Checking in on our U.S. stocks

By Dale Roberts, cutthecrapinvesting

Special to Financial Independence Hub

Eight years ago, I bought 15 U.S. dividend growth stocks as a real-life portfolio demonstration. More than a demonstration, it was the total value of our U.S. holdings in our retirement accounts. The strategy was to create a more defensive and retirement-ready portfolio. The portfolio slants to quality, profitability and business moats. The 15 stocks were added to three companies that were already held – we’ll call those stock picks. The portfolio mix beat the S&P 500 by 3.2% annual while delivering better risk-adjusted returns.

Here’s the link to my recent Seeking Alpha article – the dividend growth portfolio 8 years later. You might be able to get one of three free reads for that post on Seeking Alpha. But just in case you can’t I will share a few of the key details.

And keep in mind the post and stocks that I mention is not advice. Do your own research, and know why you do what you do.

The U.S. dividend growth, plus picks portfolio

I sold my VIG, and purchased 15 individual holdings from the top 20-25 of the index. The 15 companies that I added are 3M (MMM), Pepsi (PEP), CVS Health Corporation (CVS), Walmart (WMT), Johnson & Johnson (JNJ), Qualcomm (QCOM), United Technologies (UTX), Lowe’s (LOW), Walgreens Boots Alliance (WBA), Medtronic (MDT), Nike (NKE), Abbott Labs (ABT), Colgate-Palmolive (CL), Texas Instruments (TXN) and Microsoft (MSFT).

I also have 3 U.S. stock picks by way of Apple (AAPL), Berkshire Hathaway (BRK.B), and BlackRock (BLK). For the record, these stocks are held in my wife’s accounts and my own accounts.

United Technologies merged with Raytheon (RTX) and then spun off Carrier Global Corporation (CARR) and Otis Worldwide (OTIS). We continue to hold all three and they have been wonderful additions to the portfolio. In fact, from the time of the spin-off, the 3 stocks have greatly outperformed the market (IVV) and the dividend achievers. Given that the United Technology stocks are not available for evaluation from 2015, I have run the performance update with the remaining 14 dividend achievers.

Here’s the performance chart using Portfolio Visualizer.

And here are the returns of the individual assets, from January of 2015 to end of April 2023.

The portfolio has performed very well thanks to enough growth and not a lot of losing. Also, the United Technology spinoffs have been the best performing basket from 2021 (the time of the merger and spinoffs). With those 3 stocks, it brings the total U.S. portfolio to 20 stocks.

Stay the course

The exercise has taught me the benefit of simplicity and consistency. I have not sold out of any stocks. I did not rebalance (though you should consider that when you run a portfolio). I buy and hold and reinvest the dividends.

Once we set our course we can stay the course. Holding a group of larger cap higher quality companies certainly helped to make it easy to execute.

When it comes time to fund retirement, we will use the dividends and sell shares. This basket of U.S. stocks will work in concert with our Canadian Wide Moat Stocks. For the record, at times I do harvest a very modest amount of the Canadian dividends, being in semi-retirement.

We also hold Canadian oil and gas stocks. With the addition of cash and bonds and other inflation-fighters it is my version of an all-weather portfolio.

Keep in mind that the index I skimmed in 2015 (Dividend Achievers) included financial health screens. Vanguard switched indices for the ETF, there is no financial health screen for the ETF – VIG. I am writing a post that will look at what I would consider if building the higher quality dividend growth portfolio today. I will post that on Seeking Alpha, and on Cut The Crap Investing.

Of course, most investors would be more that fine buying a U.S. market index ETF.

On the topic of U.S. stocks, Bob at Tawcan asks – does it make sense to invest in U.S. stocks in your TFSA? Growth wins in the end, and so does selling shares to create retirement income. As I wrote …

Living off of the dividends? You gotta sell shares to not sell yourself short.

Diversification and risk management usually trumps tax considerations. Though you might avoid a high U.S. dividend yield strategy in your TFSA. And you might certainly slant to more tax efficient RRSP and Taxable accounts for the U.S. holdings.

Roberts is the owner operator of the Cut The Crap Investing blog,  and a columnist for MoneySense. This blog originally appeared on Cut the Crap Investing on May 14, 2023 and is republished on the Hub with permission. 

Leave a Reply