> ## Content Index > Fetch the complete content index at: https://www.rolandhead.com/llms.txt > Use this file to discover other available public pages before exploring further. # Q3 2026 dividend portfolio review: AI profits + a new stock - URL: https://www.rolandhead.com/portfolio/q3-2026-dividend-portfolio-review-ai-profits-a-new-stock/ - Published: 2026-10-14T16:01:18.000Z - Updated: 2026-10-14T16:01:18.000Z - Description: After a positive quarter, I've tweaked the portfolio to lock in some gains and (hopefully) benefit from the superior value on offer in some of my more unloved holdings. - Author: Roland Head - Tags: Portfolio Q3 was another positive period for my [model dividend portfolio](https://www.rolandhead.com/dividend-portfolio/), which finished the quarter modestly ahead of the FTSE 100\. The quarter was bookended with another series of trades, following those at the [end of Q2](https://www.rolandhead.com/portfolio/2026-half-year-dividend-portfolio-review-b/). This time round, I exited my position in [**IG Group Holdings (LON:IGG)**](https://www.rolandhead.com/dividend-portfolio/#ig-group-holdings)completely and reduced another position to lock in some profits from AI-related gains. To put the resulting cash influx to work, I added one new business to the portfolio and topped up three existing positions. More on all of this below. Further transactions are almost certain in the coming months: I continue to hold shares in both [**DCC Energy (LON:DCC)**](https://www.rolandhead.com/dividend-portfolio/#dcc)and [**Intertek (LON:ITRK)**](https://www.rolandhead.com/dividend-portfolio/#intertek), both of which have agreed takeovers that are expected to complete in late 2026 or early 2027\. If and when these FTSE 100 firms are sold and delisted, I'll need two new companies to replace them. I haven't made any decisions yet, although I'd quite like to find something that provides continued exposure to energy and fossil fuels. In the remainder of this review, I'll take a closer look at the portfolio's performance in Q3, summarise recent trades and update my record of the portfolio's key financial metrics. - [Q3 2026 performance review](#q3-2026-performance-review) - [Portfolio changes in Q3 2026](#portfolio-changes-in-q3-2026) - [Position weightings](#position-weightings) - [Key financial metrics for the portfolio](#portfolio-key-financial-metrics) - [Final thoughts](#final-thoughts) *As a quick reminder, the dividend portfolio documented on this website is a *model portfolio* that largely mirrors my main personal investments. My main goals are to:* - *Generate a *dividend yield greater than the FTSE 100*;* - *Provide *inflation-beating income growth*.* --- ## Q3 2026 performance review As the ultimate aim of this portfolio is to provide a reliable and rising income, I'll start with a snapshot of the portfolio's dividend performance to date. At this stage, it's not clear if I'll be able to extend the run of growth seen since the portfolio's inception, but I'm hopeful that Q4 dividends will enable me to preserve this record: ![](https://storage.ghost.io/c/81/b0/81b02f4d-7696-44c3-a500-35a32fccad19/content/images/2026/10/3q26-rh-pf-div-income.png) Dividend yield based on the portfolio's initial capital of £100k (Dec 2021) While no new capital has been added to the model portfolio since its inception, all income is reinvested. Given this, I would hope to see a rising trend of dividend payouts over time. Of course, dividend income is less useful if the capital value of the portfolio is being eroded or underperforming the wider market. That's been an issue in recent years, but capital performance has improved this year. This has allowed me to begin narrowing the gap with the FTSE 100 Total Return index I use as a benchmark. **Q3 2026 performance:** - RH model portfolio total return: 6.8% - FTSE 100 Total Return index: 1.8% **9M 2026 performance:** - RH model portfolio total return: 16.4% - FTSE 100 Total Return index: 9.5% Here's a longer view on the portfolio's performance since inception in December 2021: ![](https://storage.ghost.io/c/81/b0/81b02f4d-7696-44c3-a500-35a32fccad19/content/images/2026/10/3q26-rh-portfolio-perf.png) Total return performance from 1 Dec 2021 to 30 Sept 2026 **Share price changes:** a simple average can mask a wide range of underlying movements. That's normal in most portfolios, even over quite short periods. Here's a snapshot of share price movements with the model portfolio during the third quarter of 2026\. An average share price gain of 7.6% was aided by a sharp turnaround in market sentiment towards one of my AIM holdings: ![](https://storage.ghost.io/c/81/b0/81b02f4d-7696-44c3-a500-35a32fccad19/content/images/2026/10/3q26-rh-pf-share-price-chg.png) **Note:** the biggest loser in the chart above is **IG Group**, which has now been sold. Fortunately, my IG sale took place prior to October's profit warning. --- ## Portfolio changes in Q3 2026 The third quarter was an unusually busy period for trades. I made a number of trades during at the end of September, in line with my normal policy of only trading once each quarter. ### SALE: IG Group Holdings (LON:IGG) IG Group was one of the model portfolio's original 2021 holdings and is a stock I've owned personally since 2018\. Here's a recap from my [sell note in