VNNVF - How To Allocate $20000 Among 25 Dividend Income Stocks And ETFs

2023-04-24 16:00:00 ET

Summary

• In this article, I will show you how you could build a broadly diversified investment portfolio with a relatively high Dividend Yield.
• The Weighted Average Dividend Yield [TTM] of the investment portfolio that I’m presenting in this article, stands at 6.00%.
• In addition to that, the selected picks have shown a Weighted Average Dividend Growth Rate [CAGR] of 9.39% over the past 5 years, indicating that they will show dividend growth.

Investment Thesis

By investing in companies that provide you with a relatively high Dividend Yield, you can generate an extra income for yourself. Furthermore, you can reduce your reliance on the ups and downs of the stock market.

The principal objective of today's article is to introduce you to an investment portfolio that provides you with a relatively high Dividend Yield [TTM], while at the same time offering you dividend growth. Moreover, its composition leads to a broad diversification over sectors, industries and countries.

The investment portfolio that I have built for you and that I will present in this article, has a Weighted Average Dividend Yield [TTM] of 6.00% and the selected picks have shown a Weighted Average Dividend Growth Rate [CAGR] of 9.39% over the past 5 years. This indicates that the portfolio should not only be able to provide you with a relatively high Dividend Yield, but also with Dividend Growth.

The following companies / ETFs are part of the portfolio that I will present today:

• Allianz ( OTCPK:ALIZF , OTCPK:ALIZY )
• Altria (NYSE: MO )
• AT&T (NYSE: T )
• Axa ( OTCQX:AXAHY , OTCQX:AXAHF )
• BASF ( OTCQX:BASFY )
• British American Tobacco (NYSE: BTI )
• Chevron (NYSE: CVX )
• Deutsche Post ( OTCPK:DPSGY )
• Imperial Brands ( OTCQX:IMBBF ) ( OTCQX:IMBBY )
• iShares International Select Dividend ETF (BATS: IDV )
• iShares MSCI Brazil Capped ETF (NYSEARCA: EWZ )
• Medical Properties Trust (NYSE: MPW )
• Mercedes-Benz Group AG ( OTCPK:MBGAF )
• Phillip Morris (NYSE: PM )
• Realty Income (NYSE: O )
• Rio Tinto (NYSE: RIO )
• Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD )
• Simon Property Group (NYSE: SPG )
• Sociedad Química y Minera de Chile S.A. (NYSE: SQM )
• Société Générale Société ( OTCPK:SCGLF )( OTCPK:SCGLY )
• Swiss Re AG ( OTCPK:SSREF )
• TotalEnergies (NYSE: TTE )
• Verizon (NYSE: VZ )
• Vonovia ( OTCPK:VONOY )
• Zurich Insurance Group AG ( OTCQX:ZURVY )

Overview of the 25 Selected Picks of This High Dividend Yield Portfolio

Portfolio Allocation per Company / ETF

The highest proportion of this investment portfolio is held by the three ETFs that have been included. The Schwab U.S. Dividend Equity ETF (27.5% of the investment portfolio) and the iShares International Select Dividend ETF (27.5%) together make up 55% of the overall portfolio. Meanwhile, the iShares MSCI Brazil ETF makes up 5% of the portfolio.

One of the main reasons I have chosen Schwab U.S. Dividend Equity ETF to be part of this portfolio is because it doesn't only provide investors with an attractive Dividend Yield [TTM), but it also offers an attractive Dividend Growth Rate: while the ETFs' Dividend Yield [TTM) stands at 3.58%, its Dividend Growth Rate [CAGR] over the past 5 years is 15.56%. Therefore, the ETF can help you raise the portfolio's Average Dividend Yield at an attractive growth rate.

One of the main reasons for which I have chosen the iShares International Select Dividend ETF to be part of this portfolio is that it provides you with an attractive Dividend Yield [TTM] of 6.48%.

I selected the iShares MSCI Brazil ETF, since it can help you to further increase the Weighted Average Dividend Yield of your portfolio: the ETFs' Dividend Yield [TTM] stands at 12.69%.

In addition, I would like to highlight that I suggest overweighting the Schwab U.S. Dividend Equity ETF and the iShares International Select Dividend ETF in this high dividend yield portfolio in order to decrease its risk level.

The individual positions of each company only make up a maximum of 2.5% of the total investment portfolio. Therefore, a dividend cut of one of the selected companies, would only have a minor impact on the dividend payments you receive.

The graphic below illustrates the portfolio allocation per company / ETF.

Portfolio Allocation per Sector

In the following, I will take a closer look at the portfolio allocation per sector: as mentioned before, the largest part of this investment portfolio consists of three ETFs (60%).

The second largest sector is the Financials Sector: Allianz (1.5% of the overall portfolio), Axa (1.5%), Société Générale Société (1.5%), Swiss Re (2.5%) and Zurich Insurance Group (1.5%) make up 8.5% of the portfolio.

The third largest sector is the Real Estate Sector: Realty Income (2.5%), Simon Property Group (2.5%), Medical Properties Trust (1.5%) and Vonovia (1.5%) make up 8% of the overall portfolio.

