Strategies for Building a DGI Portfolio

[fenders53]

(02-22-2019, 11:56 AM)Otter Wrote: Credit rating is becoming an ever more important part of my portfolio strategy for selecting and keeping stocks. Companies with lousy credit don't have a lot of room to maneuver when times get tough. As I mentioned in the initial post, BBB+ and better is my preferred range for creditworthiness. KHC today (BBB rating) just reiterated that sentiment.

Perhaps no surprise that some of my worst-performing holdings have lousy credit ratings:

BT: BBB
CVS: BBB
F: BBB
GIS: BBB
SKT: BBB
T: BBB

Granted, I have some dogs with good credit (NGG, QCOM, WFC), but those downtrends tend to be from unique issues (regulatory, Brexit, lawsuits, etc.). Clean balance sheets will outperform in the next downturn.

There isn't any doubt most of my severe under performers are/were BBB or worse.  Credit rating trumps PE.  Unfortunately I haven't always invested that way.  The allure of the accidental high yielders gets the dividend investor in trouble if you over indulge.  It surely won't get better for those companies when a recession finally comes.