I am a firm believer that asset allocation plays a significant part in a portfolio's long-term results. In the past, I was asked if you could have a diversified portfolio of dividend stocks and other income securities. It is an interesting question that deserves further examination.
As for my portfolio, I consider asset allocation only when looking at my holdings in total. It would be much too difficult to maintain a good allocation within individual portfolios (income, growth, 401(k), Roth IRA, etc.), while trying to maintain my overall allocation. However, an investor could build a degree of allocation into a portfolio of dividend income securities. Consider the following:
Basic Materials
- MDU Resources Group Inc. (MDU, Financial) is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production. Yield: 3.4%
- Nucor Corporation (NUE, Financial) is the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas. Yield: 3.1%
Communication Services
- AT&T Inc. (T, Financial) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless) Yield: 5.6%
- Verizon Communications Inc. (VZ, Financial) is the largest U.S. wireless carrier, Verizon also offers wireline and broadband services primarily in the northeastern U.S. Yield: 4.4%
Consumer Services Sector
- Genuine Parts Company (GPC, Financial) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. Yield: 2.6%
- McDonald's Corporation (MCD, Financial) is the largest fast-food restaurant company in the world, with about 35,000 restaurants in 119 countries. Yield: 3.5%
Consumer Services Sector
- Kimberly Clark Corp. (KMB, Financial) is a global consumer products company producing tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, and Scott. Yield: 3.2%
- The Coca-Cola Company (KO, Financial) is the world's largest soft drink company, and also has a sizable fruit juice business. Yield: 3.2%
Energy Sector
- ConocoPhillips Co. (cop) is of the largest independent oil and gas exploration and production (E&P) companies in the world, COP spun off its downstream assets in May 2012. Yield: 4.5%
- Exxon Mobil Corp. (XOM, Financial), formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company. Yield: 3.4%
Financial Services Sector
- Aflac Incorporated (AFL, Financial) provides supplemental health and life insurance in Japan (78% of pretax operating profits) and the U.S. Products are marketed at work sites and help fill gaps in primary coverage. Yield: 2.4%
- T. Rowe Price Group Inc. (TROW, Financial) operates one of the largest no-load mutual fund and life cycle fund complexes in the United States, with December 31 AUM of nearly $747 billion. Yield: 2.5%
Health Care Sector
- Abbott Laboratories (ABT, Financial) is a diversified health care products company that is now focused on nutritionals, diagnostics, generic drugs, and medical devices, following the spinoff of its R&D-based prescription pharmaceuticals business. Yield: 2.0%
- Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries. Yield: 3.00%
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Industrials Sector
- General Dynamics (GD) is the world's fourth largest military contractor and also one of the world's biggest manufacturers of corporate jets. Yield: 2.0%
- 3M Company (MMM) provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives, and other chemical additives. Yield: 2.6%
Real Estate Sector
- Health Care Property Investors, Inc. (HCP) is a California based equity-oriented real estate investment trust that has direct or joint venture investments in health care-related facilities across the U.S. Yield: 5.7%
- Realty Income Corporation (O) is an equity real estate investment trust that owns commercial retail real estate properties in the United States. Yield: 5.7%
Technology Sector
- Cisco Systems, Inc. (CSCO) offers a complete line of routers and switching products that connect and manage communications among local and wide area computer networks employing a variety of protocols. Yield: 2.9%
- Microsoft (MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. Yield: 2.6%
Utilities Sector
- Consolidated Edison, Inc. (ED) is an electric and gas utility holding company serves parts of New York, New Jersey and Pennsylvania. Yield: 4.2%
- Southern Company (SO) is an Atlanta-based energy holding company and is one of the largest producers of electricity in the U.S. Yield: 4.9%
Bonds
- Entergy Louisiana LLC (ELJ), 5.25% Series First Mortgage Bonds, due 7/1/2052, Yield: 5.2%
- NextEra Energy, Inc. (NEEpJ), 5.00% Series J Junior Sub Debentures due 1/15/2073, Yield: 5.2%
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Preferred Stock
- Vornado Realty Trust (VNOpK), 5.70% Series K Cumulative Redeemable Preferred Shares, Yield: 5.9%
- U.S. Bancorp (USBpO), 5.15% Dep Shares Non-Cumulative Perpetual Preferred Stock Series H, Yield: 5.2%
Needless to say, the above will not provide a perfect allocation, but it goes a long way to provide diversity in a portfolio focused only on income securities. In my personal portfolio, I buy the best available dividend securities and use my other investments to balance my asset allocation.
Full Disclosure: Long T, VZ, GPC, MCD, KMB, KO, COP, XOM, AFL, TROW, JNJ, GD, MMM, HCP, O, CSCO, MSFT, ED, SO, ELJ, NEEpJ, VNOpK, USBpO. See a list of all my dividend growth holdings here.
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