August](https://www.rolandhead.com/portfolio/august-26-dividend-portfolio-update-mixed-views-the-next-stock-im-selling/): > In July [I reviewed IG Group's half-year results and the acquisition of US fantasy sports operator Underdog](https://www.rolandhead.com/portfolio/july-26-dividend-portfolio-update-quality-at-a-reasonable-price-takeover-action/#ig-group-igg) and concluded that *"IG is becoming a very different business to the one I invested in"*. > The changes being made by CEO Breon Corcoran may create a larger and more profitable business. Or they may not. I've no way to evaluate this. > What does seem clear to me is that this is becoming a more complex and riskier business, both operationally and in regulatory terms. As a result, it's not clear to me whether future earnings will be as dependable as those in the past. > On a more personal note, I am not keen on the company's ongoing shift towards gambling. I don't generally invest in gaming stocks. **I sold IG Group at 1,325p on 30 September 2026\. The model portfolio's holding generated total return of approximately 115%, or 19% annualised from December 2021 to September 2026.** ### BUY: a FTSE 350 financial with a 5%+ yield I've replaced IG with a market-leading FTSE 250 business that enjoys some of the same beneficial exposure to market volatility as IG Group. The valuation is more modest, however, and unlike IG the company isn't embarking on major acquisitions or shape-shifting (that's been done already). My new financial stock offers a forecast dividend yield of more than 5.5% and trades on a modest 9x forecast earnings. I think the current valuation looks fairly undemanding. I'm also encouraged to see that broker EPS forecasts have edged higher over the last year: ![](https://storage.ghost.io/c/81/b0/81b02f4d-7696-44c3-a500-35a32fccad19/content/images/2026/10/image.png) Source: [Stockopedia](https://www.stockopedia.com/a/home?ref=rolandhead.com) Premium subscribers can find the identity of this business and learn more about it [here](https://www.rolandhead.com/portfolio/sept-26-dividend-portfolio-update-1-sell-1-top-slice-1-buy-3-top-ups/#new-stocks-top-ups). ### PARTIAL SALE: a quality UK business riding the AI boom I can't claim any particular insight by suggesting that there are downside risks to being too heavily exposed to AI. The financial press is full of stories suggesting reasons for caution – while also noting that the boom appears to remain in full swing. Given that all the major players have now exhausted their free cash flow and become reliant on debt funding for further expansion, it looks like lenders will effectively decide when the party is over. This is all relevant to me because one of the portfolio's larger positions is a FTSE 350 company that's profited hugely from the build-out of AI data centres in the US. This is a conviction long-term holding for me, but I can't ignore the risk of a cyclical reset in profits and valuations if AI spending slows. [My analysis](https://www.rolandhead.com/portfolio/sept-26-dividend-portfolio-update-1-sell-1-top-slice-1-buy-3-top-ups/) of this company's recent accounts suggested that – perhaps – there were some tentative signs that AI-related demand might be levelling out. With the shares having risen by around 120% since my purchase, I decided to lock in some profits. To this end, I recently sold around 35% of my shares, thus protecting the majority of the capital I originally invested. I may yet sell more of this position at some point, but I've no fixed plans at this time. ### TOP UP: adding to three positions My strategy involves periodically using accumulated dividend cash and sale proceeds to top up existing positions. The sale activity outlined above means that the portfolio's cash weighting was higher than usual at the end of the quarter. To deploy some of this cash into income-producing investments, I chose to top up three existing positions. All three are somewhat unloved at the moment, but offer attractive yields and (in my opinion) positive medium-term prospects. - **A UK biotech (8%+ yield):** this business is at the speculative end of the spectrum for me. It's future growth prospects are uncertain and dependent on a small number of potential new products. On the other hand, cash flow from mature products supports *most* of the generous dividend. I think the valuation already reflects a relatively cautious view of the future. - **A FTSE 250 retailer (5%+ yield):** this business is suffering from the usual consumer spending pressures and perhaps some challenges of its own making. However, strong profitability, good scale and long-term ownership continue to appeal to me. I think the stock could offer value at current levels. - **A small-cap specialist asset manager (6%+ yield):** life has been tough for many asset management businesses and this niche specialist is no exception. Risks remain, but progress is being made and a forward P/E of 10 suggests to me that low expectations are already priced in. Subscribers can find full details of all of these transactions [here](https://www.rolandhead.com/portfolio/sept-26-dividend-portfolio-update-1-sell-1-top-slice-1-buy-3-top-ups/#new-stocks-top-ups). 