As I was updating the spreadsheet, it occurred to me that some of you might have questions about position size. Position size is the percentage of your total portfolio that each stock accounts for. You don’t want it to be either too small or too big.

This week, I explain the strategy used in the Dividend Investing (DI) model portfolio as well as how the other AAII model portfolios handle rebalancing. I then go over how to use the DI Rebalancing Tool.

A quick side note before I begin: Our My Portfolio tool shows you the percentage weight for each stock you hold. You can use those percentages to apply the concepts discussed here. An updated version of My Portfolio with new features that you will really like is in the works. Stay tuned. I think you will enjoy the new version.

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I’ll start with the deets:

• Both Amgen Inc. (AMGN) and Pfizer Inc. (PFE) raised their full-year profit guidance after beating second-quarter earnings expectations.

• The DI model portfolio rose for third consecutive month in July, boosted by double-digit gains in six stocks.

• The August heat has fatigued the S&P 500 index during the post-election years of all second-term presidents since the 1950s.

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I explain why UnitedHealth Group had such a big impact on the Dow before going into its earnings and updated guidance. I then share takeaways from the other eight earnings reports.

There’s lots to discuss, so let’s get right to this week’s deets:

• The DI model portfolio saw a mix of results: two positive surprises, five in-line reports and two misses.

• The Dow’s price-weighting mechanism allowed UnitedHealth Group to single-handedly drag the average down.

• Tariffs and uncertainty were a common theme during many of the earnings conference calls.

UnitedHealth Group Warns and Drags the Dow Down

Last week, UnitedHealth Group reported in-line earnings but cut its full-year 2025 adjusted earnings guidance from between $29.50 and $30.00 per share to between $26.00 and $26.50 per share. Traders responded by sending shares of the stock down 22%. This plunge resulted in 805 points being deducted from the Dow on Thursday, April 17.

Such a large point loss was possible because the Dow is price-weighted. The higher a Dow component’s share price is, the more influence the stock has on the average’s value. Shares of UnitedHealth Group closed on at $585.04 on Wednesday, April 16, 2025—the highest share price of any Dow component.

The S&P 500 index, conversely, is market-capitalization weighted. Companies with the biggest market cap have the most influence on the index.

To better illustrate the difference, according to data from State Street Global Advisors as of the end of last week, UnitedHealth Group accounted for 7.47% of the SPDR Dow Jones Industrial Average ETF Trust’s (DIA) value. Its weight in the SPDR S&P 500 ETF Trust (SPY) was just 0.94%.

An ongoing criticism of the Dow is its price-weighted methodology. I agree with those criticisms since a stock’s price is partially influenced by whether a company’s board of directors chooses to split a stock whose share price exceeds a certain dollar amount (e.g., $100). UnitedHealth Group’s last stock split was 20 years ago. UnitedHealth Group closed at $424.25 per share on Thursday, April 24, 2025; only 70 exchange-traded stocks had a higher share price.

Medicare and UnitedHealth Group’s Lowered Guidance

Three separate factors caused UnitedHealth Group to cut its full-year 2025 earnings guidance. First, care activity in UnitedHealth Group’s Medicare Advantage business increased at twice the rate the company had projected. Put another way, the company saw a significant increase in claims.

Second, a portion of the new members to Optum Medicare were previously covered by plans that were exiting markets. These new members used medical services significantly less than expected last year. “[This] led to 2025 reimbursement levels well below what we would expect and likely not reflective of their actual health status,” explained CEO Andrew Witty.

Finally, risk model changes by the Centers for Medicare and Medicaid Services (CMS) have impacted reimbursement rates for “many of the current and new complex patients” UnitedHealth Group serves.

Last week was the first time UnitedHealth Group reported earnings below the consensus estimate since 2008, according to Reuters. (UnitedHealth Group earned $7.20 per share, 1.3% below the S&P Global consensus estimate. This was close enough to be considered an in-line surprise.) The lowered guidance means UnitedHealth Group will realize a calendar-year earnings decline for the first time since 2008 as well, according to MarketWatch.

UnitedHealth Group’s Dividend Grades

UnitedHealth Group currently has a Dividend Strength Grade of B and a Dividend Growth Grade of A. Both indicate that the stock remains fundamentally strong. We will be watching to see if these Medicare-related issues are temporary or an ongoing headwind.

Dividend Pillars for UNH

A Mixed Bag of Earnings From the Other Eight Companies

As noted above, the DI model portfolio saw a mix of positive surprises, in-line reports and negative surprises. Counting all earnings results announced to date, the DI model portfolio’s first-quarter 2025 earnings scorecard stands at four positive surprises, five in-line reports and two negative surprises.

Here are recaps of the other earnings reports released last week and this week:

• Abbott Laboratories’ (ABT) adjusted first-quarter earnings totaled $1.09 per share, in line with expectations. Regarding guidance and tariffs, CEO Robert Ford told an analyst: “We’re already considering raising our [earnings] guidance. But tariffs are here. So, we felt that reaffirming our guidance [of $5.05 to $5.25 per share on adjusted basis for full-year 2025] is already, I think, a pretty strong statement.”

