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DividendMax Model Portfolio 2018

The 2017 Model Portfolio increased by 15.6% with dividends and 10.48% without dividends. This compares favourably to the FTSE 100 which increased by 7.1%. The main winners were Barratt Developments (48.28%), Bellway (44.87%), Booker (35.15%), Crest Nicholson (26.24%), Easyjet (50.87%), European Assets Trust (34.77) and finally the star performer was XL Media with 119.1%. The main laggard was OPG Power Ventures with a fall of 69.25%. 

This year we will continue the theme of previous years with a portfolio of 20 shares, each comprising approximately £5000. As with previous years, there will be no trading of the portfolio, there being a buy and hold strategy running from early January to the end of the trading year.

 

Company 3 Div Yield P/E Cover FDI Sector Price Weighting
Connect Group PLC 14.77% 7.1 1.6 4.1% Support Services 112.0 5.0%
Bellway plc 3.68% 8.6 3.0 11.5% Household Goods and Home Construction 3571.0 5.0%
Glaxosmithkline plc 7.69% 11.9 1.6 0.0% Pharmaceuticals & Biotechnology 1312.0 5.0%
Direct Line Insurance Group plc 7.5% 12.4 1.5 38.4% Nonlife Insurance 376.5 5.0%
Avon Rubber plc 1.78% 17.2 4.4 30.0% Aerospace & Defence 1185.0 5.0%
Photo-Me International plc 5.57% 18.8 1.3 20.1% Leisure Goods 182.0 5.0%
Dignity 1.84% 15.2 2.5 10.0% Retailers 1825.0 5.0%
RPC Group plc 4.05% 12.6 2.5 22.1% General Industrials 848.0 5.0%
Royal Dutch Shell Plc - Class B Shares 9.37% 17.6 1.1 -0.6% Oil & Gas Producers 2501.0 5.0%
Saga Plc 8.77% 9.3 1.5 2.4% Retailers 124.0 5.0%
BAE Systems plc 4.77% 13.4 1.9 2.3% Aerospace & Defence 575.0 5.0%
Pennon Group 6.2% 16.4 1.3 7.5% Gas, Water & Multiutilities 771.0 5.0%
Murray International Trust plc 6.18% 23.9 1.1 5.3% Investment Trusts 1273.0 5.0%
Centamin Plc 13.37% 18.0 1.8 -24.3% Mining 159.1 5.0%
ITV 6.1% 10.6 2.0 7.9% Media 166.0 5.0%
Marks & Spencer Group 7.14% 11.2 2.0 1.6% Retailers 314.0 5.0%
AA Plc 6.6% 8.0 2.8 2.2% Retailers 173.0 5.0%
Vedanta Resources 6.2% 13.2 2.0 6.6% Mining 810.0 5.0%
Lloyds Banking Group plc 6.3% 8.5 1.6 17.6% Banks 67.81 5.0%
Rio Tinto plc 6.0% 11.0 1.7 30.7% Mining 3853.0 5.0%

Aerospace & Defence

Avon Rubber plc, BAE Systems plc

Avon Rubber have been growing their dividend consistently at 30% per annum for the past four years and with good cover and continued growth, decent dividend increases should continue.

BAE systems recently won a £5 Billion contract with Qatar. They have been a very good dividend payer over the years, although dividend growth has been sluggish in recent years.

Alternative Energy

No company in this sector meets our criteria

Automobiles & Parts

No company in this sector meets our criteria

Banks

Lloyds Banking Group plc

Once again, we are selecting Lloyds Banking Group which gave us a 14% increase last year including dividends. The market seems convinced that more dividend increases are on the way from Lloyds and its healthy yield and the gradual erosion of the PPP situation give us reason to pick them again.

Beverages

No company in this sector meets our criteria

Business Services

No company in this sector meets our criteria

Chemicals

No company in this sector meets our criteria

Commercial Transportation

No company in this sector meets our criteria

Conglomerates

No company in this sector meets our criteria

Construction & Materials

No company in this sector meets our criteria

Consumer Staples

No company in this sector meets our criteria

Educational Goods & Services

No company in this sector meets our criteria

Electricity

No company in this sector meets our criteria

Electronic & Electrical Equipment

No company in this sector meets our criteria

Energy

No company in this sector meets our criteria

Engineering

No company in this sector meets our criteria

Equity Investments

No company in this sector meets our criteria

Financial Services

No company in this sector meets our criteria

Food and Drug Retailers

No company in this sector meets our criteria

Food Producers

No company in this sector meets our criteria

Forestry & Paper

No company in this sector meets our criteria

Gas, Water & Multiutilities

Pennon Group

This year we are selecting Pennon for its sector leading dividend policy of RPI +4%. 

