The diversification by country of my portfolio

In this post I will make an analysis of the diversification by country of my share portfolio. I will compare my diversification by country with the MSCI World Index just as when I made an analysis of the diversification per sector of my portfolio.

The breakdown per country of my portfolio

In the table below you can see the diversification per country of my portfolio:

Summary:

  • I’m overweighted in The Netherlands
  • I’m underweighted in The USA
  • I’m lacking exposure in Japan
  • Other countries have a deviation smaller than 5% versus the World Index
  • The Netherlands

    Shares from The Netherlands are 22,4% of my portfolio. In the MSCI World Index The Netherlands is 1,2%. The Netherlands is my home country so it’s easy for me to get enough information about Dutch companies and decide if I consider them good potential investments. The Netherlands is also the home country for many international companies.

    I have Royal Dutch Shell, ASML Lithography, Unilever and Aegon in my portfolio listed as companies from The Netherlands, but the majority of their income comes from other countries than The Netherlands. Also I have the Think AEX ETF in my portfolio. This EFT is fully invested in Dutch stocks.

    I don’t mind being overinvested in The Netherlands, but now I compared the share of Dutch stocks in my portfolio versus the MSCI World Index, I think I should reduce the share of Dutch stocks in my portfolio. I could sell the ETF and refrain from investments in Dutch stocks until I consider the share more in balance.

    The United States

    The USA is 48,8% versus 61,7% in my portfolio. I always had the idea that I’m overweighted in the USA and decided to mainly buy euro stocks for the last months of 2018, but compared with the MSCI World Index I’m underweighted. I guess this is mainly the result of being overweighted in The Netherlands.

    The positive thing of this analysis is that I have a decent number of American companies high on my watchlist. The devil in my head saying that I’m overweighted in USA and that I should buy euro stocks I now silenced by looking at the MSCI World Index.

    Japan

    I don’t have any stocks from Japan and Japan forms 8,4% of the MSCI World Index. I don’t see myself buying any Japanese stocks anytime soon. I simply don’t have enough knowledge to pick quality Japanese stocks. Softbank is top of mind as a big investor in Tech companies, but having just one company top of mind is not a solid basis to my investment decissions.

    I probably take it for granted that I’m not invested in Japan.

    Conclusion

    For the next year I will focus on slowly reducing the exposure in The Netherlands and I will add some more American stocks.

    Microsoft increasing their quarterly dividend with 9,5%

    This week Microsoft (MSFT) announced this week that the quarterly dividend is increased with 9,5% from $0,42 to $0,46 per share. Unfortunately Microsoft is only on my watchlist and not (yet) in my portfolio. Microsoft Corporation is a strong company with strong brands like Windows and Microsoft Office (Excel, Word, Powerpoint, etc) and also together with Amazon AWS, Microsoft is a leading player in cloud services.

    Like I said Microsoft is just on my watchlist and I don’t own shares of them at the moment. This is mainly due to my preference to buy shares on a dip, when shares are closer to their 52 weeks low than to their 52 weeks high. Microsoft price is up almost 50% this year, performing much better than the market average.

    Due to the price increase the yield is only 1,6% after this dividend increase.

    Microsoft will stay high on my watchlist so I hope to add some shares when there is a market correction and else someday I will buy it probably against a current price level to add this Tech giant to my portfolio.

    WDP (ESA:WDP) announces a target dividend increase of 6,6%

    While reading the half-year report of Warehouses De Pauw (ESA:WDP) I noticed that WDP also did announce a target dividend increase. WDP has the intention to increase the dividend with 6,6% from €4,50 to €4,80. This increase is not yet final, but based on the development of their EPRA Earnings per share.

    I own 11 shares of Warehouses De Pauw so this planned dividend increase will result in €3,30 extra dividend income. Yield on cost will become 5,1% for me after this dividend increase. Current yield based on today’s stock price is 3,9%.

    WDP is a REIT investing in semi-industrial and logistical real estate mainly located in Belgium, The Netherlands, the north of France and Romania. WDP is listed on the Euronext stock exchange in Brussels and Amsterdam. I have this stock in my portfolio, because I believe in the steady cashflow these kind of buildings are generating and I also believe they will stay in strong demand due to eCommerce growth.

