I realized I have not done a proper review of my US Dividend Growth Portfolio in a blog post before, so here's one blog post to address that lack.
The underlying idea for my US Dividend Growth Portfolio is that it is difficult to find dividend growth stocks in Singapore. I'll have to make a qualifier here before proceeding further. My understanding of the term "dividend growth" entails that the dividends distributed by a given firm increases year-on-year much like clockwork, over decades, and is supported by genuine growth in the underlying business.
Currently, I have the following "dividend growth stocks" in said portfolio (ordered by decreasing position size):
- General Mills
- Hormel Foods
- JM Smucker
- Kimberly Clark
- Abbott Laboratories
The breakdown for each counter, in percentage terms, is as follow. The numbers do not add up to 100% as I rounded the decimals to a whole number.
In my Q1 2018 Portfolio Update, I mentioned that I am moving towards a more portfolio-centric way of managing my investment portfolios. Hence, at one glance at the pie chart, I realized that my asset allocation is wonky.
Considering the trio of General Mills, Hormel Foods, and JM Smucker, General Mills occupy the largest share in the portfolio. General Mills' current record is a 14-year streak of increasing dividends. In contrast, Hormel Foods and JM Smucker boasts a 52-year and a 20-year streak, respectively. If I were to weigh each counter according to their historical track record, Hormel Foods and JM Smucker should deserve a far larger weight than General Mills in my portfolio.
How did it turn out that way? When I started out investing in US counters, I was far more cautious and initiated small positions (e.g. JM Smucker). As I grew more experienced, my initial positions became a teeny-weeny bit larger (e.g. General Mills).
Currently, the majority of US consumer staples stocks are on a downtrend, with General Mills exhibiting an even greater downtrend compared to its peers. This may seem like an opportune time to scale in further. However, doing so will result in General Mills occupying a larger proportion in my portfolio, which I am not comfortable with. So I will not do anything for now.
Welltower, a blue-chip healthcare REIT, has a 14-year streak of increasing dividends. It was my very first US counter which I initiated back in December 2016. I added to the position/averaged up in December 2017. It is still a smallish position even after taking into account the addition in December 2017. If I were to value US blue-chip healthcare REITs (e.g. Welltower, Ventas, HCP) by yield, the crisis yield of Welltower would be around ~10% yield. To manage risks, I will only scale in to Welltower (and maybe Ventas) when they are trading at 10% yield. Currently? They are trading at ~6 yield.
Anyway, I expect Welltower to get kicked out of the Dividend Contenders (10 - 24 straight years of dividend growth) list one of these days. It is difficult for REITs to distribute almost all of their cashflow and still grow their dividends. HCP, another "blue-chip healthcare REIT", was supposedly the last man standing until it got kicked out of the Dividend Aristocrat list in 2016/2017. This is yet another example of "cannot blindly buy blue-chips."
Nothing much to comment on for Kimberly Clark and Abbott Laboratories. Small positions due to being cautious when I first started out investing in US counters. I will scale in when the opportunity presents itself.
In the meantime, I will wait it out. There is more room to fall for US dividend growth consumer staples, healthcare REITs, and utilities (which I am trying to research and initiate a position in).
For those who are wondering, my US Dividend Growth Portfolio is around 1/10 the size of my SG Portfolio.
Thanks for reading!