Ultimate Sustainable Dividend Portfolio – October 2013 Update – Adding ETF’s To The Mix

By: ispeculatornew
Date posted: 10.17.2013 (3:00 am) | Write a Comment  (2 Comments)

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pas2In September 2011, I did some in-depth research to find long term sustainable dividend stocks and have been doing updates on this Ultimate Sustainable dividend portfolio since then in the attempt to show how well such a portfolio can perform over the long term. I would personally say that things have been going very well and will certainly continue to evolve. I do have a few more things planned which I will discuss in the near future.

The USDP is obviously a critical part of my now very public quest to replace my job income with passive income. you can see my most recent update here. I recently came back from vacations and I can tell you that it’s one incredible motivation.. Not that I needed it but wow:)

So today, I decided to do something I had hinted I might do a few months ago. I’m adding some ETF’s to the USDP. I know that some of you will not agree with it but hear me out. I’m trying to build a long term portfolio that will be able to generate an increasing amount of income. Currently, I’ve been restricting myself to US traded stocks which is fine but also means that I have a lot of concentration in that portfolio. Here are in my opinion the benefits & downsides of adding ETF’s:

Pros:

-Getting exposure to 2 types of assets that are currently too expensive to do (international stocks and bonds – I’ll also consider adding a REIT ETF)
-I’ll be able to do better for the same level of risk (in theory)

Cons:

-Fees – I’m paying around 0.20% annually on those holdings which could add up over time
-Comparing the USDP returns with the S&P500 will not make as much sense given the fact that I’ll have other types of exposure

So what is the plan for now? I’ll slowly build positions in 4-5 ETF’s that might grow to around 15-20% of the USDP. I’ll adjust over time.

Things continue to go very well for the USDP which I’m thrilled to see. Very exciting stuff and I’m thrilled with how things have gone so far. I have done a couple of trades and continue to work on optimizing it, if ever you would like to receive those types of updates, please join, it’s free:

Keep in mind that this portfolio was built by selecting 20 stocks out of thousands. The goal is not to pick the best dividend stocks but rather to pick a diversified, high quality portfolio that will keep dividends increasing over time.

Here are the holdings as of last night to start off:

TickerNamePriceEPSPE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsMkt CapRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
RAXRackspace Hosting Inc38.210.7857.0350.88-48.5527.723.637.071.022/12/20145.34B9.6823.126

Dividends Received

October is one of those rare months where income ($29) will end up being lower than the same month last year. It’s not ideal but nothing to worry about for now.  Take a look at the progress:

usdp2

Ultimate Sustainable Dividend Portfolio News

Not much to report here. one of the USDP Holdings, Omnicom (OMC) announced a special $2.00 dividend. It’s not clear when it will be paid but that will be a nice bonus:)

Otherwise, Microsoft is increasing its quarterly dividend by 22% which will help out.

Returns

Not much to report here. Unfortunately, the portfolio slightly underperformed in the past month. Not by much though and it does remain ahead of a similar S&P500 portfolio (that reinvests all dividends). Not bad at all.  Here are the top and worst performers:

Top Performers
Occidental Petroleum Corp OXY 8.13%
BlackRock Inc BLK 6.53%
Aflac AFL 6.09%

Worst Performer
Baxter International BAX -6.06%

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Trades

Tonight I made 2 trades as I hinted a bit earlier. I bought stocks of 2 ETF’s
VWO Vanguard FTSE Emerging Markets
BND Vanguard Total Bond Market
Those add 2 segments that were clearly missing from the USDP.
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2 Comments

  1. Comment by Ian King — October 17, 2013 @ 7:54 am

    You seem to be tracking the S&P quite accurately. Why not save yourself a lot of work and get the iShares XSP etf and reduce your fees to 0.2% and have done with all the administration of stocks? The only difference I could see is if your average dividend is higher than 2.3%.

  2. Comment by IS — October 21, 2013 @ 11:51 am

    @Ian – That is a fair point, especially in the first year as I had a diversified fairly large cap portfolio which did track it well. I would argue a few things though:

    #1-I have been planning to add other types of assets (started this month)
    #2-That higher dividend yield is significant to me
    #3-That 0.20% is not big right now but as this portfolio grows, it will become significant.

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