DividendMax Ultra Safe Portfolio 2012

BAE Systems

Here we choose BAE systems for it's superior yield and share buyback programme. It is currently yielding 8.43% on the 3 dividend optimizer. It has a forward P.E of around 7 and is forecast to increase it's dividend by around 5.5%. It has an excellent track record of increasing it's dividend. We would be underweight in this sector due to U.S. Defence cuts, but would still retain a holding rather than a zero weighting.

Chemring

Chemring has an amazing recent track record, growing rapidly by acquisition. It has a decent yield, a good forecast dividend growth target and has very high dividend cover. We prefer it the BAE in spite of the lower yield and so give it a slightly higher weighting in the portfolio.

Diageo

Diageo is a very defensive stock and is on a premium rating to reflect this. It meets our criteria and so is included in the portfolio with a relatively low weighting of 3%.

ICAP

ICAP really is an excellent company. It is tarnished with the 'financials' brush as investors remember what happened to their bank shares. This is no bank. It is a money making machine and it pays a whopping dividend. Absolutely essential part of the portfolio. We attach a very high weighting of 8%.

Man Group

Although strictly speaking, MAN does not meet our criteria of having to have a forecast dividend increase for the current year, it has maintained it's dividend and changed it's year end. We believe it is worth holding as it has a lot of surplus cash and will benefit hugely from a return to stability in the markets as clients return and the redemptions stop. It's very high yield tempts us into a decent weighting of 4% of the portfolio.

Reckitt Benckiser

Another defensive stock with a long track record. A decent yield, cover and FDI lead us to weight it at 4%

BskyB

Forced into a share buyback to support it's ailing share price in light of the News of the World scandal, BskyB nevertheless is a good investment. There has to be some worry over people cutting their subscriptions in the recession, but the company has shown great resiliance. With decent cover and good forecast dividend growth, we weight it 4%.

WPP

Strong results for the first 3 quarters of the year bode well for the full year outcome. Strong dividend cover and a high expected dividend increase make this advertising giant a 4% weighting in the portfolio.

Kazakhmys

Is a major producer of copper. The company now has net cash on the balance sheet and is using it's strong cash generation to return surplus cash to shareholders in the form of buybacks and increased dividends. With dividend cover over 9, the scoppe for increased dividends over time is huge.

Rio Tinto

This mining giant is buying back it's own shares, enjoys high dividend cover and has considerable scope to increase the dividend through increased profitability and strong cash flows.

We recommend a weighting of 4% each for Rio and Kazakhmys.

Vodafone

Vodafone is an absolute must for any dividend portfolio for a number of reasons. It's huge cash generative abilities make it essential. Reasons to hold Vodafone include It's high yield of over 8%, it's stated dividend policy of increasing the dividend by at least 7%. There is also the wild card of what it will do with it's Verison dividends, if and when Verison choose to pay them. Last year Vodafone returned them directly to shareholders in the form of an 4p special dividend with the Interim.

Glaxo Smithkline

Glaxo is a core holding for any portfolio. It is excellent value and pays a good dividend. The new business strategy promises much for shareholders.

Astra Zeneca

On a very low P/E, the prospects for Astra Zeneca are fully accounted for in the low share price,. It remains a highly cash generative business.

WH Smith

WH Smith is another company with an excellent track record and is not expensive.

Next

Next is good value on a P/E of under 12 and a dividend approaching 5%. Good value for this very well run business.

Sage

With a 5.5% yield and a P/E of just over 14, Sage is very good value in this generally high growth sector.

Inmarsat

Inmarsat is a growth company on a very low rating with excellent prospects, a very high yield and solid dividend cover. It is entering a year of relative consilidation and the dividend is only expected to increase by 7%, but with the share buyback and a 3 dividend optimised yield of almost 9%, it is great value.

British American Tobacco

A high P/E and a high yield and a very good increase in the dividend forecast. Highly defensive.

Imperial Group

A lower P/E than BAT and a lower yield. Highly defensive

William Hill

William Hill is a reovery play on a P/E of about 10 with a yield approaching 7%.

Compass Group

Not cheap on a PE of over 14x, but the yield is nearing 6% and the company is a play on quality management and a very good track record of growth.