Preserve capital and deliver a safe dividend yield above the market’s average is the main objective of our Retirement Dividend Portfolio. Dividend growth is expected to be moderately, and the portfolio should keep up with the broader market over time. The composition of this conservative portfolio for retirees is constructed based on the following principles:
- Diversification in several sectors and minimum exposure to 20 stocks
- Average dividend yield 3.5% – 4.5%
- Dividend growth rate 4%+
- Dividend score above 60
- Average loss ratio 1.8-2.5 (see defensive aristocrats)
Holdings are rarely sold and managed with a “buy-and-hold investor” mind-set. The aim is to buy and hold positions for at least 3-5 years. If the fundamentals of the company structurally change or stock valuation reaches excessive levels, a holding could be sold. The portfolio is expected to underperform in bull markets and outperform in bear markets due to its defensive nature.
We created the Retirement Dividend Portfolio, so customers can follow a selection of “conservative” dividend stocks. Some investors could mirror the portfolio holding for holding, but others use the list to generate investment ideas and make sense of trends and risk/returns in their own portfolios.
If you decide to mirror the portfolio, our recommendation would be to invest equally across all holdings. This provides diversification between stocks, sectors. Preferable the value of one individual stock is always below 5%-8%. Some holdings may appear undervalued and some overvalued, so we provide some guidelines/rules when to buy or not to buy. Please take into account that there is currency risk if you are a non-us investor.More details and the dividend stocks in portfolio are available to members.
Retirement Portfolio Performance
Our retirement portfolio gained 5.35% in July 2020, close to the S&P 500’s performance of 5.9% and outperforming Invesco’s High Dividend Low Volatility ETF (SPHD), which was up 2.53%.
Since its inception in January 2017, our portfolio has returned 13.9%, which is behind the S&P 500 (56.8%) but well ahead of our dividend ETF benchmark (-14.2%).
This performance displays the conservative characteristics of this portfolio and the focus on capital preservation. The Maximum Drawdown (MDD) was -18% versus -31% for the benchmark and is clearly visible in the charts and table below.
Diversification in several sectors and minimum exposure to 20 stocks is an important aspect of sound investing. Our retirement portfolio as at the moment 22 holdings and the following sector allocation: