A Hard-Working ROTH IRA
As most of you know, there are no RMDs (Required Minimum Distributions) for ROTH IRA or 401(k) accounts. There is also no Federal Income Tax or State Income Tax when funds are withdrawn from this type of account. So to take advantage of the tax-free income, it makes sense to be focused on the Easy Income Strategy to maximize the long-term benefits of growing income with no additional tax burden.
This morning I will give you a brief tour of a portion of the stocks held in my ROTH IRA. The best way to do this is using charts of “top ten” views related to dividends. There are currently 61 positions in my ROTH. However, for the normal investor, it is best to exclude the options positions. If you see a ticker symbol like “CVX230728C00175000” it means I have an open covered call option on shares of CVX. Excluding those positions, 56 stocks and ETFs. Because I hold ETFs like SCHD, DGRO, and VYM, I really have much greater diversification with focus on some key holdings that I like for dividend growth.
(NOTE: There is a problem with my Seeking Alpha account, so the CVX option expired on July 28, and I still own the CVX shares. I need to work with Seeking Alpha to get my accounts resynced.)
ROTH Years of Dividend Growth
The number one position for years of growth is CVX. The numbers on this illustration indicate the relative size of the value of the shares I have in my ROTH IRA. Therefore, ABBV is my number one holding in my ROTH. The top five include ABBV, FNF, SCHD, VYM, and STAG. The knowledgeable reader will see that I have a mix of energy, REITs, technology, health care, financials, and ETFs in the “years of growth” holdings. This table is sorted by “Years of Growth.”
ROTH Five-Year Dividend Growth Rates
The rate of growth is important. If inflation averages 3-4% over time, then the growth of the dividend is material for keeping the purchasing power of the dollar at least equal to that drain caused by inflation. In the following illustration the table is sorted by the growth rate of the dividends.
The numbers, again, are the relative size of the holdings. So, while EOG is number five for the value of my shares, it is number one with a 35% dividend growth rate. The number one holding in my ROTH account is ABBV, which has a 12.34% dividend growth rate and a reasonable payout ratio of 46.32%.
ETF SCHD Holdings by Sector
Schwab U.S. Dividend Equity ETF™ has 106 holdings, so it is more focused than DGRO and VYM. One nice thing about SCHD is that it is widely diversified by sector. The top five sectors are industrials, health care, financials, consumer defensive, and technology. This broadens my exposure, as I do not own shares of many of the holdings in SCHD.
ETF SCHD Top Ten Holdings
The dividend growth rates of SCHD’s top ten are, for the most part, rational. I would not buy shares of MRK or KO, but I have no problem with seeing them in the top ten of the SCHD holdings. The numbers help you see the top five based on their 5-year dividend growth rate.
Seeking Alpha Spreadsheet of ROTH Account Holdings
If you click this link, you will be able to download a spreadsheet of my ROTH IRA Holdings from my public Dropbox account. 2023-09-11 Fidelity-WayneROTHIRA.xlsx
This image is just a small sample of what you can see in the spreadsheet. The spreadsheet has separate tabs for Holdings, Seeking Alpha Ratings, Dividends, Profitability, Earnings, Growth, Performance, and Debt. I removed some of the sheets from the download, as most readers won’t be interested in some of the data Seeking Alpha provides.
In Conclusion
As always, mimicking my portfolio is not the best idea for every investor. However, if you want growing income in retirement, you may probably benefit from looking at your holdings from a dividend growth perspective.
Know Your Flocks & Herds 