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Investment Thesis
Generating extra income that you can use to cover your monthly expenses or to reinvest (to benefit from the compounding effect) is one of the principal advantages of following a dividend income investment approach.
The latest acquisition for The Dividend Income Accelerator Portfolio is the Cohen & Steers Quality Income Realty Fund (NYSE:NYSE:RQI). I am convinced that this fund will prove to be an important addition for our portfolio since it helps us to not only increase its diversification (the proportion of the Real Estate Sector has increased from 5.71% to 12.25% of the overall portfolio), but also to significantly increase its Weighted Average Dividend Yield.
The Cohen & Steers Quality Income Realty Fund presently pays a Dividend Yield [TTM] of 8.16%. Due to its incorporation into The Dividend Income Accelerator Portfolio, the Weighted Average Dividend Yield [TTM] of the portfolio has been raised from 4.30% to 4.73% (without including the Schwab Short-Term U.S. Treasury ETF in this calculation). After this addition, the 5 Year Weighted Average Dividend Growth Rate [CAGR] stands at 7.56%.
These numbers highlight the portfolio’s strong ability to combine dividend income with dividend growth, achieving a primary objective of our investment strategy.
In this article, I will demonstrate in greater detail why I believe that the Cohen & Steers Quality Income Realty Fund has been an important incorporation into our portfolio. I will also dive deeper into the fund’s largest holdings.
Before delving into the specifics of the Cohen & Steers Quality Income Realty Fund, let’s first revisit the key features of our dividend portfolio for those who are not yet familiar with it.
The Dividend Income Accelerator Portfolio
The Dividend Income Accelerator Portfolio’s objective is the generation of income via dividend payments, and to annually raise this sum. In addition to that, its goal is to attain an appealing Total Return when investing with a reduced risk level over the long term.
The Dividend Income Accelerator Portfolio’s reduced risk level will be reached due to the portfolio’s broad diversification over sectors and industries and the inclusion of companies with a low Beta Factor.
Below you can find the characteristics of The Dividend Income Accelerator Portfolio:
- Attractive Weighted Average Dividend Yield [TTM]
- Attractive Weighted Average Dividend Growth Rate [CAGR] 5 Year
- Relatively low Volatility
- Relatively low Risk-Level
- Attractive expected reward in the form of the expected compound annual rate of return
- Diversification over asset classes
- Diversification over sectors
- Diversification over industries
- Diversification over countries
- Buy-and-Hold suitability
Cohen & Steers Quality Income Realty Fund
The graphic below illustrates the Top 10 Holdings of the Cohen & Steers Quality Income Realty Fund:
Source: Seeking Alpha
In the following, I will briefly present the five largest holdings of this fund:
American Tower
American Tower (NYSE:AMT) is among the world’s largest REITs. The company operates within the Telecom Tower REITs Industry.
With a share of 10.15%, American Tower is by far the largest position of the Cohen & Steers Quality Income Realty Fund. Today, American Tower pays shareholders a Dividend Yield [FWD] of 3.33% while the company has shown an impressive 5 Year Dividend Growth Rate [CAGR] of 15.41%.
Prologis
Prologis (NYSE:PLD) was founded in 1983 in San Francisco and is among the global leaders in logistics real estate. The company presently accounts for 6.79% of the Cohen & Steers Quality Income Realty Fund. It pays a Dividend Yield [FWD] of 2.98%.
Welltower
Welltower (NYSE:WELL) is a company from the Health Care REITs Industry that was founded back in 1970. Today, the company has 533 employees.
Welltower is the third largest position of the Cohen & Steers Quality Income Realty Fund, accounting for 5.95%.
According to the Seeking Alpha Quant Ranking, Welltower is currently ranked in third place within the Health Care REITs Industry and 54th in the Real Estate Sector. These positions underscore the company’s strong competitive position.
Source: Seeking Alpha
Simon Property Group
Simon Property Group (NYSE:SPG) was founded in 1960 and is based in Indianapolis. At the company’s current share price, it pays a Dividend Yield [FWD] of 5.02%. The company presently exhibits a P/AFFO [FWD] Ratio of 14.20, which is slightly below the Sector Median of 14.60.
Simon Property Group currently accounts for 4.93% of the Cohen & Steers Quality Income Realty Fund, representing the fourth largest position.
Invitation Homes
Invitation Homes (NYSE:INVH) is a company from the Single-Family Residential REITs Industry located in Dallas. The firm presently employs 1,555 staff. The company pays a Dividend Yield [FWD] of 3.21% while its Payout Ratio of 59.89% indicates that there is room for dividend enhancements in the years to come.
With a share of 4.65%, Invitation Homes represents the fifth largest position of the Cohen & Steers Quality Income Realty Fund.
According to the Seeking Alpha Quant Rating, the company is presently a buy, further underlying the attractiveness of the Cohen & Steers Quality Income Realty Fund.
Source: Seeking Alpha
Why The Cohen & Steers Quality Income Realty Fund Aligns With the Investment Approach of The Dividend Income Accelerator Portfolio and Why You Should Also Consider Including This Fund in Your Dividend Portfolio
The Cohen & Steers Quality Income Realty Fund presently pays a Dividend Yield [TTM] of 8.16%, which strongly aligns with the investment approach of The Dividend Income Accelerator Portfolio to generate income. The fund’s inclusion contributes to increasing the Weighted Average Dividend Yield [TTM] of our dividend portfolio.
It is further worth highlighting that this fund invests in 203 different holdings, which is a clear indicator of its broad diversification and reduced risk level. Once again this aligns with the investment approach of our dividend portfolio.
Moreover, only three of the fund’s 203 holdings (American Tower, Prologis, and Welltower) account for more than 5%, further highlighting its elevated diversification and reduced risk level.
The reduced risk level of this fund is further highlighted by the credit ratings of the three largest positions: while American Tower exhibits a Baa3 credit rating from Moody’s, Prologis and Welltower showcase a Baa1 rating from the same agency.
Investor Benefits of The Dividend Income Accelerator Portfolio After Investing $400 in the Cohen & Steers Quality Income Realty Fund
After the incorporation of the Cohen & Steers Quality Income Realty Fund into The Dividend Income Accelerator Portfolio, the Weighted Average Dividend Yield [TTM] has been increased from 4.30% to 4.73%. This number indicates that the portfolio is now even better positioned for dividend income investors aiming to generate a significant amount of income via dividend payments.
After the inclusion of the fund, the portfolio’s 5 Year Weighted Average Dividend Growth Rate [CAGR] stands at 7.56%.
Since this latest addition, the share of the Financials Sector compared to the overall portfolio has decreased from 29.57% to 27.49%. This indicates an elevated diversification and a reduced overall risk level for our portfolio.
At the same time, the proportion of the Real Estate Sector has increased from 5.71% to 12.25% in relation to the overall investment portfolio.
The graphic below showcases the positions that are part of this dividend portfolio.
Source: Interactive Brokers
Risk Factors
Before investing in the Cohen & Steers Quality Income Realty Fund, it is crucial to assess the multiple factors that underscore the fund’s heightened risk profile.
The fund has a 24M Beta Factor of 1.36, which indicates an increased volatility when compared to the overall market.
It is further worth noting that the Top 10 holdings of this fund account for 50.77% of the overall portfolio, indicating an elevated concentration risk despite the fund comprising 203 holdings in total.
It is important to mention the elevated Expense Ratio of 2.21%, which you should take into consideration before making the decision to invest in this fund.
In addition to that, it should be mentioned that the Cohen & Steers Quality Income Realty Fund uses leverage as part of its investment strategy, a practice that can increase the volatility of the fund and therefore serves as an additional risk factor for investors.
Conclusion
Through the incorporation of the Cohen & Steers Quality Income Realty Fund into The Dividend Income Accelerator Portfolio, we have significantly increased the Weighted Average Dividend Yield [TTM] of our portfolio.
Due to the fund’s elevated Dividend Yield [TTM] of 8.16%, we have managed to increase the Weighted Average Dividend Yield [TTM] of the portfolio from 4.30% to 4.73%.
It is further worth highlighting that we have increased the portfolio’s diversification, reducing the proportion of the Financials Sector from 29.57% to 27.49%. At the same time, the proportion of the Real Estate Sector has been significantly raised from 5.71% to 12.25%.
Due to the fund’s incorporation, I am convinced that the portfolio is now even better positioned for the generation of income through dividends, which is one of its principal objectives. Therefore, I am convinced that this fund has been a strategically important addition.
The portfolio is now even more suitable for investors aiming to look for ways to generate extra income via dividend payments while implementing an investment approach with a reduced risk level, which offers a high probability for positive investment outcomes.
In case you decide to include the Cohen & Steers Quality Income Realty Fund into your own dividend portfolio, I suggest providing the fund with less than 10% of the overall portfolio.
While the fund may serve as a strategically important component for your portfolio due to its elevated potential for income generation via dividend payments, it also entails a higher risk level, as detailed in the risk section of this analysis.
Author’s Note: Thank you for reading! I would appreciate hearing your opinion on my selection of the Cohen & Steers Quality Income Realty Fund as the latest acquisition for The Dividend Income Accelerator Portfolio. Feel free to share any thoughts about the current composition of the portfolio. I would love to hear any suggestions of companies that would fit its investment approach!