    The diversification by sector of my portfolio

    Earlier this month when writing my post about the 10 biggest positions in my stock portfolio I realised that maybe my portfolio isn’t as balanced as I thought. For this reason I decided to compare my portfolio with a world index and in this post I will start with looking at

    What Index did I select for the comparison?

    After doing some googling I decided to compare my portfolio with the MSCI World Index. The MSCI World Index has a broad exposure to a wide range of global companies within 23 developed countries. The MSCI World Index is only investing in developed countries so I’m still missing the emerging markets in my comparison, but I’m fine with that for now.

    Comparison of my portfolio per sector vs. MSCI World Index sectors

    Below is a table with the share in € in my portfolio per sector compared to the sector diversification of the stocks in the MSCI World Index.

    Summary:

  • I’m massively overweighted in Real Estate
  • Also moderately overweighted in other Consumer Defensive and Utilities
  • Underweighted in Technology, Financial Services and Consumer Cyclical
  • In general I’m overweighted in sectors with a well above average and steady dividend
  • I’m underweighted in sectors with a less steady dividend as cyclical sectors like industrials, technology, consumer cyclical and basic materials
  • Real Estate

    Real Estate did grow to 22% of my portfolio in 2018 vs only 2,9% in the MSCI World Index. At the begin of this year I have bought Real Estate Stocks various times due to a combination of decling prices as a result of the fear for rising interest rates.

    I increased my positions in Coresite Realty, Monmouth REIT, Simon Property Group, Wereldhave and WDP. I initiated a new position in Unibail-Rodamco (EPA:URW) to benefit from the pricedrop after they announced their bid for Westfield.

    I do believe that Real Estate stocks can take an above average share in a dividend portfolio, because in general Real Estate funds are good for a steady flow of dividend income, but I think in my portfolio the share of Real Estate is too high.

    I will reduce the share of Real Estate stocks in my portfolio by selling 1 or 2 positions or by simple not investing any further in Real Estate stocks until they share is well below 15%

    Consumer Defensive

    Consumer Defensive stocks are 14,2% of my portfolio versus 8,2% in the MSCI World Index. This is mainly due to investments in Unilever, Danone and Coca Cola. I’m fine with being overweighted in this sector. It are in general steady funds with a reliable dividend income which will not suffer to much in times of crisis.

    Technology

    Technology is underweighted in my portfolio. Often Technology funds are not paying dividend or they have a low dividend yield. In my portfolio 3 largest technology shares are Apple, Alphabet and Facebook.

    I’m planning to increase the weighting of Technology shares in my portfolio by buying for example shares as Tencent (TCEHY) or NXP (NXPI), etc.

    Financial Services

    I’m underweighted in this sector. My biggest positions are Aegon, Flow Traders and Royal Bank of Canada. Companies in this sector often have a decent dividend, but last few years I not often invested in banks or insurance companies due to the low interest which often results in low margins for Banks and Insurance companies.

    I probably keep this share of the Financial sector steady in my portfolio.

    Utilities

    I’m at a share of 8,2% versus 3,0% in the MSCI World Index. I only have 3 Utilities stocks in my portfolio with Fortum, Dominion Energy and National Grid. Fortum (CPH:FORTUM) is up 70% since I purchased this stock and this had a big influence on the sales share of the Utilities sector. I’m fine with being overweighted in Utilities. It brings in nice and steady dividends.

    Consumer Cyclical

    I’m underweigted with a share of 6,8% in Consumer Cyclical shares versus 12,7% in the MSCI world index. I only have 3 Consumer Cyclical stocks in my portfolio: Amazon, McDonalds and LVMH. I wouldn’t mind increasing the sales share of this sector more in my portfolio, but I tend to invest in cyclical funds at times when the economy is in a recession.

    Other Sectors

    The sectors with a deviaton of less than 5% I don’t cover. I consider those deviations close enough to the index.

    Conclusion

    I want to reduce my exposure to Real Estate. Probably I will reduce the exposure by investing in Consumer Defensive and Technology shares and not by selling shares.

    I also should analyse every 6 months how the share of the various sectors in my portfolio is developing so I stay aware of how my portfolio is developing.

