Hi I'm Jimmy in this video
we're looking at the dividend stocks
that are going to make up our
dividend portfolio from our Dow
30 analysis.
If you new to this channel Well
we've been doing an analysis of
all 30 companies in the Dow Jones
industrial average with the
intention of taking that analysis
and building three different
portfolios if value a dividend
and a growth portfolio.
This is the dividend portfolio.
So my goal here is not to simply
pick the highest dividend paying
stocks but instead to
put together a portfolio of.
Dividend paying stocks that have
consistent dividends that are
sustainable and the whole portfolio
is well positioned to
do at least decent in today's
environment which let's face it
could see a market pullback
or a market crash whatever you want
to call it that could happen over
the next couple of years.
Now in picking these dividend stocks
I had to mostly limit myself to the
30 companies in the Dow since
I've wanted people to be able to see
the research process behind
each of the companies.
So every dividend paying stock that
we talk about in this video.
Well there's a another there's a
research video behind that to find
all those in the link in the
description below.
Some of them we've been working on
this for a little while.
So some of them are older than
others. If there's any that you
think should be updated please let
me know in the comments below and we
will be sure to do that.
OK. Now let's get rolling.
So this is the breakdown
by sector.
For all the companies there are 16
different companies in the portfolio
all from the Dow.
We're gonna have a few additions to
this portfolio from non Dow
companies but we'll get to those in
a minute. So as you can see I try to
diversify amongst a bunch of
different sectors to try to add the
benefits of diversification.
And then when picking the individual
names I try to weigh things like
their valuation their business model
the dividend yield the dividend
payout ratio dividend growth rate
debt cash things like that.
OK. So now let's get to the
individual companies.
The first one from the energy sector
this one is Chevron.
Chevron has a dividend yield of a
bit more than 4 percent.
And this is Chevron's current
dividend payout ratio.
So as we could see the dividend
payout ratio spiked back when
oil prices went a bit crazy back in
2015.
But it seems that the dividend
payout ratio has stabilized since
then. Now when we switch over to
their dividend per share
we could see the dividend per share
has grown nicely over the past few
years. Same issue when oil prices
went nuts in 2015 you could see they
sort of helping stagnant a bit but
then it started moving up again
recent switching back to the whole
portfolio.
Now our next company is Exxon Mobile
from the energy sector and they
have a certainly better dividend
yield than Chevron does at our
dividend yield just short of 5
percent but
that may be partially due to the
fact that they didn't slow their
dividend back when Chevron did.
But they probably should have
because when we switch over the
dividend payout ratio this what that
looks like and just so we're all on
the same page.
These numbers these right here are
in quarterly numbers and this
100 line right here.
Well this means that if the bar
reaches 100 that is 100
percent of net profits.
That would mean that the company
brought in for whatever profits they
brought in they paid out 100 percent
of it. If the number is greater than
100 percent like it was right here.
Well that would mean that the
company paid out more
profits than they brought in.
Now I know some people like to look
at this from an annual perspective
but I wanted to see how
it looked on individual quarter
basis see if it gave us any extra
insight. But overall what
we want is the lower the better with
the dividend payout ratio.
Now this recent spike here I know
that Exxon had a bunch of
maintenance that they had to do in
the refineries over the past quarter
and that single quarter had a huge
spike in it.
Now I'm not too worried about that
because I know a lot of those are
short term expenses that should go
away soon.
I expect over the long term for them
to maintain profitability fairly
well. Plus the stock is down like 15
percent since they came out with
earnings. So it seems like a good
time to add this to a portfolio.
Okay. Moving on to our next segment.
Next up we have communications in
here we want with Verizon.
Now I'm a big fan of Verizon
and they have a dividend yield of a
bit more than 4 percent and it's
been growing fairly consistently
over the past few years and their
dividend payout ratio has been
trending lower which is a good thing
for their stock.
And one more thing I want to bring
out if we switch back to their
dividend per share chart.
Well here if we would add a line
the average dividend growth rate
over this time period.
And then we would compare that
to the average growth of the
earnings per share.
So in theory if the earnings per
share growth is greater than the
dividends per share growth that
would imply a longer term
sustainability of that growth
rate of the dividend.
In this case there is a gap.
So that would even imply that at
some point perhaps Verizon could
increase their dividend or perhaps
to a one time special dividend
or maybe they keep that cash
and they simply make the company
grow faster which in theory wouldn't
lead to higher stock prices.
Now I just want to bring that out as
one of the metrics I probably won't
pull that chart up again but I just
want to bring it out as one of the
metrics to consider.
Okay now jumping over the technology
the first company there is Apple
Apple has a dividend yield of just
short of 2 percent but
that dividend has grown nicely
ever since they started paying out a
dividend a few years back.
And I would expect to continue
to see their dividend growth be at a
pretty good pace then
if we switch over to their dividend
payout ratio well their their
dividend payout ratio has been
trending between 20 and 30 percent
which I think is a good level
for both growth for the company and
a reasonable amount for investors to
get back. Okay now back to the whole
portfolio. Now here I just want to
bring out that I've assumed that we
invested an equal amount in each
company. So six point to five
percent goes into every holding.
So the next company is Intel.
