A while back I had posted about Dividend Risks and the need for dividend diversification. Back then, 6 stocks (GE, MO, KMP, ARCP, AAPL and HPQ) contributed close to 60% of my total projected annual dividends at that time ($1,590.46) even though some of these stocks didn’t have a huge weight in my portfolio. This is little risky, since if one of the companies cuts or eliminates the dividend, it will be a huge hit to my potential annual dividends.
A course of action that I had planned was to increase the weight in stocks that I already held like PG, COP and GIS, but did not have lot of weight in my portfolio. But unfortunately I haven’t had a chance to increase my holdings in these stocks. But over the past few months, I did initiate positions in several new stocks which has helped reduce the reliance for potential dividends in the above stocks.
Based on the updated portfolio (updated as of 9/30/2014), these 6 stocks (GE, MO, KMP, ARCP, AAPL and HPQ) contribute just under 50% of my total projected dividend income of $2,039.58. This is in spite of recent dividend increases. So while 50% is still higher than I like it to be, I feel that it is good progress in 4 months. I will revisit this in the next few months and see where I stand.
Disclosure: Long on all stocks mentioned above.
8 thoughts on “Dividend Diversification – Update”
Good stuff, DGJ. Its good not to depend on just a handful of companies for most of your dividend income. You are heading the right direction…keep it up!
Thanks R2R. Over a period of time, I believe this will get sorted out after further investments.
I wouldn’t worry about the diversification too much right now. As you’ve already seen, in just four months you’ve already reduced the impact from those six positions by over 10%. As you continue to build your portfolio, you will find that they will naturally even out. Once your dividends are at the $3k mark, you will be a world away from where you are now. Things are very fluid in the accumulation stage, so weights are much less important.
That’s true W2R. Like you mentioned, over a period of time this should get adjusted automatically with new investments. I just wanted to see how much progress I have made since I last checked.
Thanks for stopping by.
I agree with W2R. Diversification will happen over time naturally as you invest in other stocks, increase equity stakes in others, etc. I started seriously tracking my diversification at about $30k or so, but even then it wasn’t all that relevant because every $1,500 purchase was causing substantial swings in how the portfolio was diversified.
That being said, it’s good to be cognizant of your situation and the potential problems. Sounds like you’re slowly rectifying the situation. 🙂
Thanks DM. I just wanted to do a check on where I was and see how much progress I made. I am sure that with future investments, this should get adjusted accordingly.
Good job at lowering the risk to your dividends. 10% is a pretty decent cut, so I imagine you will drop that down significantly with other ongoing buys. Best of luck!
Thanks Agent. As I made future investments, this will continue to improve. Will check it again in a few months to see where things stand.