    How is your portfolio looking?

    I’m curious if I’m the only one how is overweighted in sectors like Real Estate, Utilities and Consumer Defensive stocks. Let me the biggest sectors in your portfolio so I can compare it and see if it’s fine for a dividend portfolio to have some extra exposure to these sectors.

    Top 10 biggest positions in my portfolio

    top 10 biggest stock positions

    This post is about my top 10 biggest stock positions in euro’s I currently have in my portfolio. I don’t often pay attention to the size of the positions I have, because I most of the time base my decision to buy stocks on other factors then looking at the weighting of a single position in my portfolio. At the moment it’s in my eyes still not a big issue, but it’s something to be aware of.

    Enbridge is responsible for 4,8% of my portfolio, because I did use my monthly budget twice on purchasing Enbridge. Having almost 5% in a single position is maybe already the maximum I should have if I want to keep my portfolio balanced and diversified.

    I’m just a private person who enjoys reading about companies and selecting shares, but still I’m aware that I’m not a professional investor with a massive team doing market research which makes it able to select the best stocks. So I really believe that I should keep my portfolio spread out over different companies, sectors, regions, currencies, etc so my return can’t be massively influenced by 1 bad stock pick.

    For that reason I decided to take a look at my top 10 biggest investments. I will also use the top 10 of my portfolio as inspiration to write 10 follow up articles in the next few weeks. In these follow up articles I will update the summary I made of the key financial figures of these companies when I made my investment decision.

    By writing articles about the top 10 biggest positions in my stock portfolio I will push myself to evaluate again if I still consider these companies worth being in the top 10.

    As of writing this article my top 10 including sector and industry in which they are active is:

    1. Enbridge (ENB) – Energy – Oil & Gas Midstream
    2. AbbVie (ABBV) – Healthcare – Drug Manufacturers
    3. Simon Property Group (SPG) – Real Estate – REIT Retail
    4. Fortum (CPH:FORTUM) – Utilities – Utilities Diversified
    5. Facebook (FB) – Techology – Internet Content & Information
    6. Unilever (EPA:UNA) – Consumer Defensive – Household & Personal Products
    7. Royal Dutch Shell (EPA:RDSA) – Energy – Oil & Gas Integrated
    8. Coresite Realty Corporation (COR) – Real Estate – REIT Office
    9. Apple (AAPL) – Technology – Consumer Electronics
    10. Dominion Energy (D) – Utilities – Utilities Diversified

    The top 10 of my stock portfolio is making up 33% of the total value of my portfolio. I have 41 positions so if every stock would have the same size the top 10 would be approximately 25%. So in my opinion the top 10 is not making up a to big share of my portfolio.

    If I look at my top 10 it doesn’t really give me the feeling I have a very diversified portfolio. Energy, Utilities and Real Estate companies are making up most of the top 10 list. This is the result of me being a dividend investor and companies in these sectors often have a steady dividend and got a prominent position in my portfolio.

    By just making this list I feel I also should compare my portfolio grouped by sector with a benchmark like the MSCI world index or S&P 500 index to evaluate where I differ from these indices so I can evaluate if I consider it a problem or that for some reason I totally miss a sector or geographical area in my portfolio.

    I know I’m mainly invested in North-America and Europe, but I have the idea that by investing in large caps like for example Apple, Unilever and Coca Cola I also have exposure in other parts of the world where I simply don’t have enough knowledge to do stock picks.

    Based on comparing my portfolio with a world index I will make up my mind and see if I need to make some adjustments in my portfolio by selecting stocks from different regions. Although I think I would prefer buying a regional ETF in this case to avoid the risk of not having enough information available about for example African or Asian stocks.

    I don’t have the feeling I’m missing out on something by not having an African company in my portfolio, but just having 1 small position in Baidu (BIDU) is probably not enough to say from my portfolio I have enough exposure in Asia. Will be fun to compare my portfolio with a world index and have a look at the differences.

    Anyway, just looking at the top 10 of my portfolio gives me inspiration to look critically to my portfolio and ask myself the question if my portfolio is balanced enough. Like I said I will post follow up articles with small analysis of the companies listed above and I will also do my research about the diversification of my portfolio and make a follow up post on that.

