It is important for investors to know what holdings in their portfolio are Core and what are Speculative. Core positions should be looked upon as the foundation of one's portfolio. One should not sell these positions but instead add to them whenever they are decently priced. Core positions offer safety and consistency in dividends and dividend increases. The Core positions are not expected to garner out-sized gains, however they can still provide decent gains over many years of compounding. The Speculative positions help in improving gains but introduce volatility. There is also a chance that the Speculative position may cancel or decrease their dividend. Below is a description of how I decide what is high quality and what is lesser quality in my portfolio.
In the portfolio below, Green Tickers signify what I consider "Core", Yellow Tickers are supporting positions, and Red Tickers are speculative. I consider companies to be "Core" if they have predictable earnings, are non-cyclical and anti-recessionary in nature, have wide moats, demonstrate predictable dividend histories, and have strong credit ratings. I want to stress the point about having consistent earnings and being anti-recessionary. Many of the business I consider must haves are businesses that produce goods and services people need no matter the economic situation. When a recession occurs, we will still need to buy medicine when we are sick, use toilet paper, pay for electricity, consume food and drink, and wash ourselves. My portfolio aims at getting the dollar that people have to spend everyday, whether they like to or not.
In the portfolio below, Green Tickers signify what I consider "Core", Yellow Tickers are supporting positions, and Red Tickers are speculative. I consider companies to be "Core" if they have predictable earnings, are non-cyclical and anti-recessionary in nature, have wide moats, demonstrate predictable dividend histories, and have strong credit ratings. I want to stress the point about having consistent earnings and being anti-recessionary. Many of the business I consider must haves are businesses that produce goods and services people need no matter the economic situation. When a recession occurs, we will still need to buy medicine when we are sick, use toilet paper, pay for electricity, consume food and drink, and wash ourselves. My portfolio aims at getting the dollar that people have to spend everyday, whether they like to or not.
The highest of high quality stocks have their Tickers bolded with green and can only qualify for such honor if they meet all 4 of these criteria:
1) A or higher S&P financial rating
2) A++ in Value Line financial strength rating
3) 1 in Value Line safety rating
4) Be considered by me to be "Core" or have the Green Ticker name
4) Be considered by me to be "Core" or have the Green Ticker name
Companies that are "Core" and satisfy the 4 criteria above have their entire row in Green and their Ticker bolded, and I call these my Elite collection of high quality stocks. I am always on the lookout to add to these at fair value or less. These positions make up the foundation of my dividend growth portfolio since I do not see them going out of business anytime soon.
Companies can meet the first 3 requirements (very high scores for credit rating and safety) but fall in an industry I am not too fond of. Some examples of stocks that I own are CVX, DIS, and TJX. Chevron is an oil major that is incredibly strong but I still see it as a risk due to the cyclical nature of oil prices. The only oil major I will count on is Exxon with its proven history and AAA credit rating. I consider Disney to be speculative because of its lower yield, discretionary nature (do we really need entertainment to live??), and my perception of the company as a growth stock. TJX is labeled as a Speculative position because I do not completely trust retail, and I own it purely for capital gains despite the meager dividend (which I must add grows rather quickly). One can never be too comfortable with retail when we continuously hear of the cancerous giant called Amazon. An investor needs to do their due diligence to decide if a company is really something he or she is comfortable owning despite the strong ratings.
Companies that turned sour (dividend cut, fraud, or destruction in fundamentals) which I have held in the past but eventually sold would all be classified under the Speculative or (more generously stated) Supporting category from the rules defined. These include KMI, ARCP, and SDRL. I have sold each of these at an average of a 20%-30% loss.
There are definitely other "Core" positions in my portfolio, but they do not qualify for the Elite status because they have lower safety or lower credit rating due to their debt, company size, type of business, cyclical nature, less predictable earnings, dividend history, or whatever other factors.
Currently in the portfolio below "Core" positions (which includes the Elite) occupy 72% of my portfolio. To be more specific, Elite positions occupy 27% of my portfolio. Hence the majority of my holdings are companies that I want to buy and hold forever. Speculative positions only occupy at the moment 9% of my holdings.
