Sure Dividend

Sure Dividend

HIGH QUALITY DIVIDEND STOCKS, LONG-TERM PLAN

December 2014 Model Portfolio

By Ben Reynolds

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20 Stock Model Portfolio

The 20 Stock Model Portfolio weights the Top 20 high quality dividend stocks based on the 8 Rules of Dividend Investing so that stocks with lower correlations and higher quality scores are more heavily weighted in the portfolio.

The portfolio is designed to spread risk across various factors so investors are not overly exposed to any one stock, industry, or risk factor. The 20 stock portfolio is well diversified, with no holding making up more than 10% of the total portfolio value.

The 20 Stock Model Portfolio Target Weights are for investors looking to start their model portfolio. If you are currently running the portfolio, refer to the Rebalancing and Closed Positions portion of this guide to see if rebalancing is needed or if positions need to be switched.

Portfolio Construction Rules

The 20 Stock Model Portfolio is updated each month. Holdings will be sold if they have a P/E ratio over 40, or if a dividend payment is reduced or eliminated. Additionally, if a position falls out of the top 30% of rankings using the 8 Rules of Dividend Investing, it will be eliminated and replaced with a higher ranked stock.

Otherwise, positions will be rebalanced if they are 50% above or below the target weight. Performance will be tracked on both absolute and risk adjusted metrics and compared to the performance of the S&P500, as measured by the ticker SPY.

Suitability

The 20 Stock Model Portfolio is suitable for investors who are no longer in the accumulation phase of investing; people who have a fixed amount of assets and are no longer saving money each month. Retirees are an excellent example of a group for whom this 20 stock model portfolio may be suitable.

The goal of the model portfolio is to provide steady, growing dividend income from extremely stable businesses while minimizing overall volatility by maximizing gains from diversification. The overall portfolio statistics are below for this month's target weights:

Growth Rate: 7.62% P/E Ratio: 19.19

Metrics

Current Dividend Yield: 2.34%

Standard Deviation:

14.26%

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20 Stock Model Portfolio Target Weights

KMB, 3.00%

PM, 3.00% BDX, 3.00% KO, 3.00%

T, 1.00% K, 3.00%

SJM, 3.00%

MDT, 4.00% BCR, 4.00% MCD, 5.00%

ECL, 1.00% ABT, 9.00%

HRL, 8.00% PEP, 8.00% CB, 8.00%

GIS, 6.00%

MKC, 7.00%

GWW, 7.00%

XOM, 7.00%

WMT, 7.00%

Ticker ABT HRL PEP CB WMT XOM GWW MKC GIS MCD BCR MDT SJM KO BDX PM KMB K T ECL

Company

Target Weight

Abbott Laboratories

9%

Hormel Foods

8%

PepsiCo

8%

Chubb Corporation

8%

Wal-Mart Stores

7%

Exxon Mobil

7%

W.W. Grainger

7%

McCormick & Company

7%

General Mills

6%

McDonald's

5%

CR Bard

4%

Medtronic

4%

J.M. Smucker

3%

The Coca-Cola Company

3%

Becton, Dickinson and Company 3%

Philip Morris

3%

Kimberly-Clark

3%

Kellogg

3%

AT&T

1%

EcoLab

1%

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20 Stock Model Portfolio Fundamentals

Ticker ABT HRL PEP CB WMT XOM GWW MKC GIS MCD BCR MDT SJM KO BDX PM KMB K T ECL

Company Abbott Laboratories Hormel Foods PepsiCo Chubb Corporation Wal-Mart Stores Exxon Mobil W.W. Grainger McCormick & Co. General Mills McDonald's C.R. Bard Medtronic J.M. Smucker The Coca-Cola Co. Becton, Dickinson Philip Morris Kimberly-Clark Kellogg AT&T EcoLab

P/E 21.07 23.66 21.44 13.94 16.62 11.80 20.98 21.57 19.46 18.88 22.86 19.14 17.72 21.03 22.05 16.26 18.94 17.47 13.63 27.12

