Portfolio Allocation – Income

 Income  With some indication of a 0.25% rate hike “later this year”, income-related stocks will be in the spotlight – some for the better and some, not so much. However, I tend to focus more on the individual industries and specific stocks that will do well regardless of the short-term effects on rates. It should be kept in mind, as I revise the income portfolio allocation, that the overall distribution of financial assets (equities, bonds, alternative investments, cash, etc.) should be based on one’s penchant for risk and the time frame as to when funds will be needed (i.e. college, retirement, etc.). This macro allocation of assets, if you will, should also be re-balanced from time-to-time, as personal and financial conditions change. I made one modification to the income list since my February posting; specifically DuPont & Co. was removed from the account and replaced with Dow Chemical Co. However, I am initiating Dow with the same 8% slice as was DuPont. On the plus side, I am increasing Intel from 10% to 12%, as these shares have solid total return prospects for the pull to 2018-2020. Conservative income accounts seeking a technology holding for their portfolio would do well to consider this Dow-30 component as the shares, yielding 3.3%, have held up fairly well during the recent market downturn. The upcoming acquisition of Altera should enhance INTC’s position in the server and data center markets and prospects, while not assured, remain bright. I am moving Johnson & Johnson up three percentage points to 12%, as I believe the shares are oversold at current levels. While earnings are being squeezed with the strong dollar, next year should bring some relief and per share earnings may surprise to the upside approaching $6.45 per share. The generous dividend, yielding 3.2%, should grow at a 5% annual rate commensurate with cash flow providing for decent total returns to late decade. To make room for Intel and Johnson & Johnson’s increases, I am reducing my exposure to energy related plays and moved the ETRACS Alerian MLP Index ETF down 2% to 6% and Total, SA from 7% to 6%. Also, Verizon Communications has announced that it will see flat earnings next year and the shares may languish until some of the initiatives the company is making in pricing and exposure to media content materialize. All other positions remain as they did in February. Here is the most recent income portfolio allocation mix:

Income

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: