my model portfolio compared to my benchmark: The Schwab U.S. Dividend Equity ETF (SCHD).

Performance & Yield

During the month of October, many new positions were added to the model portfolio and now the portfolio is nearly fully invested. As you can see, because I have been building the model portfolio over time, it has lagged because of not being fully invested right out of the gate. However, now that it is nearly fully invested, I expect my portfolio will catch up to my benchmark. As I will show later in my article, the three largest sectors my model portfolio has exposure to are: Industrials, REITs, and financials. These sectors have had large corrections and underperformed this year for various reasons. My model portfolio has a slightly higher yield than my benchmark, which when combined with the potential for sector rotation/mean reversion will help close the performance gap.

*Data as of October 31st

SCHD Return

DG Portfolio Return

2.96%

-1.72%

SCHD Yield

DG Portfolio Yield

2.76%

2.98%

Data exported from Sharewise

Previous positions added to

During the month of October, additional shares of 3M (MMM), Douglas Emmett (DEI), Eaton (ETN), and Rockwell Automation (ROK) were added to the model portfolio. In addition, multiple times during the month of October, shares of Bank of New York Mellon (BK), Blackrock (BLK), First Hawaiian (FHB), Las Vegas Sands (LVS), Morgan Stanley (MS), Packaging Corp. (PKG), and Weyerhaeuser (WY) were added to the model portfolio.

New Portfolio Selections

During the month of October, the model portfolio went on a spending spree because of the large market decline and added thirteen new stocks. Out of this group, you will notice that there are many industrials stocks that declined because of the ongoing trade dispute and because of earnings worries that were started by PPG (PPG), which sent many industrials lower. As of November 7th when I am writing this article, 9 of these 13 selections have a positive return since they were added to the model portfolio, so I am very encouraged by that thus far.

Symbol

Company

(AMT)

American Tower

(BMY)

Bristol-Myers Squibb

(CCI)

Crown Castle International Corp.

(DAL)

Delta Air Lines Inc.

(EMN)

Eastman Chemical Co.

(HD)

Home Depot Inc.

(HON)

Honeywell International

(MAA)

Mid-America Apartment Communities Inc.

(DGX)

Quest Diagnostics Inc.

(SWK)

Stanley Black & Decker Inc.

(TRNO)

Terreno Realty Corp.

(TXN)

Texas Instruments Inc.

(WM)

Waste Management Inc.

Current Portfolio Holdings

The table below shows all the current model portfolio holdings. You will notice that Johnson & Johnson (JNJ) and Xcel Energy (XEL) currently hold the top spots in the model portfolio and that is due to the fact they performed very well during the market correction during October.

*Data as of October 31st

Image data from Sharewise

Portfolio breakdown

The following table shows the breakdown of the allocation by sector the model portfolio currently has. Financials, Industrials, and REITs are the top three sectors. As I noted in the first paragraph, these sectors have had large corrections and underperformed this year for various reasons. This underperformance will not last forever and when the performance turns around, my model portfolio should be able to catch up my benchmark. The second chart below shows the performance of SCHD vs. Financials (XLF), REITs (IYR), and Industrials (XLI). This just puts into visual form the underperformance, but as sector rotation occurs or there is an end to the trade dispute with China, industrials could rocket higher.

*Data as of October 31st

Table data from Sharewise

Yahoo Finance

Closing Thoughts

In closing, so far, the performance of my model dividend growth portfolio is lagging, but that was to be expected given positions in underperforming sectors were being added, however, that will eventually turn around over time and my model portfolio should catch up to my benchmark.

Disclaimer

Disclosure: I am/we are long WY, LVS.

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.