Today, I decided to take a deeper look into the USDP. I got a question a few weeks ago about the beta of the portfolio. I thought that was interesting and decided to take some time to look at it. Just in case some of you are not as familiar, beta is basically a factor that gives you an indication how a stock or portfolio reacts historically compared with the rest of the market.
-A stock/portfolio with a beta of over 1 would generally increase more than the market in rising markets but also decline more in down markets. Cyclical companies, technology stocks and others would fit.
-A stock/portfolio with a beta of exactly1 would increase exactly like the overall market. You’d expect the SPY ETF for example to be very close to that (according to Bloomberg, it is 0.9957)
-A stock/portfolio with a beta between 0 and 1 would increase less than the overall market in rising markets but also decline less in down markets. Large cap stocks would generally be here
Finally, some stocks could have negative beta if they generally rise in falling markets and vice-versa.
I expected the USDP to be a bit under 1. Why? Dividend stocks are generally more stable than the overall market. The only thing that made me pause was the close relationship between the performance of the USDP and the S&P500 total return.
Drilling DownHere are the top Beta’s in the USDP:
Johnson Controls Inc (JCI) : 1.38
Occidental Petroleum Corp (OXY) : 1.37
Eaton Corp (ETN) : 1.36
And the lower ones:
PepsiCo Inc/NC (PEP) : 0.56
JM Smucker Co/The (SJM) : 0.69
Hasbro Inc (HAS) : 0.77
Here are some numbers for the USDP using the shares as of Jan 14th and last night’s data.
Ticker Name Shares As Of Jan 14 Price Value EPS PE Ratio PE Next Year Sales Growth Beta OMC Omnicom Group Inc 26 54.39 1414.14 3.38 3.38 13.6748165 10.60394658 1.18 MSFT Microsoft Corp 50 28.01 1400.5 2.02 2.02 8.818297332 5.404400726 0.92 JCI Johnson Controls Inc 36 31.11 1119.96 1.8 1.8 9.978882391 2.747777533 1.38 PEP PepsiCo Inc/NC 17 72.94 1239.98 4.08 4.08 16.48480036 14.98322902 0.56 ETN Eaton Corp 26 57.54 1496.04 3.98 3.98 12.87683616 17.01786365 1.36 DOV Dover Corp 20 69.65 1393 4.59 4.59 11.63082134 1.939575907 1.25 ITW Illinois Tool Works Inc 24 64.14 1539.36 5.31 5.31 13.07470673 0.772587967 1.14 XLNX Xilinx Inc 33 36.65 1209.45 2.01 2.01 18.70030581 -5.432031552 1.16 SJM JM Smucker Co/The 15 88.65 1329.75 4.06 4.06 15.69407604 14.50634648 0.69 BLK BlackRock Inc 7 238.01 1666.07 14.03 14.03 13.57040518 5.010461403 1.17 TROW T Rowe Price Group Inc 21 71.61 1503.81 3.47 3.47 16.56869606 #N/A N/A 1.34 OXY Occidental Petroleum Corp 13 85.11 1106.43 8.16 8.16 11.07302632 25.69703334 1.37 COP ConocoPhillips 21 61.66 1294.86 9.04 9.04 10.48008172 31.35497747 0.99 XOM Exxon Mobil Corp 15 91.76 1376.4 8.43 8.43 11.46031348 26.91859546 1 ADI Analog Devices Inc 31 44.15 1368.65 2.18 2.18 16.97728148 -9.761001163 1.13 HAS Hasbro Inc 29 37.22 1079.38 2.88 2.88 12.81944444 7.081874018 0.77 MAT Mattel Inc 39 37.26 1453.14 2.2 2.2 13.1965751 6.998434991 0.82 INTC Intel Corp 49 21.28 1042.72 2.2 2.2 9.651535993 -1.218541084 1.01 AFL Aflac 25 53.35 1333.75 4.21 4.21 7.985265374 6.940960833 1.33 BAX Baxter International 20 67.35 1347 4.22 4.22 12.94162826 2.137767221 0.9 Cash 638.01
I was quite surprised to see that the overall number is above 1. I guess that goes to show that not all dividend portfolio’s are not created equal. I also took a look at some of the top dividend ETF’s:
VIG 0.9953
DVY 0.9975
You could certainly say that the portfolio is more volatile than the average and that is not something I have an issue with
SectorsI also took a look at how much exposure I have to certain sectors, you can see the following table:
Industry % Communications 5.17% Consumer, Cyclical 13.35% Consumer, Non-cyclical 14.32% Energy 13.81% Financial 16.47% Industrial 16.19% Technology 18.36% Grand Total 97.67%
I personally think that it’s fairly diversified. As I add more money into the portfolio, I will likely add a few more names but I want to avoid getting to a point where I struggle to keep up with news for my holdings. As I have discussed in the past, I’m also looking to add more international stocks to the portfolio to achieve greater diversification. I do feel like having 20 names is perfect for a portfolio of this size but as it gets to $30-40K, I will likely add a few more names to avoid dropping too much if one of my holdings suffers an Enron-like event.
What does your portfolio look like?Disclaimer: I will be writing more about this but the USDP-dividend strategy is just one part of my investing strategy, I do have higher concentrations in others, especially in higher risk plays on certain technology stocks (Facebook – FB for example)