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5%+ Dividend Yield Portfolio: The Number Of Stocks To Own (Apr 2019 Review)

Published Sun, 05 May 2019 12:44:46 -0400 on Seeking Alpha

Musings
More than any single topic, I get a LOT of comments on my articles about ideal portfolio size (the age old ‘concentration vs. diversification’ debate). This is especially true of my extensive ETF holdings (about 50% of my total assets) where I own small pieces of many hundreds of companies. I suppose I’ve always tended to error towards over-diversification since I’ve internalized the ‘wisdom’ that I was taught as an undergraduate finance major about how diversification is the greatest thing since sliced bread. However, my professors also told me the market was efficient and never wrong, so I’ll delve open-minded into this subject that deserves deeper attention.
Concentration
“Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know and far too much in others which they know nothing about.” -Phil Fisher, 1958
The case for a more concentrated portfolio has many nuances, but essentially comes down to this ‘if you have confidence in your picks, then increasing your number of holdings means you are adding weaker ideas that will dilute the returns from your winners.’ This is well summarized by a recent article by Sean Stannard-Stockton. You should read the article, but here is my main takeaway:

Source: Burton Malkiel via Sean Stannard-Stockton
“This chart is based on a study discussed in the book "A Random Walk... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
NEW RESIDENTIAL INVESTMENT 15.04   10.6 1.42 2.00 13.01
TRANSOCEAN 5.63   0.0 -4.10 0.00 10.31
SABRA HEALTHCARE REIT 19.98   27.4 0.73 1.80 8.79
TANGER FACTORY OUTLET CENTERS 16.26   18.9 0.86 1.42 8.57
IRON MOUNTAIN 30.54   25.2 1.21 2.44 7.99
BLACKSTONE MORTGAGE TRUST 35.60   13.9 2.56 2.48 6.90
PACWEST BANCORP 37.63   9.8 3.86 2.40 6.46
ABBVIE 68.54   19.6 3.49 4.28 6.26
BP 39.23   13.3 2.94 2.44 6.21
AT&T 32.79   12.2 2.68 2.04 6.13
OCCIDENTAL PETROLEUM 51.01   9.6 5.31 3.16 6.11
SPDR S&P INTERNATIONAL DIVIDEND ETF 39.57   0.0 0.00 0.00 5.73
FORD MOTOR 10.26   13.2 0.78 0.60 5.71
KINDER MORGAN 20.42   20.6 0.99 1.00 4.78
GLAXOSMITHKLINE 41.41   20.9 1.98 1.86 4.52
IBM 149.63   15.5 9.68 6.48 4.51
PEOPLE'S UNITED FINANCIAL 16.33   12.5 1.31 0.71 4.36
CARDINAL HEALTH 44.99   449.9 0.10 1.92 4.27
CANON 28.54   15.2 1.88 1.15 4.09
GILEAD SCIENCES 65.04   14.4 4.53 2.52 3.77
GENERAL MILLS 53.28   18.4 2.90 1.96 3.71
MORGAN STANLEY 44.43   9.5 4.66 1.20 2.70
BANK OF AMERICA 29.40   10.5 2.80 0.60 2.06
GOLDMAN SACHS 214.52   9.0 23.84 5.00 1.58
ISHARES DOW JONES INTERNATIONAL SELECT DIVIDEND INDEX FUND 30.84   0.0 0.00 0.00 0.00