CA - How To Allocate $15000 Among My Top 10 High Dividend Yield Companies For May 2023

2023-04-29 15:00:00 ET

Summary

• In this article, I will demonstrate how you can build an investment portfolio that is oriented towards generating dividend income with my top 10 high dividend yield companies for May.
• This portfolio for dividend income investors provides you with a Weighted Average Dividend Yield [TTM] of 4.41%.
• At the same time, the 10 companies and 2 ETFs that I have selected have shown a Weighted Average Dividend Growth Rate [CAGR] of 8.99%.

Investment Thesis

There are a lot of different ways that you can build an investment portfolio, which focuses on dividend income. The allocation of a portfolio depends significantly on your investment-horizon as well as on your individual investment goals.

In this article, I will show you how you can build an investment portfolio with 10 high dividend yield companies that I currently consider to be attractive to invest in. At the same time, you can achieve a broad diversification and a reduced risk level in order to always maintain control over your investments.

The 10 selected high dividend yield companies and the two ETFs, which are part of this dividend income oriented investment portfolio, provide you with a Weighted Average Dividend Yield [TTM] of 4.41%. In addition to that, they have shown a Weighted Average Dividend Growth Rate [CAGR] of 8.99% over the past 5 years.

I have selected the following as my top 10 high dividend yield stocks to invest in for May 2023

• Altria (NYSE: MO )
• AT&T (NYSE: T )
• Deutsche Post ([[DPSTF]], [[DPSGY]])
• Johnson & Johnson (NYSE: JNJ )
• Pfizer (NYSE: PFE )
• Suncor Energy (NYSE: SU )
• U.S. Bancorp (NYSE: USB )
• Vale (NYSE: VALE )
• Verizon Communications Inc. (NYSE: VZ )
• VICI Properties (NYSE: VICI )

Overview of the 10 High Dividend Yield companies and 2 ETFs and its Allocation

Source: The Author, data from Seeking Alpha

Portfolio Allocation per Company

The following ETFs/companies have the highest proportion of this investment portfolio that has been built with the principal objective of achieving an attractive Dividend Yield:

• Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) (30%)
• iShares Core High Dividend ETF (NYSEARCA: HDV ) (30%)
• Altria (6%)
• Johnson & Johnson (6%)
• Pfizer (5%)
• AT&T (4%)
• Suncor Energy (4%)
• Verizon (4%)

In order that no individual company represents a proportion of the overall investment portfolio that I would consider as too high (since this would imply a high risk for investors), the Schwab U.S. Dividend Equity ETF (30% of the portfolio) and the iShares Core High Dividend ETF (30%) have been included.

The inclusion of these two ETFs contributes to the fact that a possible decline of the stock price of one of the selected companies would have a smaller negative impact on the Total Return of your investment portfolio.

In addition to that, by overweighting companies such as Altria and Johnson & Johnson, you can additionally protect your investment portfolio against a future stock market decline: this statement can be proven by the fact that Altria has a 24M Beta Factor of 0.41 while Johnson & Johnson's is 0.32. This helps you to maintain more control over your investments.

The following companies have a lower proportion of this investment portfolio due to the fact that I consider the risk attached to investing in them as being higher:

• Deutsche Post (3%)
• U.S. Bancorp (3%)
• VICI Properties (3%)
• Vale (2%)

In the case of investing in Deutsche Post or Vale, currency risks can be named as additional risk factors for investors based in the United States, thus contributing to my decision to underweight these companies in this investment portfolio.

Illustration of the Portfolio Allocation per Company

As mentioned, the investment portfolio that I'm presenting in this article is focused on achieving an attractive Dividend Yield. However, in case you would like to increase the dividend growth of this portfolio, you could also add the type of companies that are able to raise the Weighted Average Dividend Growth Rate. In order to find an attractive company that can provide your portfolio with dividend growth, you could take a look at my list of dividend growth companies that I currently consider to be attractive.

Portfolio Allocation per Sector

The two selected ETFs (Schwab U.S. Dividend Equity ETF and iShares Core High Dividend ETF ) have by far the largest proportion on the overall portfolio.

Each makes up 30%, which ensures that your investment portfolio achieves a broad diversification.

Besides the two ETFs, the Health Care Sector has the highest proportion of the overall portfolio (representing 11%).

The Communication Services Sector represents 8% of this investment portfolio (Both AT&T and Verizon with 4% each). The Consumer Staples Sector (with Altria) represents 6%, while Suncor Energy from the Energy Sector has 4%.

The Financials Sector (U.S. Bancorp with 3%), the Industrials Sector (Deutsche Post representing 3%) and the Real Estate Sector (with VICI Properties representing 3%) make up 3% each. The Materials Sector (with Vale representing 2%) makes up the smallest percentage of the overall portfolio.

Expect for the ETFs, no industry represents more than 11% of the overall portfolio, indicating that my diversification requirements are fulfilled.

