My Five Largest Dividend Portfolio Holdings for the Long Term

My goal as a dividend investor is to build a diversified portfolio of income producing investments, which grow earnings and reward shareholders with higher dividends every year. I only purchase dividend growth stocks that are attractively valued, and will grow distributions over time, after a rigorous screening and stock analysis process. My holding period is forever, and I will only sell if one of these three events happens. I have sold recently shares in companies whose past and expected earnings and dividends growth was very unsatisfactory however.

I have built my dividend cash machine around the same time I started this site in 2008.  As my portfolios has started to generate a decent amount of distributions, I have started maxing out any tax-deferred accounts that I might be eligible for, in order to reduce tax bills. In general, I view each dollar I allocate to dividend growth stocks today as the seed behind a money tree that will generate a dollar of income in 25 - 30 years. By shielding a portion of my wealth, I would minimize some expenses related to taxes.

Below I have summarized the largest five holdings in my investment portfolios as of December 2015. The reason why they represent a high allocation to my portfolio is due to addition of new funds and significant capital appreciation. Some of those stocks have been purchased many years ago at much better valuations. I would not think anyone in their right mind would purchase them today.



Realty Income Corporation (O) is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. Realty Income is a dividend achiever, which has managed to boost distributions to shareholders for 23 years in a row. In the past decade, the company has managed to boost distributions by 5%/year. Currently, the stock sells for 19 times FFO and yields 4.40%. Given the slowdown in dividend growth, and the rich valuation, I would not be initiating a position in this stock if I were starting over as a dividend investor unless I receive a starting yield of at least 5% - 6%. Check my analysis of Realty Income for more information about this REIT.

Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and wellbeing company. The company operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale. Walgreens is a dividend champion, which has managed to boost distributions to shareholders for 40 years in a row. In the past decade, the company has managed to boost distributions by 19.50%/year. Currently, the stock sells at 19.20 times expected earnings and yields 1.70%. I am satisfied with the expansion in earnings per share, which ultimately drives dividend growth and increases the intrinsic value of the business. If I were just starting over however, I would be more interested in initiating a starter position the stock if it yields above 2%. If the company is ever available at an yield of 3%, it would likely be an even better candidate. Check my analysis of Walgreens for more information about the company.

Johnson & Johnson (JNJ), together with its subsidiaries, researches and develops, manufactures, and sells various products in the health care field worldwide. It operates in three segments: Consumer, Pharmaceutical, and Medical Devices. Johnson & Johnson is a dividend champion, which has managed to boost distributions to shareholders for 53 years in a row. In the past decade, the company has managed to boost distributions by 8.80%/year. Currently, the stock sells for 16.60 times expected earnings and yields 2.90%. This is the quintessential slow and steady dividend growth stock, which always deliver solid dividend growth you can count on. This is the type of company I would be buying if I were just starting over. Check my analysis of Johnson & Johnson for more information about the company.

Kimberly-Clark Corporation (KMB), together with its subsidiaries, manufactures and markets personal care, consumer tissue, and K-C professional products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional. Kimberly-Clark is a dividend champion, which has managed to boost distributions to shareholders for 43 years in a row. In the past decade, the company has managed to boost distributions by 7.60%/year. Currently, the stock is a little overvalued at 22.10 times expected earnings and yields 2.80%. This is another slow and steady consumer staple, which provides dependable earnings and dividend growth to investors over time. However, if I were just starting out, I would require a better entry valuation. Check my analysis of Kimberly-Clark for more information about the company.

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. Philip Morris International has managed to boost distributions to shareholders ever since the spin-off from Altria (MO) in 2008. Over the past five years, the company has managed to boost distributions by 11.10%/year. Unfortunately, dividend growth has slowed down dramatically in recent years, as the company has been unable to grow earnings per share since 2011. Currently, the stock sells for 19.90 times expected FY 2015 earnings and yields 4.60%. Given the lack of earnings growth, I would not be buying shares in this international tobacco giant if I were just starting out. In my case, I am allocating the dividends elsewhere and haven't added any new funds to the stock in over two years. Check my analysis of Philip Morris International for more information about the company.

Full Disclosure: Long O, WBA, JNJ, KMB, MO, PM

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