2023-04-17 14:00:00 ET
Summary
- In this article, I will show you how you could allocate $10,000 among my top 20 dividend growth and high dividend yield companies for the month of April.
- Due to the allocation I have chosen, that I’ll discuss in this article, you would achieve a Weighted Average Dividend Yield [FWD] of 3.12% with this portfolio.
- The selected companies have also shown a Weighted Average Dividend Growth Rate [CAGR] of 10.26% over the past 5 years.
- In addition to that, you achieve a geographical diversification: 82% of the portfolio is represented by companies from the U.S., and 18% from companies outside the U.S.
Investment Thesis
In previous articles, I have introduced you to my top 10 dividend growth stocks and my top 10 high dividend yield companies to invest in for April 2023. In these articles, I discussed that I consider these companies to currently be attractive due to a wide variety of reasons: among other factors, their financial health, their strong competitive advantages and their current Valuation.
In today’s article, I will show you how you could allocate $10,000 among these 10 dividend growth and 10 high dividend yield companies. I’ll also go on to discuss this allocation in greater detail.
The following companies were my top 10 high dividend yield stocks to invst in for April 2023:
- 3M Company (NYSE: MMM )
- AbbVie Inc. (NYSE: ABBV )
- Altria (NYSE: MO )
- Johnson & Johnson (NYSE: JNJ )
- Mercedes-Benz Group AG ( OTCPK:MBGYY , OTCPK:MBGAF )
- Suncor Energy Inc. (NYSE: SU )
- TotalEnergies SE (NYSE: TTE )
- The Toronto-Dominion Bank (NYSE: TD )
- U.S. Bancorp (NYSE: USB )
- Verizon Communications Inc. (NYSE: VZ )
The following were my top 10 dividend growth stocks to invest in for April 2023:
- Apple ( NASDAQ: AAPL )
- Bank of America ( NYSE: BAC )
- Bristol-Myers Squibb Company (NYSE: BMY )
- Charles Schwab (NYSE: SCHW )
- Deere & Company (NYSE: DE )
- JPMorgan ( NYSE: JPM )
- Mastercard (NYSE: MA )
- Microsoft ( NASDAQ: MSFT )
- Taiwan Semiconductor (NYSE: TSM )
- Visa ( NYSE: V )
Overview of the 20 selected Companies
Company Name | Sector | Industry | Dividend Yield | Dividend Growth 5Y | Proportion |
3M | Industrials | Industrial Conglomerates | 5.88% | 4.09% | 3% |
AbbVie | Health Care | Biotechnology | 3.72% | 16.92% | 4% |
Altria | Consumer Staples | Tobacco | 8.56% | 7.18% | 6% |
Apple | Information Technology | Technology Hardware, Storage and Peripherals | 0.56% | 7.87% | 10% |
Bank of America | Financials | Diversified Banks | 3.13% | 14.87% | 6% |
Bristol-Myers Squibb | Health Care | Pharmaceuticals | 3.14% | 7.04% | 4% |
Charles Schwab | Financials | Investment Banking and Brokerage | 1.80% | 21.22% | 3% |
Deere & Company | Industrials | Agricultural and Farm Machinery | 1.27% | 14.44% | 4% |
Johnson & Johnson | Health Care | Pharmaceuticals | 2.99% | 6.11% | 7% |
JPMorgan | Financials | Diversified Banks | 3.14% | 12.91% | 6% |
Mastercard | Financials | Transaction & Payment Processing Services | 0.59% | 17.66% | 7% |
Mercedes-Benz Group AG | Consumer Discretionary | Automobile Manufacturers | 6.85% | 11.54% | 3% |
Microsoft | Information Technology | Systems Software | 0.89% | 9.92% | 8% |
Suncor Energy | Energy | Integrated Oil and Gas | 5.00% | 8.00% | 3% |
Taiwan Semiconductor | Information Technology | Semiconductors | 1.99% | 9.26% | 5% |
The Toronto-Dominion Bank | Financials | Diversified Banks | 4.84% | 7.98% | 3% |
TotalEnergies | Energy | Integrated Oil and Gas | 4.88% | -5.11% | 4% |
U.S. Bancorp | Financials | Diversified Banks | 5.40% | 10.14% | 2% |
Verizon | Communication Services | Integrated Telecommunication Services | 6.93% | 2.06% | 5% |
Visa | Financials | Transaction & Payment Processing Services | 0.73% | 17.55% | 7% |
3.12% | 10.26% | 100% |
Source: Seeking Alpha
Allocation per Company
From the 20 companies that are among my top dividend companies to invest in for April 2023, I have given Apple the highest proportion of this portfolio with 10%. One of the main reasons for this is that, in my opinion, the company from Cupertino is an excellent choice when it comes to risk and reward.
I have also overweighted companies such as Microsoft (8% of the overall portfolio), Mastercard (7%) and Visa (7%) for similar reasons. In addition to that, both Visa and Mastercard can help you to significantly raise the Weighted Average Dividend Growth Rate of your investment portfolio: while Visa’s Dividend Growth Rate [CAGR] over the past 5 years is 17.55%, Mastercard’s is slightly higher (17.66%).
The reasons for overweighting Johnson & Johnson (7% of the overall portfolio) is that the company contributes to protecting your investment portfolio against the next stock market crash. This statement is underlined by the company’s 24M Beta of 0.32 and its 60M Beta of 0.53.
