Dividends4Life: Asset Allocation For A Well-Rounded Dividend Portfolio

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I am a firm believer that asset allocation plays a significant part in a portfolio's long-term results. Recently, I received a question asking if you could have a diversified portfolio of dividend stocks. 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:

Business Services Sector

  • Automatic Data Processing Inc. (ADP)
    Yield: 3.33% | Style: Large Growth | Analysis

  • C H Robinson Worldwide Inc. (CHRW)
    Yield: 1.86% | Style: Large Growth

  • Expeditors International of Washington Inc. (EXPD)
    Yield: 1.16% | Style: Mid Growth

Consumer Goods Sector

  • Clorox Company (CLX)
    Yield: 3.23% | Style: Mid Core

  • Coca-Cola Company (KO)
    Yield: 3.04% | Style: Large Growth | Analysis

  • Procter & Gamble Company (PG)
    Yield: 2.85% | Style: Large Core | Analysis

Consumer Services Sector

  • Genuine Parts Company (GPC)
    Yield: 4.19% | Style: Mid Value | Analysis

  • Sysco Corporation (SYY)
    Yield: 3.56% | Style: Large Core | Analysis

  • McDonald's Corporation (MCD)
    Yield: 3.22% | Style: Large Core | Analysis

Energy Sector

  • BP Plc ADR (BP)
    Yield: 6.15% | Style: Large Value

  • Chevron Corporation (CVX)
    Yield: 3.75% | Style: Large Value

  • ExxonMobil Corporation (XOM)
    Yield: 2.56% | Style: Large Value

Financial Services Sector

  • Harleysville Group Inc. (HGIC)
    Yield: 3.90% | Style: Small Value | Analysis

  • Chubb Corporation (CB)
    Yield: 2.85% | Style: Large Value | Analysis

  • Aflac Inc. (AFL)
    Yield: 2.38% | Style: Large Core | Analysis

Hardware Sector

  • Diebold Incorporated (DBD)
    Yield: 3.67% | Style: Small Value

  • Linear Technology (LLTC)
    Yield: 3.23% | Style: Mid Core

  • Raven Industries Inc. (RAVN)
    Yield: 1.90% | Style: Small Growth | Analysis

Health Care Sector

  • Meridian Bioscience Inc. (VIVO)
    Yield: 3.27% | Style: Small Growth

  • Johnson & Johnson (JNJ)
    Yield: 3.08% | Style: Large Core | Analysis

  • Cardinal Health Inc. (CAH)
    Yield: 2.10% | Style: Large Core | Analysis

Industrial Materials Sector

  • Nucor Corp. (NUE)
    Yield: 3.40% | Style: Large Core | Analysis

  • Emerson Electric Co. (EMR)
    Yield: 2.90% | Style: Large Core | Analysis

  • 3M Company (MMM)
    Yield: 2.58% | Style: Large Core

Media Sector

  • McGraw-Hill Companies Inc. (MHP)
    Yield: 2.63% | Style: Large Core

Pharmaceuticals Sector

  • Eli Lilly & Company (LLY)
    Yield: 5.77% | Style: Large Value

  • Abbott Laboratories (ABT)
    Yield: 2.97% | Style: Large Growth | Analysis

Real Estate Sector

  • Essex Property Trust (ESS)
    Yield: 5.14% | Style: Mid Core

  • Corporate Office Properties Trust Inc. (OFC)
    Yield: 4.29% | Style: Mid Core

  • Federal Realty Investment Trust (FRT)
    Yield: 4.06% | Style: Mid Core

Telecommunications Sector

  • CenturyLink Inc. (CTL)
    Yield: 8.10% | Style: Large Value

  • AT&T Inc. (T)
    Yield: 6.54% | Style: Large Value | Analysis

Utilities Sector

  • Integrys Energy Group Inc. (TEG)
    Yield: 6.61% | Style: Mid Value

  • Consolidated Edison Company (ED)
    Yield: 5.59% | Style: Large Value

  • MGE Energy Inc. (MGEE)
    Yield: 4.45% | Style: Small Core


  • Vanguard Short-Term Bond ETF (BSV)
    Yield: 2.74% | Style: Short-Term Bond

  • Vanguard Intermediate-Term Bond ETF (BIV)
    Yield: 4.32% | Style: Intermediate-Term Bond

  • Vanguard Long-Term Bond ETF (BLV)
    Yield: 5.16% | Style: Long-Term Bond
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 ABT, ADP, AFL, BIV, BLV, BP, CLX, CTL, CVX, ED, EMR, GPC, HGIC, JNJ, KO, LLY, MCD, MMM, NUE, PG, SYY, T, TEG. See a list of all my income holdings here.
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  1. The Rat // February 19, 2010 at 7:50 PM

    I really like your approach to creating a properly diversified equity portfolio that pays solid dividends in various sectors.

    Some of the investments you mention that interest me a lot are KO, JNJ, MMM, PG, and XOM.

    Nice thread.

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