Week 9: Diversifying the Dividend Farm even more

OK, so last week I tossed my initial investment strategy out the window for a new, almost completely opposite one. What can I say? The little investor in my head had an identity crisis.

If you read my LAST POST, you know what I’m talking about. Instead of building up the handful of positions I started with, like I did for the first month and change, I sold them to buy a bunch more. I went from something like five or six companies to 30 … and I did it in the name of diversity. I liked the companies I had from a value standpoint – I owned 20 shares of General Motors, a bunch of Fifth Third Bank, AT&T and a few others – but something was missing. That “something” was diversity. I had three or four sectors covered, but absolutely nothing from the other six or seven.

Oh, another thing I was missing was companies I actually wanted to own … companies like Disney, Microsoft, Apple, Activision, Starbucks, etc. That’s important, too.

I didn’t own them because of high multiples (P/E ratios) and high prices. Most were at or near 52-week highs, in some cases all-time highs. Buying high isn’t necessarily a recipe for success, but either is investing your hard-earned money into companies you don’t care about. I knew I wanted the five companies I mentioned above, and a few others, as core positions in my portfolio, so I just went ahead and made that happen. YOLO.

Now, back to diversity. Diversity is huge for someone like me … someone who sucks at picking stocks. I’m not a complete novice anymore – I can look at financials and have a pretty good idea of what all the figures mean – but I see stocks all the time that go straight up when the numbers say they should go down … and vice versa. All … the … time!

I also see stocks of companies that have done nothing but rise, like Microsoft, continue to rise. All … the … time.

I knew I had to reevaluate what I was doing … so I did. I bought all the companies I wanted to own a piece of, regardless of price, and started to build from there. I split them up into sectors to see which ones I had represented and which ones I didn’t. Once that was done, I added new positions until I had three from all the sectors other than real estate. I simply added companies I wanted to own, which I’m happy to say is the majority of the ones I came up with, and looked for blue chips, like Exxon and Chevron in the energy sector, to fill out the rest.

Once that was done, I added more. Now I’m at 50 companies, five from each sector (again, other than real estate). I think it’s important to have a hefty number of companies in your portfolio, and I’ll tell you why in a sec. First, though, here’s what I own broken up by sector.

Walt Disney Company (The)DISCommunication Services (Entertainment)
Verizon Communications Inc.VZCommunication Services (Diversified Telecommunication Services)
Activision Blizzard, IncATVICommunication Services (Entertainment)
AT&T Inc.TCommunication Services (Diversified Telecommunication Services)
Comcast CorporationCMCSACommunication Services (Media)
JP Morgan Chase & Co.JPMFinancials (Banks)
Allstate Corporation (The)ALLFinancials (Insurance)
BlackRock, Inc.BLKFinancials (Capital Markets)
Discover Financial ServicesDFSFinancials (Consumer Finance)
Fifth Third BancorpFITBFinancials (Banks)
Microsoft CorporationMSFTInformation Technology (Software)
Apple Inc.AAPLInformation Technology (Technology Hardware, Storage & Peripherals
Cisco Systems, Inc.CSCOInformation Technology (Communications Equioment)
Texas Instruments IncorporatedTXNInformation Technology (Semiconductors & Semiconductor Equipment
Mastercard IncorporatedMAInformation Technology (IT Services)
Starbucks CorporationSBUXConsumer Discretionary (Hotels, Restaurants & Leisure)
Tiffany & Co.TIFConsumer Discretionary (Specialty Retail)
Nike, Inc.NKEConsumer Discretionary (Textiles, Apparel & Luxury Goods)
Lear CorporationLEAConsumer Discretionary (Auto Components)
Lowe’s Companies, Inc.LOWConsumer Discretionary (Specialty Retail)
Johnson & JohnsonJNJHealthcare (Pharmaceuticals) 
Quest Diagnostics IncorporatedDGXHealthcare (Healthcare Providers and Services)
AbbVie Inc.ABBVHealthcare (Biotechnology)
Pfizer, Inc.PFEHealthcare (Pharmaceuticals) 
CVS Health CorporationCVSHealthcare (Healthcare Providers and Services)
Eastman Chemical CompanyEMNMaterials (Chemicals) 
Sherwin-Williams Company (The)SHWMaterials (Chemicals) 
Vulcan Materials CompanyVMCMaterials (Construction Materials)
Nucor CorporationNUEMaterials (Metals & Mining) 
International Paper CompanyIPMaterials (Containers & Packaging)
Boeing Company (The)BAIndustrials (Aerospace & Defense)
United Parcel Service, Inc.UPSIndustrials (Air Freight & Logistics)
Caterpillar, Inc.CATIndustrials (Machinery)
Republic Services, Inc.RSGIndustrials (Commercial Services & Supplies)
3M CompanyMMMIndustrials (Industrial Conglomerates)
Pepsico, Inc.PEPConsumer Staples (Beverages)
Constellation Brands, Inc.STZConsumer Staples (Beverages)
Costco Wholesale CorporationCOSTConsumer Staples (Food Staples & Retailing)
Procter & Gamble Company (The)PGConsumer Staples (Household Products)
Kroger Company (The)KRConsumer Staples (Food & Staples Retailing)
American Electric Power CompanyAEPUtilities (Electric Utilities)
Artesian Resources CorporationARTNAUtilities (Water Utilities)
Pattern Energy Group Inc.PEGIUtilities (Independent Power & Renewable Electricity Producers)
NextEra Energy, Inc.NEEUtilities (Electric Utilities)
DTE Energy CompanyDTEUtilities (Multi-Utilities)
Exxon Mobil CorporationXOMEnergy (Oil, Gas & Consumable Fuels)
Chevron CorporationCVXEnergy (Oil, Gas & Consumable Fuels)
Phillips 66PSXEnergy (Oil, Gas & Consumable Fuels)
Valero Energy CorporationVLOEnergy (Oil, Gas & Consumable Fuels)
Halliburton CompanyHALEnergy (Energy Equipment & Services)

There it is. You won’t find any micro-caps or speculative investments on that list. Just a bunch of big boys. All 50 pay dividends, some in January, April, July and October, some in February, May, August and November and some in March, June, September and December. Some pay semi-annually (Disney) and some pay once a year (Activision). I don’t think any one of those companies will make me rich overnight, especially considering the plan is to spread the wealth a little and not just invest in one or two exclusively, but all of them from time to time. The magic will come from time and compounding. You see, 50 companies, with all but two paying quarterly, means 190-plus dividend payments a year.

I’ll funnel all of them back into the portfolio, too. The plan will be to keep an eye on ex-dividend dates and buy shares that will earn me a dividend sooner than later. The sooner I can get my hands on that dividend, the sooner I can invest it into a share that will earn me another one. I’ll pick and choose, look for dips, etc., and hopefully this thing will pick up some momentum in the near future. Right now, my 50 positions will earn me $168.67 in the next year. I’m adding all the time, though, so that number will only grow. Compounding is a wonderful thing, and I believe this strategy will only help make it more magical. This won’t work for everyone, but, thanks to commission-free trades with Robinhood, it’ll work for me! I can by singles shares of companies as many times a day as I want and never pay a dime. I know it will work, it’ll just take some time to get going.

It’s still early, week 9 of my march toward $1,000,000, but I finally feel comfortable with my strategy. I own pretty much all the companies I want to – companies I use and trust – and even the ones I don’t, like the energy companies I don’t know all the ins and outs of, have great track records and solid leadership.

March with me

Looking to get started? Start with Robinhood: http://share.robinhood.com/benjams352

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