I would also suggest overweighting Altria (6% of the overall portfolio), since the company can contribute to raising the Weighted Average Dividend Yield [FWD] of your portfolio (Altria currently pays its shareholders a Dividend Yield [FWD] of 8.56%).
By overweighting both JPMorgan (6%) and Bank of America (6%) in this portfolio, you can further increase the Weighted Average Dividend Yield [FWD] of this portfolio as well as its expected Dividend Growth Rate. JPMorgan pays a Dividend Yield [FWD] of 3.14% and its Dividend Growth Rate [CAGR] over the past 5 years has been 12.91%, while Bank of America pays a Dividend Yield [FWD] of 3.13% and has shown a Dividend Growth Rate [CAGR] of 14.87% over the past 5 years.
At the same time, I think that both banks currently have an attractive Valuation: JPMorgan currently has a P/E [FWD] Ratio of 10.04, which stands 18.82% below its average over the past 5 years. Bank of America’s P/E [FWD] Ratio is 8.85, which is 26.96% below its average over the past 5 years.
Allocation per Sector
In the following, I will take a deeper look into the allocation per sector of this investment portfolio. Financials (34% of the overall portfolio), Information Technology (23%) and Health Care (15%) are the largest sectors, followed by Industrials (7%), Energy (7%), Consumer Staples (6%), Communication Services (5%) and Consumer Discretionary (3%).
Financials Sector (34% of the overall portfolio):
- Mastercard (7%)
- Visa (7%)
- Bank of America (6%)
- JPMorgan (6%)
- The Charles Schwab Corporation (3%)
- The Toronto-Dominion Bank (3%)
- U.S. Bancorp (2%)
Information Technology Sector (23%):
- Apple (10%)
- Microsoft (8%)
- Taiwan Semiconductor (5%)
Health Care Sector (15%):
- Johnson & Johnson (7%)
- Bristol-Myers Squibb Company (4%)
- AbbVie (4%)
Industrials Sector (7%):
- Deere & Company (4%)
- 3M (3%)
Energy Sector (7%):
- TotalEnergies (4%)
- Suncor Energy (3%)
Consumer Staples Sector (6%):
- Altria Group (6%)
Communication Services Sector (5%):
- Verizon (5%)
Consumer Discretionary Sector (3%):
- Mercedes-Benz Group AG (3%)
Allocation per Industry
Below you can find a graphic that illustrates the portfolio allocation per Industry. You can see that the Diversified Banks Industry is the largest Industry with 17% of the overall portfolio, followed by Transaction & Payment (14%), Pharmaceuticals (11%), Technology Hardware, Storage and Peripherals (10%), Systems Software (8%), and Integrated Oil and Gas (7%). The fact that no industry is represented with more than 20% reflects the broad diversification of this portfolio that I have built for you.
Allocation per Country
Below you can find the allocation per country of this investment portfolio that combines a relatively high Dividend Yield [FWD] with Dividend Growth. You can see that the United States is the country that is most represented (82% of the companies are based in the U.S.). The second most represented country is Canada (6%), followed by Taiwan (5%) France (4%), and Germany (3%).
Source: The Author
The portfolio allocation meets my diversification requirements of significantly overweighting companies from the U.S., but also including companies from other countries with the goal of achieving additional geographical diversification.
How to achieve an even Broader Diversification?
In order to achieve an even broader diversification with your own investment portfolio, compared to the one I have built and am discussing in this article, you could add an ETF. One example of an ETF that would fit perfectly into this portfolio and which aims to combine a high Dividend Yield with Dividend Growth is SCHD (NYSEARCA: SCHD ).
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 one ETF:
- 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 companies/industries with which you are more familiar and you can avoid others
- You can select stocks which you think could be 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 by selecting companies outside the U.S.
In my article 10 Dividend Stocks To Show The Advantages Of Investing In Individual Stocks Over ETFs I discuss the advantages of the individual selection of stocks over ETFs in greater detail.
Conclusion
The objective of this article was to demonstrate how you could allocate $10,000 among my top 10 dividend growth companies and top 10 high dividend yield companies for April 2023.
The portfolio that I have built for you provides a Weighted Average Dividend Yield [FWD] of 3.12% and I expect it to offer significant Dividend Growth over the next years. My opinion is based on the fact that the selected companies have strong competitive advantages over their competitors, are financially healthy and have produced significant Dividend Growth over the past 5 years (they have shown a Weighted Average Dividend Growth Rate [CAGR] of 10.26% in this time period).
In addition to that, with this portfolio you would significantly overweight companies from the U.S., but also include companies from other countries (in this case: Canada, France, Germany and Taiwan) in order to achieve a broader geographical diversification.
Apple (10% of the overall portfolio), Microsoft (8%), Visa (7%), Mastercard (7%) and Johnson & Johnson (7%) are the largest individual positions of this portfolio. The reason for overweighting these companies is that I consider them all to be excellent picks in terms of risk and reward. This means that the risks of investing in these companies is relatively low and I consider the chances of achieving excellent results over the long term to be high.
Author’s Note: I would love to hear your opinion on this investment portfolio and its allocation!
For further details see:
How To Allocate $10,000 Among My Top 20 Dividend Stocks Of April 2023