Monday, December 12, 2011


            I continue to analyze the portfolio of dividend stocks that I call Dividend Machines; today I look at diversification.

            If any rule exists that is of equal importance to “always invest in something that makes money”, it is never put all your eggs in one basket.   Diversification is important in any portfolio but it is particularly important for income investors.   You see, except for the much disciplined young person who uses income investing to create wealth, the people who invest to use the income for everyday expenses have little room for
investing error.    No investment strategy is perfect.  To guard against unforeseen negative events, you must diversify.   

Diversification applies to your financial life and it applies to your dividend income portfolio.  Never invest in only one stock.  If you refer to my 2011 Dividend Machines List, you will notice that you can start investing for income with less than $2,000.   Don’t let the big brokers suggest you have to buy 100 shares of a company.   You can buy 10 or 50 or however many shares you can afford and that will allow you to then own two stocks and later on three and four stocks.  Discipline yourself to always employ diversification.

Dividend income is an old strategy and often times it has been referred to as the strategy for widows and orphans.   Dividend investors can make the mistake of concentrating on only one industry like utilities or big pharmaceuticals.   Utilities and big pharmaceuticals are important and the 2011 Dividend Machines List includes them, but you should include other industries as well.  With that in mind, let’s look at the industry diversification of the 2011 Dividend Machines.

1.      Atmos Energy ATO – gas utility
2.      Duke Energy DUK – electric utility
3.      Consolidated Edison ED – diversified utility
4.      New Jersey Resources NJR – gas utility
5.      Portland Electric POR – electric utility
6.      Scana Group SCG – electric utility
7.      Southern Companies SO – electric utility
8.      Xel  Energy, Inc. XEL – electric utility
9.      York Water Company YORW – water utility

1.      Espey Manufacturing ESP – diversified electronics
2.      Intel Corp. INTC – semiconductors broad line
3.      Microchip Technologies MHP – semiconductors – specialized
4.      Molex Corp. MOLX – diversified electronics
5.      Watsco – WSO – electronics wholesale


1.      Illinois Tool Works ITW – diversified machinery
2.      Met-Pro MPR – diversified machinery
3.      Pitney Bowes PBI – business equipment
4.      Legget & Platt LEG – home furnishing and fixtures

1.      BCE Corp. BCE – telecom domestic
2.      AT&T Corp. T – telecom domestic
3.      Telus Corp. T – wireless communications

1.      Landauer LDR – scientific & technical instruments
2.      Mine Safety Devices MSA – medical appliance and equipment
3.      Utah Medical Devices UTMD – medical instruments and supplies

1.      Lockheed Martin LOC – aerospace and defense
2.      Northrop Grumman NOC – aerospace – major diversified
3.      Raytheon RTN – aerospace – major diversified

1.      ConAgra CAG – processed & packaged goods
2.      General Mills GIS – processed & packaged goods
3.      Kimberly Clark KMB – personal products
4.      Proctor and Gamble PG – personal products
5.      Sysco SYY – food wholesale
6.      Sonoco SON – paper products

1.      Abbott Laboratories  ABT – drug manufacturer – major
2.      Johnson & Johnson  JNJ – drug manufacturer – major

1.      Conoco Philips COP – major integrated oil & gas
2.      Chevron CVX – major integrated oil & gas
3.      RPM Company RPM – specialty chemical
4.      Williams Partners WPZ – specialty chemical

1.      RSG Resources RSG – waste management
2.      Waste Management WM – waste management

1.      Cullen & Frost CFR – regional bank
2.      Harleysville Group HGIC – property & casualty insurer
3.      Travelers TRV – property & casualty insurer
4.      Westwood Group – WHG asset management

1.      Darden Restaurants DRI – restaurants
2.      Genuine Parts Company GPC – auto parts wholesale
3.      Hasbro HAS – toys and games
4.      McGrath Rentals MGR – rental and leasing
5.      National Health Investors NHI – healthcare facilities
6.      Thomson Reuters TRI – information delivery and service
7.      Universal Tobacco UVV – tobacco other

My intention when I started this dividend income project was to profile one company per week that met each of the four criteria I use to define a dividend machine.  With this accomplished, I had hoped that these fifty two stocks would give me ample opportunity to also diversify among industries.   I am very pleased to see that the 2011 Dividend Machines List is comprised of quite a diverse group of companies.

My final analysis will concentrate on capital preservation.  Stay tuned as we close out 2011 and analyze how investing in these fifty two, 2011 dividend machines affected our principal.

Very Truly Yours,