    Kas Bank out, more Aegon in

    Today I sold all 100 Kas Bank shares (EPA:KA) I have, because of their results over the first half year and their outlook.

    H1 summary of Kas Bank results:

    • Net result H1 -40% from €8.5M to €5.1M
    • Operating income H1 -3,4% from €53.6M to €51.8M
    • Average Assets under Administration -9,0% from €490B to €446B
    • Interim Dividend -36,4% from €0.33 to €0.21

    Last year I often did increase my position in companies based on bad knews. I increased for example my position in Macquarie Infrastructure Company in February of this year and I also increased my position in Wereldhave in the same month.

    This time I decided to close my position. In the case of Macquarie Infrastructure Company (MIC) and Wereldhave (EPA:WHA) in my opinion their outlook was still healthy despite some bad news which was announced. In the case of Kas Bank I have the idea that their underlying business won’t recover anywhere soon.

    Mainly the decline in assets under administration with -9.0% bothers me. In 2017 the assets under administration were also down with -3%. Kas Bank is mainly active as provider of custodian and fund administration services to institutional investors and financial institutions. This means that Kas Bank main source of income is the fee they get for asset and transaction servicing. If assets under administration are down it means Kas Bank (EPA:KA) get less fee’s for safeguarding a firm’s or individual’s financial assets.

    Kas Bank writes in their H1 press release that fierce competition resulted in loss of clients.

    If a company announced bad news I tend to look at the cashflow and try to understand how the bad news will inflence the long term cashflow. In the case of Wereldhave and Macquarie Infrastructure Company it’s my (personal) opinion that the long term cashflow outlook is the same. For this reason I bought more shares. In the case of Kas Bank I think the long term cashflow is impacted structurally, because lower assets under administration means less fee income and if Kas Bank will be able to increase their assets under administration it’s probably because of reduced fee’s. In a market with ‘fierce competition’ I don’t expect they will be able to attract new customers against above average prices.

    It’s maybe even a realistic scenario that Kas Bank has to reduce their fee’s to retain current clients at contract expiry.

    For these reasons I decided to sell my Kas Bank (EPA:KA) shares. I purchased 100 shares of Kas Bank in October 2017 at a price of €9,96 and sold them today at €8,00. I received a dividend of €0,31 this year so the closing of this position can really be called taking a loss.

    With the funds available from the Kas Bank sale I bought 150 shares Aegon (EPA:AGN) at a price of €5,24. I decided to buy Aegon, because I considerred, until today, Kas Bank as a steady fund in my portfolio with a stable dividend income, but without the expectation for huge share price increases. Aegon I also see as a steady defensive fund with a steady and relatively high dividend income.

    With the purchase of 150 shares Aegon (EPA:AGN) I add €36,00 to my estimated yearly dividend income. The sale of 100 shares Kas Bank is reducing my estimated dividend income with €64,00.

    This swap in my portfolio brings realising my 2018 dividend income further away, because Kas Bank has a dividend scheduled this year and Aegon also has 1 dividend payment left his year, but is already ex-dividend. Nevertheless it’s my opinion that this time I should sell on the bad news instead of ‘sitting out the storm’.

    August Dividend Report 2018

    Monthly Report August:

    August was an unexpectingly strong month for me with a dividend income of €310,93. My dividend income of August 2017 was €76,53 so my dividend income is up 306%. I’m very happy with this result.

    The dividend income is much higher than I expected due to the dividend payment of Flow Traders of €67,50. Flow Traders is a market maker and it did benefit a lot of the volatility in the market in Q1. This resulted in a big profit and a big dividend. Volatility is gone so I expect this was a one time extra high dividend.

    Due to this high dividend payment of Flow Traders it’s now possible I will reach the dividend income target of €2.200 I did set for this year. Based on the stocks I own and the dividend payments they have scheduled for the rest of the year I’m now expecting an dividend income this year of €2.193. I just need a few more dividend increases combined with possible dividend income from stock purchases I will make this year and I’m at the target. Still not sure I will reach the target, but at least it’s going to be very very close.