Yield 1.95% 1.52% 2.68% 1.93% 2.28% 2.94% 1.71% 2.18% 3.09% 3.53% 0.51% 1.63% 2.52% 2.80% 1.72% 4.59% 2.94% 2.95% 5.42% 1.01%

Payout Ratio 40.99% 35.96% 57.47% 26.88% 37.94% 34.68% 35.85% 47.06% 60.07% 66.67% 11.67% 31.12% 44.60% 58.84% 38.03% 74.63% 55.76% 51.58% 73.90% 27.36%

Growth Rate 10.00% 6.73% 10.74% 6.58% 8.17% 6.15% 10.13% 5.71% 6.76% 6.91% 6.48% 6.38% 6.25% 9.04% 8.02% 8.63% 5.32% 5.25% 4.02% 10.46%

Volatility Correlation

19.84%

.4085

20.13%

.3610

17.39%

.4554

27.24%

.4497

19.14%

.4096

25.33%

.4711

26.09%

.4264

19.18%

.4349

17.02%

.4238

20.14%

.4040

21.12%

.3698

24.13%

.4069

21.26%

.3845

18.71%

.4709

20.23%

.4112

24.05%

.4790

17.45%

.4578

17.35%

.4540

22.30%

.4564

23.69%

.4722

- P/E is calculated as the current price divided by trailing twelve months EPS; lower is better - Yield is calculated as the current price divided by the most recent quarterly dividend x 4; higher is better - Payout ratio is the most recent quarterly dividend x 4 divided by TTM EPS as calculated by Value Line; lower is better - Growth Rate is the lower of 10 year revenue per share or dividend per share compound growth; higher is better - Volatility is the 10 year standard deviation of dividend and split adjusted price series; lower is better - Correlation is the average correlation coefficient of a stock to the 20 stocks that make up this portfolio; lower is better

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20 Stock Model Portfolio Performance

Ticker

ABT WMT GIS HRL MCD PEP BCR SJM KO BDX XOM PM KMB CB GWW MKC T ECL MDT K CLX MMM

Company

Start

Date

Abbott Laboratories 7/6/14

Wal-Mart

7/6/14

General Mills

7/6/14

Hormel

7/6/14

McDonald's

7/6/14

PepsiCo

7/6/14

CR Bard

7/6/14

J.M. Smucker

7/6/14

Coca-Cola

7/6/14

Becton, Dickinson 7/6/14

ExxonMobil

7/6/14

Philip Morris

7/6/14

Kimberly-Clark

7/6/14

Chubb Group

7/6/14

W.W. Grainger, Inc. 7/6/14

McCormick & Co. 7/6/14

AT&T

7/6/14

EcoLab

7/6/14

Medtronic

10/6/14

Kellogg

12/8/14

Clorox

7/6/14

3M

7/6/14

Closed Date Open Open Open Open Open Open Open Open Open Open ` Open Open Open Open Open Open Open Open Open Open 10/6/14 12/8/141

Total Return 10.19% 11.84% 0.97% 8.36% -2.20% 10.25% 17.77% -4.05% 4.75% 16.21% -7.26% 2.39% 3.16% 11.58% 1.78% 3.58% -3.22% -0.88% 15.62% N/A 5.43% 13.16%2

Return Vs SPY 4.40% 6.06% -4.81% 2.57% -7.98% 4.46% 11.99% -9.84% -1.04% 10.42% -13.04% -3.39% -2.62% 5.79% -4.01% -2.20% -9.01% -6.66% 9.66% N/A 5.57% 7.37%3

*Comparisons are virtually worthless over short timeframes (like the 4 months above). 3 years and longer is a fair timeframe to judge performance.

1 Date 3M position should be closed and replaced with Kellogg. 2 Return calculated using closing price on 12/6. Return with closing price on 12/8 will be calculated in next month's

newsletter, when data is available. 3 Return calculated using closing price on 12/6. Return with closing price on 12/8 will be calculated in next month's

newsletter, when data is available.

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