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Portfolio-Update Q3 2019: 4 New Holdings For Greater Diversification And Quality

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Includes: AAPL, BASFY, BBAGF, BFFAF, BLK, CHL, GOOG, GOOGL, JPM, LVMHF, LVMUY, MSFT, NKE, NSRGF, NSRGY, PFE, PG, RDS.B, RIO, SCTBF, SEMHF, SMMNY, TRSWF, TXN, V, VNNVF, VONOY, VWO, ZFSVF, ZURVY
by: Dividend Mink
Dividend Mink
Long only, long-term horizon, dividend investing, portfolio strategy
Summary

Looking at the progress of my international dividend stock portfolio.

Dividend income in Q3 2019 totalled $358.37, up 19.8% from last year.

Since my last update, I sold two and added four new positions to my portfolio. Furthermore, I added shares to several existing holdings.

The rainy and stormy weather these days gives us a first taste of the colder months ahead. Time for me to sit down with a cup of tea and provide an update on how my stock portfolio has progressed in the past three months.

My Background

Being 35 years old and based in Germany, I only entered the fascinating world of equity investment in January 2018. While I wish I had been able to start investing in stocks earlier, working full time for approximately 30 more years should allow me to build up my portfolio with a long-term perspective.

I guess my goal is one that many readers here on Seeking Alpha can identify with: I want to create an additional source of income that can support me during all phases of life, and especially during retirement. To reach that goal, my investment approach is to build up positions gradually and hold on to them for the long term. However, this does not mean that I will not exchange companies if their fundamentals deteriorate or if I find better alternatives.

For me, investing in stocks has become not only a financial necessity, but also a private interest. When I have time, I enjoy reflecting on my strategy and exploring new investment possibilities. While I know that I am a beginner and make mistakes, I am proud that I am taking my investments into my own hands and believe that I will get better and better over time.

Despite constant discussions in the media on when to expect the next recession or a stock market crash, I continue building up my portfolio, sticking to my investment strategy. In the past three months, I made some changes to my portfolio in order to improve diversification, the quality of my holdings and future dividend income.

Dividend income in Q3 2019

Let's start with a look at my dividend income in the past months. All in all, in the third quarter of 2019 I received dividends from 12 holdings. My dividend income (after all taxes, converted to US-Dollar) totalled $358.37.

Here is a detailed overview of the companies that paid me in the past three months:

Company or fund Ticker Jul Aug Sep
BlackRock Inc. BLK $13.98
China Mobile Ltd. CHL $63.81
JPMorgan Chase & Co. JPM $17.43
Microsoft Corporation MSFT $2.41
Nike Inc. NKE $0.95
Pfizer Inc. PFE $19,88
Royal Dutch Shell plc RDS.B $50.09
Rio Tinto Group RIO $74.29
Transalta Renewables Inc. OTC:OTC:TRSWF, TSX:RNW $17.54 $17.51 $15.09
Vanguard FTSE All World High Dividend Yield ETF LSE:VHYL $43.39
Vanguard FTSE Emerging Markets ETF VWO $21.03
Visa Inc. V $0.97

Total

$100.34 $17.51 $240.52

My dividend income of $358.37 in Q3 2019 constitutes an increase of 19.8% compared to the same time period last year. The following chart illustrates the overall progress of my dividend income:

Source: The chart was created by the author with Google Sheets.

September was clearly the best month of the past quarter, with dividend income crossing the $200 mark for the second time this year. The highest individual payments of this quarter were the semi-annual dividends of Rio Tinto Group (RIO) and China Mobile Ltd. (CHL).

While a year-on-year dividend income growth of 19.8% sounds great, the main driver of growth has been the addition of fresh capital to the portfolio. I hope that in a few years, I will be able to reduce these "external" contributions of capital and let the portfolio substantially grow by dividend reinvestment.

Recent transactions

In the past three months, I continued building my portfolio in order in accordance with my investment strategy, which is:

  • Avoiding one-time investments, instead deploying capital gradually over time.
  • Paying attention to sufficient geographical and sectoral diversifications of my portfolio.
  • Investing only in large-cap companies with proven business models and sound fundamentals.

My goal is to own a portfolio consisting of 20 equal weighted individual stocks and 2 ETFs. The ETFs shall together constitute at least 30 percent of the total value so that all individual holdings will make out not more than three to four percent of the total portfolio value.

As I have only started investing last year and am building up my portfolio gradually, some positions still have a considerably larger share in the portfolio. From a strategic point of view, I am not happy with this situation. I especially want to avoid that possible losses or dividend cuts from an individual company have a significant impact to the portfolio's performance or my dividend income.

Against this background, I made the following adjustments to improve the diversity and quality of my holdings and optimise my future dividend income:

  • New position in BlackRock Inc. (BLK): I believe BlackRock is not only a fundamentally strong company, but also strategically a good addition to my portfolio. In the financial sector, I already own shares of a bank (JPMorgan Chase & Co. (JPM)) and an insurance company (Zurich Insurance Group (OTCQX:OTCQX:ZURVY)). As an asset manager, BlackRock adds a new facet to the portfolio. My cost basis for the stock is $427, which is a discount of 12.3% compared to the current 52-week high of $487 (Source: SeekingAlpha.com). I did not buy a full position, so there is potential to lower my cost basis further.
  • New positions in Apple Inc. (AAPL) and Texas Instruments Inc. (TXN): My cost basis for Apple is $219, approximately 5% below the current 52-week high of $232. For Texas Instruments, my cost basis is $129, just 2% below the current 52-week high. While both stocks do not trade at a great discount, I believe they fit well in my portfolio. Together with Microsoft Corporation (MSFT) and Visa Inc. (V), I now own shares of four strong, global businesses from the tech space that benefit from the digital revolution in different ways.
  • New position in The Procter & Gamble Company (PG): PG is an addition to my existing holdings from the consumer goods sector, which are LVMH Louis Vuitton Moët Hennessy SE (OTCPK:LVMHF, OTCPK:LVMUY), Nestlé S.A. (OTCPK:OTCPK:NSRGY, OTCPK:OTCPK:NSRGF) and Nike Inc. (NKE). My cost basis is $122, just 2% below the 52-week high of $125. I know that this is not a great discount, and that PG is considered expensive by some authors on Seeking Alpha. Therefore, I did not buy a full position, leaving the potential to reduce my cost basis in the future.
  • Addition of shares to several existing positions - most of them were regular investments which I do each month with automatic savings plans. I added shares to BASF AG (OTCQX:OTCQX:BASFY, OTCQX:BFFAF), BB Biotech AG (OTC:BBAGF), JPMorgan Chase & Co. (JPM), LVMH Louis Vuitton Moët Hennessy SE (OTCPK:LVMHF, OTCPK:LVMUY), Microsoft Corporation (MSFT), Nike Inc. (NKE), Pfizer Inc. (PFE), Rio Tinto Group (RIO), Securitas AB (OTCPK:SCTBF), Vanguard FTSE All World High Dividend Yield ETF (LSE:VHYL), Vanguard FTSE Emerging Markets ETF (VWO) and Visa Inc. (V).
  • Sold shares of Alphabet Inc. (GOOG, GOOGL): My cost basis was $1128 and I sold at a price of $1211, locking in a 7.3% capital gain. While I still consider Alphabet Inc. a fascinating company, it was my only non-dividend paying stock. I believe that with Apple, Microsoft and Texas Instruments, I have three dividend-paying companies that offer a solid exposure to the technology sector.
  • Sold shares of Vonovia SE (OTCPK:OTCPK:VNNVF, OTCPK:OTCPK:VONOY): My cost basis was $44 and I sold at a price of $46, locking in a 4.7% capital gain. Vonovia has one the weaker balance sheets of my individual holdings. Besides, German politics is currently giving real estate companies a hard time. I prefer to hold shares of companies that are less in the spotlight of regulators and have a stronger balance sheet.

Current composition of the portfolio

On 3rd October 2019, my portfolio was composed as follows:

Source: The chart was created by the author with Google Sheets.

Here is another overview of my current holdings (in alphabetical order):

Individual holdings:

Ticker Current Portfolio Weight
Apple Inc. AAPL 3.9%
BASF SE OTCQX:OTCQX:BASFY, OTCQX:OTCQX:BFFAF 4.9%
BB Biotech AG OTC:OTC:BBAGF 5.0%
BlackRock Inc. BLK 3.7%
China Mobile Ltd. CHL 5.4%
JPMorgan Chase & Co. JPM 5.6%
LVMH Louis Vuitton Moët Hennessy SE

OTCPK:OTCPK:LVMHF, OTCPK:OTCPK:LVMUY

2.0%
Microsoft Corporation

MSFT

2.0%
Nestlé S.A.

OTCPK:OTCPK:NSRGY, OTCPK:OTCPK:NSRGF

4.1%
Nike Inc. NKE 2.0%
Pfizer Inc. PFE 4.4%
Procter & Gamble Company PG 3.1%
Rio Tinto Group RIO 4.2%
Royal Dutch Shell plc RDS.B 5.4%
Securitas AB OTCPK:OTCPK:SCTBF 3.8%
Siemens Healthineers AG OTC:OTC:SEMHF, OTCPK:OTCPK:SMMNY 6.1%
Texas Instruments Inc. TXN 3.1%
Transalta Renewables Inc. OTC:OTC:TRSWF, TSX:RNW 7.4%
Visa Inc. V 1.9%

Zurich Insurance Group AG

OTCQX:OTCQX:ZURVY, OTCQX:OTCQX:ZFSVF 5.9%
ETFs
Vanguard FTSE All World High Dividend Yield ETF LSE:VHYL 8.2%

Vanguard FTSE Emerging Markets ETF

VWO 7.9%

Conclusion

Overall, I am quite happy with the recent changes in my portfolio, that have improved my asset allocation and the portfolio's overall quality.

Looking forward, there are many uncertainties that could affect the economy and stock markets on both sides of the Atlantic Ocean. For example, there is still the looming trade war between the United States, Europe and China. Furthermore, it is still not clear whether the United Kingdom will leave the EU with or without a deal, and how the future relationship of both sides will be shaped.

As a dividend (growth) investor, I don't worry too much about these uncertainties, knowing that my portfolio should provide a consistent stream of dividend income, even if the economic climate deteriorated. Instead, I see increased stock market volatility as a chance to buy more stocks at a discount, lower my cost basis and increase my portfolio's average yield.

In the coming months, I will basically stay the course and continue building my portfolio in accordance with my investment strategy. While I do not expect major changes in my asset allocation, I will have further thoughts on increasing the resilience of my portfolio and future dividend income.

I hope you enjoyed this article, and to everyone on Seeking Alpha, all the best and happy investing!

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Disclosure: I am/we are long AAPL, BLK, BASFY, BFFAF, BBAGF, CHL, JPM, LVMHF, LVMUY, MSFT, NSRGY, NSRGF, NKE, PFE, RIO, RDS.B, SCTBF, SCTBY, TRSWF, TXN, SEMHF, SMMNY, V, VNNVF, VONOY, ZURVY, ZFSVF, VWO, VANGUARD FTSE ALL WORLD HIGH DIVIDEND YIELD ETF. 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.

Additional disclosure: This is not financial advice but only a presentation of my personal opinion and strategy. Investors must do their own due diligence/consult a qualified financial advisor before making an investment decision.