The Consumer Staples Sector has a proportion of 7% on the overall portfolio. The companies from this sector are the following: Altria (2.5%), British American Tobacco (1.5%), Imperial Brands (1.5%) and Phillip Morris (1.5%).

The Materials Sector makes up 5.5% of the overall portfolio, including BASF (1.5%), Rio Tinto (1.5%) and Sociedad Química y Minera de Chile S.A. (2.5%) the selected picks from this sector.

AT&T and Verizon (2.5% each) are part of the Communication Services Sector, which makes up 5% of the overall portfolio.

The remaining sectors are the Energy Sector with a proportion of 3% of the overall portfolio (Chevron and TotalEnergies each hold a proportion of 1.5%), the Consumer Discretionary Sector (Mercedes-Benz Group AG has a proportion of 1.5%), and the Industrials Sector (Deutsche Post has a proportion of 1.5%).

The fact that no sector (besides the ETFs) is weighted with more than 8.5% of the overall portfolio, demonstrates that this portfolio is highly diversified.

The list below shows the specific sectors and their corresponding companies/ETFs that are part of the portfolio.

ETFs (60%):

• iShares International Select Dividend ETF (27.5%)
• iShares MSCI Brazil ETF (27.5%)
• Schwab U.S. Dividend Equity ETF (5%)

Financials (8.5%):

• Swiss Re AG (2.5%)
• Allianz (1.5%)
• Axa (1.5%)
• Société Générale Société (1.5%)
• Zurich Insurance Group AG (1.5%)

Real Estate (8%):

• Realty Income (2.5%)
• Simon Property Group (2.5%)
• Medical Properties Trust (1.5%)
• Vonovia (1.5%)

Consumer Staples (7%):

• Altria (2.5%)
• British American Tobacco (1.5%)
• Imperial Brands (1.5%)
• Phillip Morris (1.5%)

Materials (5.5%):

• BASF (1.5%)
• Rio Tinto (1.5%)
• Sociedad Química y Minera de Chile S.A. (2.5%)

Communication Services (5%):

• AT&T (2.5%)
• Verizon (2.5%)

Energy (3%):

• Chevron (1.5%)
• TotalEnergies (1.5%)

Consumer Discretionary (1.5%):

• Mercedes-Benz Group AG (1.5%)

Industrials (1.5%):

• Deutsche Post (1.5%)

Portfolio Allocation per Industry

Next, I'll take a closer look at the industries that are part of this investment portfolio, which has been built with the objective of achieving a high Dividend Yield.

Besides the ETFs, the Tobacco Industry (7%) is the industry with the highest proportion of the overall portfolio, followed by the Retail REITs Industry (5%), the Integrated Telecommunication Industry (5%), the Multi-line Insurance Industry (4.5%), the Integrated Oil and Gas Industry (3%), the Reinsurance Industry (2.5%), and the Fertilizers and Agricultural Chemicals Industry (2.5%).

The fact that no industry (besides the ETFs) has a proportion of more than 7% of the overall portfolio and most of the industries have a proportion of only 2.5% or even less, highlights its broad diversification.

Portfolio Allocation per Country

The graphic below provides us with evidence of the investment portfolio having a broad geographical diversification: 44.5% of the selected companies are based in the U.S. and the remaining 55.5% outside the U.S.

One of the reasons for which the proportion of companies from outside the U.S. is so high in this portfolio is the fact that the iShares International Select Dividend ETF has been included, which invests in companies outside the U.S.

If you would prefer to have a higher proportion of U.S. companies in your high dividend yield investment portfolio, you could substitute the iShares International Select Dividend ETF with an ETF that mainly invests in U.S. companies.

However, in order to still achieve a relatively high Weighted Average Dividend Yield, you should select an ETF that provides you with a relatively high Dividend Yield [TTM]: you could have a closer look at the iShares Core High Dividend ETF (NYSEARCA: HDV ), for example.

Below you can find an illustration of the portfolio allocation per country.

Conclusion

The principal objective of this article was to show you how you could build an investment portfolio that provides you with a relatively high Dividend Yield. The Weighted Average Dividend Yield [TTM] of this portfolio stands at 6.00%.

In addition to that, the selected picks have shown a Weighted Average Dividend Growth Rate [CAGR] of 9.39% over the past 5 years, providing evidence that the investment portfolio should not only offer you an attractive Dividend Yield, but it should also deliver dividend growth in the years to come.

However, you should be aware that most of these picks probably won't provide you with large capital gains in the future, but they can provide you with a relatively reliable additional income in the form of dividends.

In order to decrease the risk level of your portfolio, I have selected two ETFs as the largest positions. Combined they make up 55% of this investment portfolio.

There is no individual company that makes up more than 2.5%, which contributes to decreasing the impact that a dividend cut from one of the selected companies would have on your portfolio and its dividend payments: you receive the largest amount of dividend payments from the selected ETFs.

Focussing on the dividends instead of searching for quick capital gains, helps you to build an additional and reliable income, and, in addition to that, it helps you become increasingly independent from the price fluctuations of the stock market.

Author's Note: I would love to hear your opinion on this high dividend yield portfolio and its allocation. Do you own any of the mentioned companies?

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