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How To Build A Diversified Dividend Growth Portfolio?

Diversification is a key element in the investing space. Each investor should have a well diversified portfolio in order to eliminate the big risks.

We are no Warren Buffett who met the CEO's and Chairman’s of a company in a private talk and cannot evaluate risks in a deeper detail. What we make is desk research and those investors need to be diversified. 

Attached are 12 great Dividend Aristocrats from different sectors which you can use to build a broader diversification for your own portfolio.

Dividend Aristocrats don't just sound royal, they performed like kings in the past. Over the last decade, an index of the 54 Dividend Aristocrats stocks has returned 10.91% a year, versus just 8.06% a year for the S&P 50.

Remember, a past performance is for sure no guarantee for a solid future return. As a group, the 10 stocks below have an average dividend yield of 2.8% and an average P/E ratio of 18.5. 

These are the results with a 3+ percent annual dividend yield...

AT&T (NYSE:T) has a market capitalization of $170.05 billion. The company employs 247,700 people, generates revenue of $128,752.00 million and has a net income of $18,553.00 million.

AT&T’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $48,873.00 million. The EBITDA margin is 37.96 percent (the operating margin is 23.67 percent and the net profit margin 14.41 percent).

Financials: The total debt represents 26.92 percent of AT&T’s assets and the total debt in relation to the equity amounts to 82.20 percent. Due to the financial situation, a return on equity of 19.91 percent was realized by AT&T.

Twelve trailing months earnings per share reached a value of $3.26. Last fiscal year, AT&T paid $1.80 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 9.95, the P/S ratio is 1.33 and the P/B ratio is finally 1.87. The dividend yield amounts to 5.66 percent and the beta ratio has a value of 0.43.

Long-Term Stock Price Chart Of AT&T (T)
Long-Term Dividend Payment History of AT&T (T)
Long-Term Dividend Yield History of AT&T (T)

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Consolidated Edison (NYSE:ED) has a market capitalization of $18.70 billion. The company employs 14,648 people, generates revenue of $12,354.00 million and has a net income of $1,062.00 million.

Consolidated Edison’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3,268.00 million. The EBITDA margin is 26.45 percent (the operating margin is 18.16 percent and the net profit margin 8.60 percent).

Financials: The total debt represents 30.57 percent of Consolidated Edison’s assets and the total debt in relation to the equity amounts to 101.48 percent. Due to the financial situation, a return on equity of 8.81 percent was realized by Consolidated Edison.

Twelve trailing months earnings per share reached a value of $4.23. Last fiscal year, Consolidated Edison paid $2.46 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.00, the P/S ratio is 1.52 and the P/B ratio is finally 1.52. The dividend yield amounts to 3.97 percent and the beta ratio has a value of 0.19.

Long-Term Stock Price Chart Of Consolidated Edison (ED)
Long-Term Dividend Payment History of Consolidated Edison (ED)
Long-Term Dividend Yield History of Consolidated Edison (ED)

McDonald's Corpororation (NYSE:MCD) has a market capitalization of $88.70 billion. The company employs 440,000 people, generates revenue of $28,105.70 million and has a net income of $5,585.90 million.

McDonald's Corpororation’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $10,080.40 million. The EBITDA margin is 35.87 percent (the operating margin is 31.18 percent and the net profit margin 19.87 percent).

Financials: The total debt represents 38.58 percent of McDonald's Corpororation’s assets and the total debt in relation to the equity amounts to 88.26 percent. Due to the financial situation, a return on equity of 35.69 percent was realized by McDonald's Corpororation.

Twelve trailing months earnings per share reached a value of $5.09. Last fiscal year, McDonald's Corpororation paid $3.12 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 17.68, the P/S ratio is 3.16 and the P/B ratio is finally 5.57. The dividend yield amounts to 3.78 percent and the beta ratio has a value of 0.36.

Long-Term Stock Price Chart Of McDonald's Corpororation (MCD)
Long-Term Dividend Payment History of McDonald's Corpororation (MCD)
Long-Term Dividend Yield History of McDonald's Corpororation (MCD)

Exxon Mobil (NYSE:XOM) has a market capitalization of $386.43 billion. The company employs 75,000 people, generates revenue of $420,836.00 million and has a net income of $33,448.00 million.

Exxon Mobil’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $57,483.00 million. The EBITDA margin is 13.66 percent (the operating margin is 9.58 percent and the net profit margin 7.95 percent).

Financials: The total debt represents 6.55 percent of Exxon Mobil’s assets and the total debt in relation to the equity amounts to 13.05 percent. Due to the financial situation, a return on equity of 19.17 percent was realized by Exxon Mobil.

Twelve trailing months earnings per share reached a value of $7.95. Last fiscal year, Exxon Mobil paid $2.46 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 11.15, the P/S ratio is 0.92 and the P/B ratio is finally 2.21. The dividend yield amounts to 3.11 percent and the beta ratio has a value of 0.90.

Long-Term Stock Price Chart Of Exxon Mobil (XOM)
Long-Term Dividend Payment History of Exxon Mobil (XOM)
Long-Term Dividend Yield History of Exxon Mobil (XOM)

A Mix Of Dividend Aristocrats from different Sectors (click to enlarge)
Source: long-term-investments.blogspot.com

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*I am long MCD, WMT, T. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

For the other stocks: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.


4 comments:

  1. Very good topic, Tom. It's tempting to over-concentrate a portfolio because oil, telephone, and utilities stocks tend to be the biggest dividend payers with uninterrupted dividends. That's why I included MCD in my portfolio, despite my antipathy toward their product.

    The danger of not diversifying was well-illustrated last week with the huge drop in oil stock prices.

    Here are some other stocks outside the oil/tel/utility sectors with greater than 3% divs and a 10-year record of never decreasing the dividend:

    BHP* (mining) 5.4%
    ORI* (insurance) 5.1%
    MAT* (toys) 4.9%
    SNY (pharm) 4.2%
    CINF* (insurance) 3.5%
    AGU* (fertilizer) 3.4%
    LMT* (aerospace) 3.2%
    CAT (heavy machinery) 3.1%
    CBRL* (restaurants) 3.0%
    KO (Coca Cola) 3.0%
    KMB (household products) 3.0%
    CLX (cleaning products) 3.0%
    NVS (pharm) 3.0%

    Stocks I own are marked with an asterisk.

    Additional Notes:
    BHP's price has been plummeting, even before the drop last week.
    SNY's annual dividend is 101% of the 2014 estimated earnings/share.

    ReplyDelete
  2. Anonymous12/13/2014

    Tom, I really appreciate your articles, and read them often. I have not contributed for one reason; I have NEVER found one stock I wanted to buy based on your comments, although I do/have owned a few mentioned in columns. I think this a fair way; if I buy anything based on your comments, you are owed something. Will keep reading.

    ReplyDelete
  3. @Anonymous, another way to look at it is that you (and I) think Tom's blog is worth reading. If we "appreciate" his articles, don't we want to encourage him to keep writing them? One way to encourage him is to make a contribution to the effort.

    ReplyDelete
  4. @Anonymous and @Howard Thank you for your comments. I like to share my thoughts with you. Most stocks I don't own but in some cases I do own some stocks. I do this work to get new thoughts and view about stock valuation and market opinions. Finally I have some fun with blogging. Thank you for reading and commenting my work.

    ReplyDelete

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