As previously outlined, we are adding a 3% position in the Energy Select Sector SPDR Fund (XLE) in the Dividend Growth portfolio to replace the recently-removed position in Chevron (CVX). The 20-page ETF report on the XLE and its peers can be downloaded . In the report, we outline our thoughts on the outlook for crude oil and natural gas prices and explain why the XLE tops our list of energy sector ETF ideas.
As it relates to Chevron, we very much like the oil and gas giant, but we think the XLE will still position us to capture a potential recovery in crude oil prices but without exposing us to the individual capital budget decisions of any one major oil and gas operator. The top-10 constituents of the XLE are outlined in the energy sector ETF report. Specifically, we are adding 62 shares of the XLE to the Dividend Growth portfolio at $77.75 each. Importantly, from our perspective, the position makes the most sense for energy exposure only in the context of a balanced and diversified dividend growth portfolio, not as a standalone idea.
Individual companies within the XLE will each arrive at a decision with respect to the future outlook of their dividend payments respectively, but we think a dividend yield of 2%-2.5% is sustainable for the XLE. Kinder Morgan (KMI) and Energy Transfer Partners (ETP) are the other two energy positions in the Dividend Growth portfolio. Holdings in the Best Ideas portfolio, the other newsletter portfolio we manage, are unchanged at this time. For risk-seeking investors, if you haven’t looked at ideas in the “20 Something’s Stock Portfolio,” it can be found here.
In other news, please expect the April edition of the Dividend Growth Newsletter in your email inbox today. Financial advisor members should also expect the financial advisor publications at the beginning of next week, April 6, the start of the first full week of the second quarter. The quarterly financial publications include the Ideas100, Dividend100 and DataScreener. Financial advisor members also have access to the Excel-based valuations models that drive the fair value estimates.
We’re available for any questions.