The Basic Needs Portfolio

In May, I announced my intention to create a portfolio that embodied life's basic needs. To that end, over a period of 10 weeks I detailed 10 diverse companies that I think will outperform the broad-based S&P 500 over a three-year period because of their ability to outperform in both bull and bear markets, as well as command incredible pricing power in nearly any economic environment.

If you'd like a closer look at my reasoning behind each selection, just click on any, or all, of the following portfolio components:

Let's look at how our portfolio of basic-needs stocks fared last week.


Cost Basis


Total Value


Waste Management










NextEra Energy















Select Medical










American Water Works





Procter & Gamble





AvalonBay Communities









Dividends receivable




Total commission




Original investment




Total portfolio value




S&P 500 performance



Performance relative to S&P 500



Source: Yahoo! Finance, author's calculations.

Dividends, dividends, and more dividends!
Not to sound like a broken record, but it was once again a big week for dividend news, with the portfolio receiving a dividend, another company going ex-dividend, and another announcing its quarterly dividend.

Let's start with our payday that came from Procter & Gamble (NYSE: PG  ) on Friday -- a $0.602-per-share payout, which was added to our growing dividends-receivable column above. Procter & Gamble's dividend has grown a remarkable 56 consecutive years, which points to the consistency in cash flow behind its expansive consumer-goods product offerings. Given that many of its products are inelastic, meaning they're needed in both good and bad economic environments, I'd feel confident as a shareholder that these regular dividend payments will keep on coming.

Going ex-dividend over the past week was integrated oil and gas company Chevron (NYSE: CVX  ) , which will be paying out $1 per share to shareholders on Dec. 10, 2013, so long as they're on record as of today. Chevron certainly hasn't been one of the top performers thus far, as oil prices have dipped about 15% from their highs, but Chevron's diversified operations (refining and exploration) allow it to balance out weakness in one area of its business with strength in another. It's another dividend aristocrat I wouldn't lose sleep over if I were a shareholder.

Also making news was refuse and recycling giant Waste Management (NYSE: WM  ) , which announced on Tuesday that it would be paying out a $0.365-per-share dividend on Dec. 20, 2013, to shareholders on record as of Dec. 4. As with Chevron, conditions haven't been ideal for Waste Management, given the drop in commodity prices -- primarily metals -- which has hurt Waste Management's recycling business. But the steady demand for refuse pick-up should continue to drive bottom-line profit, and I wouldn't be surprised to see Waste Management's dividend payout rise again next year.

I'm going to the Intel store!
In a really surprising and potentially intriguing move, chipmaker Intel (NASDAQ: INTC  ) announced that it would be opening three pop-up retail locations in New York, Los Angeles, and Chicago this holiday season, which will allow the company to showcase some of the newest Intel-powered technology for consumers. Although the company didn't specifically mention what technology would be featured in its stores, this looks like a strategically ingenious move for Intel which could pull a page out of Apple's book and improve sales by simply allowing consumers to touch, feel, and play with new PC and mobile-based devices.

An attractive value?
Finally, research firm Susquehanna issued positive commentary on hospital and outpatient rehabilitation clinic operator Select Medical (NYSE: SEM  ) last week. According to Susquehanna, Select Medical could be at an attractive entry point for long-term investors as Medicaid reimbursement visibility and Select Medical's cash flow improves. I happen to agree wholeheartedly with Susquehanna and feel that it's among the cheapest hospital-operators in the industry, with a forward P/E of nine.

Back to basics
I'm not going to lie -- the precipitous uptrend in the S&P 500 has been difficult for many of these low-beta names to keep up with thus far. But a mixture of dividend growth compounded with steady cash flow and organic growth should allow this portfolio to outperform the S&P 500 over the long run, which is what this experiment is intended for.

Check back next week for the latest update on this portfolio and its 10 components.

Get rich the easy way
Perhaps the most attractive aspect of basic needs stocks is that many pay a dividend -- and dividend stocks can make you rich. While they don't garner the notoriety of highflying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list of nine in this free report. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

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9/30/2016 4:00 PM
CVX $102.92 Up +1.65 +1.63%
Chevron CAPS Rating: ****
INTC $37.75 Up +0.43 +1.15%
Intel CAPS Rating: ****
PG $89.75 Up +1.52 +1.72%
Procter and Gamble CAPS Rating: ****
SEM $13.50 Up +0.29 +2.20%
Select Medical Hol… CAPS Rating: *****
WM $63.76 Up +0.49 +0.77%
Waste Management CAPS Rating: *****