Now Intel's had solid dividend
growth over the past few years and
its dividend payout ratio is heading
in the right direction as well.
Then we have Microsoft.
Microsoft has been growing their
dividends at a good rate
and their dividend payout ratio
is also getting better much like
Intel was.
Now we shift over to consumer non
cyclical companies.
Now these companies should do
particularly well if the market does
start to head lower.
Now here we have Johnson and Johnson
Merck and Pfizer.
Now I think that each of these three
companies could do very well this
entire sector should do very well
if the market ever ends up in
trouble. They're all blue chip
companies and I expect for them
to continue to provide a stable
dividend each of them provide
somewhere between two and a half and
three and a half percent.
They also have decent
dividend payout ratios.
Then we move over to cyclical
companies. Now here we have Home
Depot McDonald's and Walgreens.
These companies are a bit more
vulnerable when it comes to a
pullback in the market but
Home Depot as an example I believe
is a very solid company.
They have good solid dividend per
share growth and they have a
reasonable dividend payout ratio
McDonalds in a similar position with
a very solid dividend per share
growth and a good
or respectable dividend payout
ratio.
Walgreens same thing solid
growth and reasonable dividend
payout ratio. But again because of
the nature of these types of
businesses if the economy were
to slow then these are likely
to be the first companies that get
hit or at least the ones that can
hit the most.
Now moving over the industrials
there I like both Caterpillar and
United Technologies and to prevent
this video from getting too long.
Well I'm going to skip the
additional charts for now and I'm
going to move right to the financial
segment where we have American
Express and Visa now
all four of these companies should
hold their own in the event that the
market were to pullback and they all
pay decent dividend yields it's
likely that they won't hold up as
well as a non cyclical companies do
but they should do better than the
cyclical companies.
And I apologize for skipping the
additional charts.
I just I'm trying to move along as
quickly as I can without dragging on
the video too much.
But if you're curious
all four of these companies are
showing decent dividend per share
growth and they are
showing pretty good dividend payout
ratios their dividend payout ratio
for the industrial companies are
about in line with the industry
average and they're in the low 30
percent range while the financial
companies also align with their
industry average or in the low
20s to high teens percentage
range. Okay.
So we're all good there.
Those are the 16 main holdings
for this dividend portfolio.
Now I've rushed through some of the
end there because I wanted to get
through some potential add ons
to this dividend portfolio.
So we have 16 companies from seven
different sectors.
So I'm fairly happy with our
diversification.
And I like I said I would equally
weighted all these companies
with an equal weighting the dividend
yield for the entire portfolio comes
out to be about two point seven
percent.
But what if we wanted to add a bit
more from a yield perspective.
So I have a few ideas that
the first company I'd like to add is
AT&T to our communications sector
there. I think that this is a good
diversifier to Verizon
and then the dividend yield of more
than six and a half percent.
Now AT&T does have
a ton of debt and I actually did two
different videos on AT&T
one of the company itself and one
specifically on their debt.
Like in the description below if
you're interested. So AT&T should
help from a diversifying standpoint
and a yield perspective.
Next up I would like to add.
CVS now CVS you may remember that
I did the video on Walgreens and
CVS I combined them into one video
and I actually like CVS is position
in the market a bit more than
Walgreens mostly because
they bought Aetna.
Now when they bought Aetna we could
really make the case that they don't
belong here but they belong
in the non cyclical sector.
That would mean that the non
cyclical sector gets even stronger
since Aetna is a health insurance
company.
And that would add more stability
to the portfolio.
Okay. The next interesting company
is Kimberly Clark Kimberly Clark has
a dividend yield of more than 3
percent and is once again
sitting in the consumer non cyclical
category.
And as you can see I'm a big fan
of being defensive at this time
in the market.
To me it's smart considering
the turmoil in the market the
potential for an economic downturn.
OK next. Moving back to the
industrial sector there
we're going to add Emerson Electric
Emerson Electric has a dividend
yield of right around 3 percent.
And overall I like their position in
the market and I think that they're
a good addition to this entire
portfolio.
And if you're wondering the videos
for both Emerson Electric and
Kimberly-Clark can be found in the
five dividend stocks for 2019
video that we did.
OK so overall that gives us 20
companies for our dividend portfolio
and assuming 5 percent go
in each company that's equally
weighted. We end up with a dividend
yield of about 3 percent for this
entire portfolio.
And finally this is the last piece
and this is something that I think
could benefit a lot of us if
we want to add a bit more
diversification and that is
to add an ETF to this
entire portfolio.
And for that ETF I actually
like the pro shares S&P
500 Dividend Aristocrats
ETF ticker symbol
NOBL.
And although they have a lot of
companies that we already have in
their portfolio they do hold
58 total companies and
that would add even more
diversification to the our entire
portfolio.
So right now their dividend yield is
a bit over 2 percent.
And for anybody if you ever looking
to start building a dividend
portfolio that could be a great
place to start start there and then
start adding companies to it.
So I hope you found this
interesting.
And if the dividend
yield wasn't quite high enough for
you let me know in the comments
below because I'd be curious about
putting together a high dividend
yield portfolio.
So let me know what you think of the
comments below.
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Thank you for sticking with me all
the way to end the video and I'll
see in the next video.
Thanks.