Thursday, October 1, 2015

September 2015 Portfolio Summary

This month was extremely volatile. The market was not sure about the direction by the Fed as they continue to hold off on the rate hike. All sectors have been hurt. The energy sector, continues to be cheap. The MLPs this month were hit especially hard. Even higher quality names like EPD, MMP, and KMI. The healthcare sector was also out of favor as biotechnology stocks experienced higher volatility. The US Dollar (DXY) has sat flat for a long time after spiking to 100 several months ago. This reduces the pain felt by many of the multinational companies I own.


I am enjoying the rise in volatility because of the drop in prices of many companies that I am watching. I was focusing on Healthcare this month. I have added decently to my initial position in Abbott this month and will continue to add on weakness. I am watching BDX and MDT as dividend champions in the healthcare sector to add on more weakness. I am already full on JNJ but will consider adding if it falls below $90. I will also consider adding more to my speculative positions in AMGN and GILD if the biotechnology continues to be out of favor. I do want to eventually own a healthcare plan company like UNH but they have not dropped as much.

After the Fed refused to hike rates, companies on my Utility and REIT watchlist went higher so I am unable to add to those yet. I will continue waiting. My high priority picks are NEE and O.

I am holding back on adding more to Energy names. At the moment I feel uncomfortable with all of the names except XOM. The only name I will consider to add to is XOM. I have concerns about KMI's high debt levels and ability to the pay the dividend. I have some worry over CVX but I believe they can weather the storm for another year before the Gorgon project comes online. I do have more confidence in CVX than KMI in paying its dividend. I don't have much concern over XOM's ability to cover the dividend.

Industrials have been refreshingly pulled back as well. Higher quality names on my watchlist include MMM and UTX. I will consider MMM if it goes lower than the drop last year in October. I will consider UTX if it goes over 3% yield. UTX hasn't popped the UTX yield since the financial crisis in 2008-2009 when it hit slightly above 4% (see graph below). Since MMM and UTX are industrials, they are volatile when the market is out of favor and I think I can get to the yield I want if I am patient.

Below is a snapshot of my portfolio after the end of 9/30/2015. My portfolio has gone nowhere in the last several months due to the drawdowns in the market. But that does not matter since my income stream continues to grow week by week. The mission of the portfolio is to generate enough passive income to pay for all my living expenses. Companies will be carefully selected that meet a strict criteria of financial quality, dividend history, dividend growth, earnings stability, moat, and fair valuation. The portfolio has succeeded in generating $333 in passive income this month. It is estimated that this portfolio as it stands will generate annual dividend income of $4033. The current dividend increase announcements from all the companies I hold averages around 9.8% in dividend increase compared to the dividends paid last year. My portfolio currently yields around 3.3% in dividends.

Ticker Sector Value Weight Annual Div Yield Credit
MO Staples $10,090.56 8.10% $418.76 4.15% BBB+
JNJ Health $8,197.91 6.58% $263.15 3.21% AAA
PM Staples $7,281.99 5.84% $374.29 5.14% A
O REIT $6,443.48 5.17% $311.22 4.83% BBB+
V Financial $5,476.75 4.40% $37.79 0.69% A+
CHD Staples $4,754.24 3.82% $76.07 1.60% BBB+
PEP Staples $4,653.80 3.73% $138.68 2.98% A
XOM Energy $4,025.22 3.23% $158.19 3.93% AAA
KMI Energy $4,020.86 3.23% $284.68 7.08% BBB-
T Telecom $3,929.03 3.15% $226.71 5.77% BBB+
KO Staples $3,820.60 3.07% $125.70 3.29% AA
GIS Staples $3,665.08 2.94% $115.08 3.14% BBB+
KHC Staples $3,653.80 2.93% $114.00 3.12% BBB-
ABBV Health $3,388.75 2.72% $127.08 3.75% A
MKC Staples $3,361.35 2.70% $65.55 1.95% A-
ROST Discret $3,093.73 2.48% $30.01 0.97% A-
PX Materials $2,811.30 2.26% $79.00 2.81% A
UNP Industrial $2,474.94 1.99% $61.63 2.49% A
AAPL Tech $2,456.82 1.97% $46.43 1.89% AA+
KMB Staples $2,363.23 1.90% $76.33 3.23% A
DIS Discret $2,291.00 1.84% $29.55 1.29% A
TJX Discret $2,191.02 1.76% $25.85 1.18% A+
SBUX Discret $2,178.36 1.75% $24.62 1.13% A-
MA Financial $2,162.88 1.74% $15.36 0.71% A-
SO Utilities $2,097.50 1.68% $101.73 4.85% A
WMT Staples $2,071.95 1.66% $62.57 3.02% AA
PG Staples $2,054.25 1.65% $75.60 3.68% AA-
BDX Health $1,897.89 1.52% $34.35 1.81% BBB+
CVX Energy $1,794.73 1.44% $97.45 5.43% AA
CL Staples $1,712.79 1.37% $41.11 2.40% AA-
HCP REIT $1,661.80 1.33% $100.87 6.07% BBB+
UTX Industrial $1,607.53 1.29% $46.30 2.88% A
MCD Discret $1,531.57 1.23% $52.84 3.45% A-
VZ Telecom $1,498.45 1.20% $77.77 5.19% BBB+
ABT Health $1,434.75 1.15% $34.29 2.39% AA-
MMM Industrial $1,265.33 1.02% $36.57 2.89% AA-
GILD Health $1,080.76 0.87% $18.91 1.75% A-
AMGN Health $514.38 0.41% $11.73 2.28% A
XEL Utilities $440.83 0.35% $15.91 3.61% A-
….. …..2 Equity Total …..4 Annual Dividend Average Yield …..8
$121,451.21 $4,033.72 3.32%
Cash Cash $3,159.50 2.54%
. .. Equity + Cash …..22 …..2 …..

At the moment I am heavy on staples and increasing my weighting in healthcare. My priorities are to have a stable base in staples, healthcare, and utility companies. These companies help create a solid foundation of stability as they offer products and services people will utilize no matter the economic environment. With these staples, healthcare, and utility companies in my portfolio, I can help minimize drawdowns during corrections while maintaining a consistent increasing dividend stream.

A picture of my stock weights are shown in the tree map above. Here are my largest holdings in each respective sector.
  -Staples: MO, PM
  -Healthcare: JNJ, ABBV
  -Energy: XOM
  -REIT: O
  -Discretionary: ROST
  -Financials: V
  -Utilities: SO
  -Telecom: T
  -Materials: PX
  -Technology: AAPL
  -Industrials: UNP


  1. Solid list of holdings and I hope to start investing again later this month. I haven't been able to take advantage of the volatility at all except for the few dividends that I reinvest automatically. It's been frustrating to say the least. I don't blame you for holding out on adding to energy names. There's not many that I feel comfortable adding to here outside of probably CVX and XOM. But the industrials are looking great.

    How do you make that last chart in your post? I like the layout of that.

    1. I am thinking of adding to XOM but it is competing with other names that I want to add. I usually pick the highest quality company with the most stable earnings to add and unfortunately energy companies do not have stable earnings, so they usually get a lower priority.

      The chart is made using Google docs (their spreadsheet editor). They have a chart mode called Tree Map.