    In August I recieved dividend payments of 13 companies. Mainly responsible for the dividend growth are new positions in Flow Traders and Omega Healthcare and also increased positions in National Grid, AbbVie, Macquarie Infrastructure Company and Simon Property Group.

    This month I bought 25 shares of Unilever at a price of €48,89 including fee’s. Unilever was already on my watchlist for a long time to buy on a dip, but the share price was mainly moving in a small range. I decided to buy this month defensive consumer goods company and I decided Unilever is my choice for this month.

    I ended the month with a portfolio value of €61.378. My estimated dividend income for 2018 based on my current portfolio is €2.193. The yearly estimated dividend income of my current portfolio is €2.386.

    Dividend Income – €310,93:

    – Flow Traders €67,50
    – National Grid €37,54
    – Macquarie Infrastructure Company €36,84
    – Omega Healthcare €30,89
    – AbbVie €29,55
    – Simon Property Group €27,59
    – Amsterdam Commodities(epa:acomo) €18,00
    – Royal Bank of Canada €13,03
    – Novo Nordisk €12,06
    – ING €12,00
    – DSM €10,01
    – EPR Properties €9,50
    – Apple €6,42

    Transactions:
    Purchase 25 shares Unilever @ €48,89

    Dividend Changes:
    Royal Bank of Canada quarterly dividend +4,3% (C$2,52 extra yearly dividend)

    2018 Target Status:
    I’m at €14.450 out of €18.000 deposit target (80,3%)
    I’m at €1.563,79 out of €2.200 dividend received target (71,1%)
    I’m at €5.400 out of €5.000 extra mortgage repayments (target reached)

    Purchase 25 shares Unilever

    Today I bought 25 shares Unilever (EPA:UNA) at a price of €48,89 including transaction fee’s. I already owned 20 shares Unilever so with this new purchase I now own in total 45 shares Unilever. Unilever is currently paying a €0,3875 per share per quarter. This is a yearly dividend of €1,55. The current dividend yield of Unilever (EPA:UNA) is 3,17%. My average purchase price is increasing by this purchase from €40,92 to €45,90

    with this purchase I add €38,75 to my yearly estimated dividend income.

    I decided to buy more shares of Unilever (EPA:UNA) to add a steady defensive consumer goods company to my portfolio.

    I have 4 transactions Unilver on record:

    1st purchase: 20 shares @ €38,59
    2nd sell: -10 shares @ €44,89
    3rd purchase: 10 shares @ €43,25
    4th purchase: 25 shares @ €48,89

    Unilever N.V. operates in the fast-moving consumer goods industry worldwide. The company operates through Personal Care, Home Care, Foods, and Refreshment segments. The Personal Care segment offers skincare and haircare products, deodorants, and oral care products. This segment markets its products under the Axe, Dove, Lux, Rexona, Sunsilk, TRESemmé, Signal, Lifebuoy, Vaseline, Dermalogica, Murad, Dollar Shave Club, Zest & Camay, and Seventh Generation brands. The Home Care segment provides home care products, such as powders, liquids and capsules, soap bars, and various cleaning products under the Dirt is Good, Surf, Comfort, Domestos, Sunlight, Cif, Pureit, Blueair, and Radiant brands. The Foods segment provides soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines, and spreads under the Knorr, Hellmann’s, Bango, Maizena, Robertsons, and Kissan brands. The Refreshment segment offers ice cream and tea-based beverages under the Heartbrand, Magnum, Lipton, Brooke Bond, Ben & Jerry’s, Pure Leaf, Taj Mahal, Grom, Talenti, and Breyers brands.

    Royal Bank of Canada increases quarterly dividend with 4,3%

    Today Royal Bank of Canada (RY) announced to increase their quarterly dividend from C$0,94 to C$0,98. This is a dividend increase of 4,3%. This is the 2nd time this year that Royal Bank of Canada increased their dividend. Earlier this year Royal Bank of Canada (RY) already increased it’s dividend from C$0,91 to C$0,94.

    The total dividend increase this year comes at 7,7%.

    This dividend increase of 4 cents results for me in €2,22 extra dividend income per year, because I own 21 shares at the moment.

    The yield on cost for me after the dividend increase is 3,85% up from 3,69%