| Ticker | Sector | Value | Weight | Annual Div | Yield | S&P Fin | VL Fin | VL Safety |
| ABT | Health | $2,143.45 | 1.48% | $45.23 | 2.11% | A+ | A++ | 1 |
| CL | Staples | $2,314.40 | 1.60% | $52.77 | 2.28% | AA- | A++ | 1 |
| JNJ | Health | $9,211.01 | 6.37% | $265.28 | 2.88% | AAA | A++ | 1 |
| KMB | Staples | $2,718.83 | 1.88% | $76.94 | 2.83% | A | A++ | 1 |
| KO | Staples | $4,167.41 | 2.88% | $127.52 | 3.06% | AA | A++ | 1 |
| MMM | Industrial | $1,330.84 | 0.92% | $36.86 | 2.77% | AA- | A++ | 1 |
| PEP | Staples | $4,905.00 | 3.39% | $138.81 | 2.83% | A | A++ | 1 |
| PG | Staples | $2,710.12 | 1.87% | $90.25 | 3.33% | AA- | A++ | 1 |
| V | Financial | $6,293.16 | 4.35% | $44.68 | 0.71% | A+ | A++ | 1 |
| XOM | Energy | $4,341.67 | 3.00% | $159.77 | 3.68% | AAA | A++ | 1 |
| APD | Materials | $1,163.72 | 0.80% | $28.63 | 2.46% | A | A+ | 1 |
| BDX | Health | $2,823.00 | 1.95% | $48.56 | 1.72% | BBB+ | A++ | 1 |
| CHD | Staples | $4,807.98 | 3.32% | $76.45 | 1.59% | BBB+ | A+ | 1 |
| D | Utilities | $2,826.77 | 1.95% | $110.81 | 3.92% | A- | B++ | 2 |
| GIS | Staples | $4,262.34 | 2.95% | $128.30 | 3.01% | BBB+ | A+ | 1 |
| KHC | Staples | $3,757.06 | 2.60% | $119.85 | 3.19% | BBB- | A | 2 |
| MKC | Staples | $3,440.55 | 2.38% | $69.84 | 2.03% | A- | A+ | 1 |
| MO | Staples | $10,742.36 | 7.42% | $423.25 | 3.94% | BBB+ | B+ | 2 |
| NEE | Utilities | $1,428.40 | 0.99% | $44.57 | 3.12% | A- | A | 2 |
| NVO | Health | $7,063.63 | 4.88% | $91.83 | 1.30% | AA- | A++ | 2 |
| O | REIT | $7,676.28 | 5.31% | $352.34 | 4.59% | BBB+ | A | 2 |
| PM | Staples | $8,160.50 | 5.64% | $378.65 | 4.64% | A | B++ | 2 |
| SO | Utilities | $2,156.99 | 1.49% | $103.10 | 4.78% | A- | A | 2 |
| T | Telecom | $4,134.55 | 2.86% | $229.88 | 5.56% | BBB+ | A++ | 1 |
| ABBV | Health | $1,793.90 | 1.24% | $72.47 | 4.04% | A | A | 2 |
| CVS | Health | $1,261.21 | 0.87% | $19.04 | 1.51% | BBB+ | A+ | 1 |
| CVX | Energy | $2,136.33 | 1.48% | $98.48 | 4.61% | AA | A++ | 1 |
| HCP | REIT | $2,343.60 | 1.62% | $146.01 | 6.23% | BBB+ | B++ | 3 |
| MA | Financial | $4,629.95 | 3.20% | $30.09 | 0.65% | A | A++ | 2 |
| MCD | Discret | $1,831.50 | 1.27% | $55.68 | 3.04% | BBB+ | A++ | 1 |
| PX | Materials | $1,844.57 | 1.27% | $49.80 | 2.70% | A | A | 1 |
| UTX | Industrial | $1,696.12 | 1.17% | $46.64 | 2.75% | A- | A++ | 1 |
| VFC | Discret | $764.06 | 0.53% | $18.03 | 2.36% | A | A | 2 |
| VZ | Telecom | $1,883.81 | 1.30% | $93.44 | 4.96% | BBB+ | A++ | 1 |
| XEL | Utilities | $645.83 | 0.45% | $23.25 | 3.60% | A- | A | 1 |
| AAPL | Tech | $2,472.07 | 1.71% | $46.47 | 1.88% | AA+ | A++ | 2 |
| DIS | Discret | $2,514.27 | 1.74% | $31.93 | 1.27% | A | A++ | 1 |
| ROST | Discret | $3,451.80 | 2.39% | $30.03 | 0.87% | A- | A | 2 |
| SBUX | Discret | $2,306.09 | 1.59% | $30.67 | 1.33% | A- | A++ | 1 |
| TJX | Discret | $2,167.68 | 1.50% | $25.80 | 1.19% | A+ | A++ | 1 |
| ….. | …..2 | Equity Total | …..4 | Total Annual Div | Avg Yield | …..8 | …..83 | …..9 |
| $138,322.80 | $4,062.01 | 2.94% | ||||||
| Cash | Cash | $6,364.59 | 4.40% | |||||
| . | .. | Equity + Cash | … | …..22 | …..2 | ….. | …..222 | …..2222 |
| $144,687.39 |
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