Today I am removing my position in the iShares Global Communication Services exchange traded fund (NYSE: IXP – $57.76). The Dow Jones’ S&P and the MSCI Indices changed their views of companies that comprise the communication’s sector within the new Global Industry Classification Standard definitions. Hence, large holdings in companies such as AT&T, Verizon Communications, Vodafone and Nippon Telephone have been downgraded, or in some cases removed, from the index in favor of Facebook, Alphabet (Google), Netflix, China’s Tencent Holdings and Comcast. Many of the new additions, which are now weighted in the top-ten holdings, do not pay dividends and no payouts are in sight. While these internet communication companies are all fine and highly regarded players within their respective markets, they are no longer suitable – in my opinion – to be represented in the income portfolio, as they provide substantially higher risk and minimal dividend returns. The shares of IXP have done well for income investors with a 9% price appreciation gain (see chart, below) and a 4.2% annualized dividend providing for a safe and steady total return of about 5.33% a year over the time frame since it was added to the list. I will look for an alternative to this position over the next few weeks.
Ten Year Chart ~