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 2.5% – 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. Preferably 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 on 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
The full-year return for 2020 is 1.62% Our benchmark for this portfolio, Invesco’s High Dividend Low Volatility ETF (SPHD), which ended down 12.71% for 2020
Since its inception in January 2017, the initial investment of $10,000 in this portfolio would have grown to $14,794, which is well ahead of our dividend ETF benchmark ($11,284).
The annual dividend received this year is 3.29% and this is within the projected range of 2.5%-4.5%.
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: