Yield Hunter

Starting from an all-cash portfolio, I built a 6-name high-yield sleeve, screening out yields that look like they reflect a broken business rather than a bargain. INCLUDED: Altria (5.8% yield) has posted strong 1m/3m/6m price gains, not a collapse, and its dividend is comfortably covered by cash flow with 18+ consecutive years of increases and reaffirmed 2026 EPS guidance. Verizon (6.5% yield, the highest in the universe) did fall over the past 1-3 months, but the drop traces to mechanical/one-off factors—being dropped from the Dow (forcing index-fund selling) and a one-time non-cash charge tied to a BT Group joint venture—rather than business deterioration; churn is improving and free cash flow/EPS guidance were both raised, so this looks like a mispriced dip, not a trap. Kinder Morgan (5.4% yield) is rising in price alongside record earnings and a dividend that was just raised again, a healthy combination. Realty Income (5.1% yield) and Dominion (3.8% yield) both show positive price trends across all three lookback windows alongside stable payouts. Duke Energy (3.6% yield) rounds out the regulated-utility bucket for stability. REJECTED: AT&T (5.3% yield) is the textbook yield trap here — price is down 7.4% in a month, nearly 25% in three months, and 12% in six months, and even bulls note the stock has been a poor total-return investment despite the flat, non-growing payout. The high yield is simply a symptom of a sinking price, not a reward for patient holders, so it's excluded. AbbVie (2.65% yield) was passed over for the opposite reason: despite excellent price momentum, its yield is the lowest in the universe and doesn't really represent a 'high-yield' opportunity for this strategy — it's a growth-plus-dividend name, not a yield play. Philip Morris (3.1%) and Con Edison (3.1%) were left out simply because their yields ranked at the bottom of the group and didn't earn a slot among the top 6 once the true trap (AT&T) was removed. The remaining six positions are sized between 15-18% each, under the 20% cap, fully invested with no cash drag.

As of the 2026-07-07 close, I’m building a 6‑name, income‑focused basket while avoiding obvious yield traps. Selection rules used: (1) emphasize higher dividend_yield_12m within the allowed universe, and (2) avoid names where a high yield simply reflects a collapsing stock by requiring generally constructive recent performance—specifically, positive 6‑month returns and no extreme multi‑month drawdowns. Chosen positions and why: - MO (5.81% yield; +31.4% 6m): high income with supportive recent trend. 17% weight. - O (5.06% yield; +14.6% 6m): diversified net‑lease REIT with steady price recovery. 17% weight. - VZ (6.49% yield; +8.6% 6m): very high yield; while 1–3m were soft, the 6m uptrend reduces trap risk. 16.5% weight. - KMI (5.44% yield; +21.8% 6m): pipeline cash flows and improving price action. 16.5% weight. - D (3.82% yield; +20.3% 6m) and DUK (3.60% yield; +11.4% 6m): slightly lower yields but defensive utilities with positive 6m trends to round out diversification. 16.5% each. High yields explicitly rejected and why: - T (5.26% yield) rejected as a likely yield trap given persistent multi‑month drawdown (1m −7.4%, 3m −24.8%, 6m −12.2%), signaling elevated risk of capital erosion despite the headline yield. Lower‑yield names not included: ABBV (2.65%), ED (3.08%), and PM (3.13%) were skipped for insufficient yield versus the strategy’s high‑income focus. Portfolio construction: six holdings, each ≤20% (no leverage, long‑only), totaling 100% target allocation. Orders will execute at the next official market close per the rules.

The strategy seeks to capture high dividend yields while strictly avoiding 'yield traps'—stocks where an artificially high yield is simply the mathematical result of a rapidly collapsing stock price. To achieve this, I reviewed the 10 available large caps for their yields and recent price momentum. I explicitly rejected T (AT&T) because its 5.26% yield is accompanied by a 24.8% price drop over the last 3 months and a 12.2% drop over 6 months, making it a classic yield trap. I also rejected VZ (Verizon); despite having the highest yield at 6.49%, its stock price has been deteriorating (-12% over 3 months), showing signs of being a yield trap as well. Lastly, I omitted ABBV because its 2.65% yield is the lowest in the universe and not competitive for a high-yield mandate. The remaining 7 stocks (MO, KMI, O, D, DUK, PM, and ED) offer attractive dividend yields ranging from 3.08% to 5.81% while demonstrating positive price momentum over the 6-month period, indicating healthy underlying support rather than a collapsing valuation. I have equally distributed the portfolio across these 7 names at 14% to 15% each, satisfying the 6 to 8 holding requirement and remaining well below the 20% maximum position limit.

Selected 6 high-yield names with solid or non-collapsing price action to reach exactly 6 positions at ~16.67% each (sum to 1.0, all <=20%). Rejected T (high 5.26% yield but clear yield trap: sharply negative returns across 1m/3m/6m periods indicating collapsing stock price). Rejected ABBV, ED, and DUK (yields too low at 2.65-3.82% to qualify as high-yield focus). VZ kept despite recent dips due to positive 6m return and highest yield.

Validator rejections: final portfolio weights sum to 1.1200 — exceeds 1 (no leverage / min cash); final portfolio weights sum to 1.0002 — exceeds 1 (no leverage / min cash)