💡 Subscribe today for full access to my model dividend portfolio. Paid subscribers also receive full coverage of portfolio company results and details of all my portfolio trades. [Click here to sign up now](https://www.rolandhead.com/#/portal/signup). --- ## Position weightings Here's a snapshot of how the model portfolio looked following these top ups, on the 1 October 2026 *(premium subscribers can see this chart with company names on my* [*portfolio page*](https://www.rolandhead.com/dividend-portfolio/)*)*: ![](https://storage.ghost.io/c/81/b0/81b02f4d-7696-44c3-a500-35a32fccad19/content/images/2026/10/3q26-rh-pf-positions-anon.png) I don't have a fixed policy on maximum weightings or rebalancing, but if a position rises above 10% then I tend to take a fresh look at the situation to consider whether I should top slice. --- ## Portfolio: key financial metrics Using an approach borrowed from [Terry Smith](https://www.fundsmith.co.uk/?ref=rolandhead.com) (and others), I like to calculate average metrics for all of my stocks so that I can view the portfolio as it if was a single company. Of course, I'm aware that a healthy average can mask a multitude of individual sins. But I find this portfolio profiling approach useful because it enables me to track any changes in the overall profile of the portfolio. By doing this, I can gauge whether – in aggregate – the stocks I own have the characteristics I'm targeting. Here's how the model portfolio looked on **30 September 2026** (you can see the Q2 figures [here](https://www.rolandhead.com/portfolio/2026-half-year-dividend-portfolio-review-b/#portfolio-key-financial-metrics)): | **Period end** | **31 Dec 21** | **31 Dec 22** | **31 Dec 23** | **31 Dec 24** | **31 Dec 25** | **30 Sept 26** | | -------------------------- | ------------- | ------------- | ------------- | ------------- | ------------- | -------------- | | Median mkt cap | £3,200m | £2,300m | £1,700m | £983m | £1,230m | £532m | | TTM ROCE | 20.6% | 22.2% | 21.0% | 22.5% | 20.2% | 23.8% | | TTM EBIT yield | 8.7% | 9.4% | 11.3% | 11.0% | 8.7% | 8.7% | | TTM FCF yield | 6.7% | 7.0% | 7.1% | 8.0% | 6.4% | 6.6% | | Net debt/5yravg net profit | \-0.2x | 0.3x | 0.2x | \-0.3x | 0.0x | 0.0x | | TTM div yield\* | 4.1% | 4.5% | 5.3% | 5.4% | 5.1% | 4.5% | | 5yr avg div grth | 8.3% | 7.6% | 6.3% | 6.3% | 5.0% | 5.0% | | fc div yield\* | 4.4% | 5.0% | 5.2% | 5.4% | 5.3% | 5.5% | | No. yrs div paid | 24 | 21 | 24 | 24 | 26 | 26 | *Scroll L-R (Data source: SharePad/company accounts. Some adjustments were needed. \*Dividend yields were weighted to reflect position size from 2025 onwards. Prior to this they were simply averaged.)* There is very little new to report, so I'll simply highlight some of the main points from these numbers. - The **median market cap** is lower than previous years but is little changed from £505m at the end of Q2. - Portfolio average **ROCE** remains comfortably above the 20% level I see as a benchmark for quality businesses. - An average **free cash flow yield** of 6.6% comfortably covers the **trailing average dividend yield** of 4.5%, suggesting that in aggregate the portfolio income is covered by companies' surplus cash generation. - **Leverage** is negligible across the portfolio, although this reflects an underlying mix of companies with net cash and some with net debt. I prefer to buy companies with net cash or minimal net debt, but I recognise that this isn't always possible if I want to be able to own shares in larger companies. - The portfolio's **average forecast dividend yield of 5.5%** is higher than the 4.8% implied by combining the **trailing yield** of 4.5% with the **5-year average dividend growth rate** of 5%. I think this largely reflects the changing mix of the portfolio, rather than an acceleration in dividend growth. Cash from the sales I discussed earlier has been reinvested in companies offering significantly higher dividend yields than those sold, thus lifting the portfolio's overall average yield. --- ## Final thoughts After a period of underperformance, my dividend portfolio has performed more strongly so far this year. As I [explained recently](https://www.rolandhead.com/portfolio/sept-26-dividend-portfolio-update-1-sell-1-top-slice-1-buy-3-top-ups/), my aim going forward is to stick more closely to a systematic approach that's based the scoring system I use to rank dividends stocks. I feel my discipline may have slipped slightly since the portfolio's launch in December 2021 and am keen to remedy this. What won't change are the core principles of the portfolio: a focus on quality, cash generation and sustainable dividend growth. The majority of my personal portfolio is invested alongside the model portfolio, so I remain very interested in improving outcomes if I can. Wishing you good fortune in the markets in Q4, Roland Head --- #### Disclaimer This is a personal blog/newsletter and I am not a financial adviser. All content is provided for information and educational purposes only. Nothing I say should be interpreted as investing advice or recommendations. You should carry out your own research and make your own investing decisions. Investors who are not able to do this should seek qualified financial advice. Reasonable efforts are made to ensure that information provided is correct at the time of publication, but no guarantee is implied or provided. Information can change at any time and past articles are not updated.