General Financial

No company in this sector meets our criteria

General Industrials

RPC Group plc

RPC Group has a terrific track record of dividend increases having increased their dividend every year for the past 25 years.

Health Care Equipment & Services

No company in this sector meets our criteria

Hedge Funds

No company in this sector meets our criteria

Household Goods

No company in this sector meets our criteria

Household Goods and Home Construction

Bellway plc

Bellway has been our favoured housebuilder for many years now and for good reason. They produced a return of 46% last year for the model portfolio and the shares still do not look expensive. Their dividend has risen from 9p in 2009 at the height of the financial crisis to 122p last year.

Industrial Engineering

No company in this sector meets our criteria

Industrial Metals

No company in this sector meets our criteria

Industrial Transportation

No company in this sector meets our criteria

Investment Trusts

Murray International Trust plc

Last year we gained international exposure via European Assets trust which rose over 30%. This year we are going to do the same with Murray International Trust.

Leisure Goods

Photo-Me International plc

Photo-me International have been a feature of our model portfolios for a few years now have never failed to deliver. Their dividend policy has been to increase by 20% for the past few years and until next year. Their Laundry business is growing rapidly, fuelled by cash flow from their Photo business and the growth picture looks robust.

Life Insurance

No company in this sector meets our criteria

Media

ITV

With all of the downbeat talk over its advertising revenues, it is probably not a bad idea to look at ITV in a world cup year. They should get a shot in the arm from the world cup and the rest of the business (The studios business) has performed consistently well. They underperformed the market in 2017, falling 19%.

Mining

Centamin Plc, Vedanta Resources, Rio Tinto plc

Rio Tinto demonstrated its strength as a business in 2016 by only cutting its dividend by 6% and making it up to investors in 2017 with a 29% rise in the dividend. Sector rival BHP Billiton reduced by over 70% in 2016.

With plenty of doom and gloom mongers out there it is always good to have exposure to gold as a hedge and with that in mind we have chosen Centamin which has a decent yield and pleny of cash in the bank.

Vedanta resources, like other broad based resource companies is bouncing back with some strong profits forecasts out there. The yield is a solid 5%.

Mobile Telecommunications

No company in this sector meets our criteria

Nonlife Insurance

Direct Line Insurance Group plc

It looks like Direct Line may have abandoned their policy of paying special dividends, but they did reward their investors with a big hike in the ordinary dividend which indicates a more stable dividend policy. It has the highest yield in the non-life insurance sector.

Oil Equipment, Services & Distribution

No company in this sector meets our criteria

Oil & Gas Producers

Royal Dutch Shell Plc - Class B Shares

Most years we pick a company from this massive sector and for the second year running we are going for Royal Dutch Shell. It is a close call between the two major British companies but shell has a slightly higher yield than BP and the memory of Deepwater Horizon has not fully receded.

Personal Goods

No company in this sector meets our criteria

Pharmaceuticals & Biotechnology

Glaxosmithkline plc

Last year we chose Astra Zeneca from the Pharma sector which gave us a 22% rise and this year we are switching to GlaxoSmithkline who underperformed their rival last year and have a superior yield. Additionally, Glaxo pay their dividends in sterling. This benefitted Astra who declare in dollars. The recent rise in the pound may help Glaxo to outperform this year, certainly from a dividend perpective when paid in Sterling.

Property

No company in this sector meets our criteria

Real Estate

No company in this sector meets our criteria

Real Estate Investment & Services

No company in this sector meets our criteria

Real Estate Investment Trusts

No company in this sector meets our criteria

Retailers

Dignity, Saga Plc, Marks & Spencer Group, AA Plc

Dignity was an underperformer in our model portfolio last year, but we are going to stick with it again this year. From a dividend perspective they are very solid increasing their dividend by 10% every year since our records began in 2006. They have very high dividend cover and great cash flows so we expect this to continue.

Archie Norman has got a very good track record and he could be the person to turn around retail giant Marks & Spencer.

Software & Computer Services

No company in this sector meets our criteria

Support Services

Connect Group PLC

We chose Connect Group last year for its very high yield, but the big dividend could not compensate for the capital loss and overall they were down by almost 23%, so we are going for them again as we expect them to hold the dividend or even produce a small increase as they did last year. The two disposals last year will bolster the balance sheet and focus on their well defined strategy.

Like connect, AA Group look like good value from an income perspective if they can hold their dividend.

Technology Hardware & Equipment

No company in this sector meets our criteria

Telecomms

No company in this sector meets our criteria

Tobacco

No company in this sector meets our criteria

Travel & Leisure

No company in this sector meets our criteria

Saga took a bad hit recently following its latest trading statement and market slammed its shares, but the statement outlined remedial action and a commitment to the progressive dividend policy. If the dividend is maintained or even increased, then the yield is very attractive.

Unknown

No company in this sector meets our criteria