Illustration of the Portfolio Allocation per Sector

Below you can see which companies belong to each sector of this investment portfolio:

ETFs (60%)

• Schwab U.S. Dividend Equity ETF (30%)
• iShares Core High Dividend ETF (30%)

Health Care (11%)

• Johnson & Johnson (6%)
• Pfizer (5%)

Communication Services (8%)

• AT&T (4%)
• Verizon (4%)

Consumer Staples (6%)

• Altria (6%)

Energy (4%)

• Suncor Energy (4%)

Financials (3%)

• U.S. Bancorp (3%)

Industrials (3%)

• Deutsche Post (3%)

Real Estate (3%)

• VICI Properties (3%)

Materials (2%)

• Vale (2%)

Portfolio Allocation per Industry

The Pharmaceutical Industry (with Johnson & Johnson representing 6% and Pfizer representing 5% of the overall portfolio) make up the largest industry of this portfolio (beside the ETFs), followed by the Integrated Telecommunication Services Industry with 8% (AT&T and Verizon represent 4% each).

The Tobacco Industry (with Altria representing 6%) also makes up a relatively high percentage of the overall portfolio.

Since we are aiming to achieve an investment portfolio with a relatively high Dividend Yield, industries that provide us with companies that pay a relatively high Dividend make up a higher proportion of the portfolio.

Among these industries are the Integrated Telecommunication Services Industry and the Tobacco Industry, both of which share a significant percentage of this portfolio.

From my point of view, no industry in this portfolio has a proportion that I would consider to be too high.

The Integrated Oil and Gas Industry (with Suncor Energy representing 4%), the Other Specialized REITs Industry (VICI Properties representing 3%), the Diversified Banks Industry (U.S. Bancorp has 3%), and the Air Freight and Logistics Industry (Deutsche Post representing 3%) have a relatively small percentage of the overall portfolio.

The industry with the smallest percentage is the Steel Industry (with Vale representing 2%).

Illustration of the Portfolio Allocation per Industry

Portfolio Allocation per Country

Companies based in the United States are by far the most represented in this investment Portfolio: 91% of this investment portfolio consists of U.S. based companies while 9% of companies are based outside the country.

4% of the selected companies are based in Canada (Suncor Energy), 3% are based in Germany (Deutsche Post), and 2% are based in Brazil (Vale).

Since the majority of companies that are part of this high dividend yield investment portfolio are from the U.S., and at least 5% are from outside the country, my geographical diversification requirements have also been met.

Illustration of the Portfolio Allocation per Country

How to Achieve an Even Broader Diversification

If you would like to achieve an even broader diversification than this investment portfolio offers , you might consider invest ing in an additional ETF: you could take a closer look at the iShares Core Dividend Growth ETF (NYSEARCA: DGRO ) , since it provides you with a relatively attractive Dividend Yield [TTM] of 3.37% and a Dividend Growth Rate [CAGR] of 10.32% over the past 5 years.

In case you ask yourself if it makes sense to only invest in SCHD, I would like to highlight some advantages of picking stocks individually over only investing in ETFs:

• It provides your portfolio with more individuality and flexibility
• You can protect your investment portfolio against the next stock market crash by adding companies with a low Beta Factor (an example of a company with a low Beta Factor would be Johnson & Johnson, which is part of this portfolio)
• You can overweight industries with which you are more familiar and you can avoid others you do n't want to invest in
• You can select stocks which you think are able to beat the market or you can select ones to raise the Weighted Average Dividend Yield or Weighted Dividend Growth Rate of your investment portfolio
• You can also achieve an even broader geographical diversification of your portfolio

In my article 10 Dividend Stocks To Show The Advantages Of Investing In Individual Stocks Over ETFs , I discuss the advantages of the selection of stocks over ETFs in greater detail.

Conclusion

The aim of this article was to show you how you could build an dividend income oriented investment portfolio with 10 selected high dividend yield companies that I currently consider to be attractive.

I have suggested adding two ETFs (Schwab U.S. Dividend Equity ETF and the iShares Core High Dividend ETF) in order to achieve a broader diversification over sectors and industries as well as to contribute to reducing the portfolio's risk level.

The risk level of this investment portfolio has declined, since the ETFs offer a broad diversification and each individual company only represents a relatively small percentage of the overall portfolio.

Furthermore, its risk level has also been reduced as I have only overweighted the companies which I consider to be the least risky and that I expect to deliver an attractive compound annual rate of return over the long term.

Through this approach, we aim to achieve excellent investment results over the long term while investing with a reduced risk level. This allows us to maintain control over our investments in different market environments.

At the same time, we can benefit from the steadily increasing dividend payments that the selected companies and ETFs provide us with, since the Weighted Average Dividend Yield [TTM] of this investment portfolio stands at 4.41% and the Weighted Average Dividend Growth Rate [CAGR] over the past 5 years at 8.99% .

Author's Note: Thank you very much for reading and I would love to hear your opinion on this investment portfolio and its allocation!

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