• CME Group Inc.’s (CME) first-quarter adjusted earnings of $2.80 per share were one penny shy of the S&P Global consensus estimate but more than close enough to be considered in line. The volatility in the financial markets benefited the company, which saw record average daily contract volume. CME Group raised its margin requirements “in various products across all asset classes” given the ongoing level of volatility.

• Eastman Chemical Co. (EMN) earned $1.91 per share on an adjusted basis, in line with the S&P Global consensus estimate. However, the company’s second-quarter 2025 guidance for adjusted earnings of between $1.70 to $1.90 per share is below the consensus estimate of $2.16 per share. Executives currently anticipate a “$30 million net tariff impact related to the U.S.-China trade dispute.”

• PepsiCo Inc. (PEP) earned $1.48 per share on a core basis, in line with the S&P Global consensus estimate. The company lowered its full-year 2025 guidance: Core earnings are now expected to be “approximately even” with last year instead of growing by mid-single digits. CFO Jamie Caulfield blamed the changed outlook on tariffs, “heightened macro and consumer uncertainty,” and Frito-Lay Inc.’s “subdued performance.”

• Quest Diagnostics Inc. (DGX) earned $2.21 per share on an adjusted basis, beating the S&P Global consensus estimate by 2.8%. Though earnings were $0.06 per share above analysts’ forecasts, Quest Diagnostics had previously warned in March that first-quarter earnings would be $0.10 per share lower than its initial expectations. The company did maintain its full-year 2025 adjusted earnings guidance of between $9.55 and $9.80 per share. Regarding tariffs, CEO Jim Davis says that Quest Diagnostics sources “less than 1%” directly from China.

• Snap-on Incorporated’s (SNA) first-quarter earnings of $4.51 per share missed analysts’ expectations. Executives blamed last quarter’s earnings decline—which was particularly attributable to a decline in tools group segment revenues—on uncertainty related to tariffs, government spending and geopolitical events. “Uncertainty” was mentioned eight times on the conference call, and “fog” was mentioned nine times.

• Texas Instruments (TXN) earned $1.28 per share during the quarter, beating analysts’ expectations. Revenue grew on a year-over-year basis, with the industrial markets segment realizing higher sales for the first time in eight quarters. Executives view industrial demand as starting to rebound from a bottom. About 20% of Texas Instruments’ sales are to China, but no tariff-related changes in orders have been noticed yet.

• Tractor Supply Co.’s (TSCO) earnings of $0.34 were $0.03 per share short of the S&P Global consensus estimate, missing expectations. This was primarily due to adverse weather conditions. The company widened its full-year 2025 net sales growth guidance from between 5% to 7% to between 4% and 8%. Earnings guidance was widened from $2.10 to $2.22 per share to $2.00 to $2.18 per share. CEO Hal Lawton cited spring softness in sales, continued consumer cautiousness about making big ticket purchases and “a range of scenarios related to tariff costs.”

One More Busy Week

Eight model portfolio companies are scheduled to announce earnings next week. Cincinnati Financial Corp. (CINF) will report on Monday, April 28, followed by Pfizer Inc. (PFE) on Tuesday, April 29, and Oshkosh Corp. (OSK) on Wednesday, April 30. Amgen Inc. (AMGN), EOG Resources Inc. (EOG), Hershey Co. (HSY), Huntington Ingalls Industries Inc. (HII) and IDEX Corp. (IEX) will all report on Thursday, May 1.

News and Notes

CME Group Inc. (CME) reported first-quarter 2025 diluted earnings of $2.80 per share, up 11.1% from $2.52 per share in the prior quarter. This was 0.3% below the S&P Global consensus estimate of $2.809 per share. Total revenues were $1.6 billion, up 10.4% year over year from $1.5 billion. Operating income was $1.1 billion, up 15.5% year over year from $959.6 million.

During the quarter, the company returned $2.6 billion to shareholders through dividends.

Quest Diagnostics Inc. (DGX) reported first-quarter 2025 diluted earnings of $2.21 per share, up 12.8% from $1.72 per share in the prior-year quarter. Earnings were 2.8% higher than the S&P Global consensus estimate of $2.15 per share. Net revenues were $2.7 billion, up 12.1% year over year from $2.4 billion. Operating income was $346.0 million, up 15.4% year over year from $300.0 million.

During the quarter, Quest Diagnostics returned $84 million to shareholders through dividends.

Eastman Chemical Co. (EMN) reported first-quarter 2025 adjusted diluted earnings of $1.91 per share, up 18.6% from $1.61 per share in the prior-year quarter. Earnings were 1.1% higher than the S&P Global consensus estimate of $1.89 per share. Sales revenue was $2.29 billion, relatively unchanged year over year from $2.31 billion. Net earnings were $183 million, up 10.9% year over year from $165 million.

During the quarter, Eastman Chemical returned $96 million to shareholders through dividends.

PepsiCo Inc. (PEP) reported first-quarter 2025 diluted core earnings of $1.48 per share, down 8.1% from $1.61 per share in the prior-year quarter. Earnings were 0.7% below the S&P Global consensus estimate. Net revenues were $17.9 billion, down 1.8% year over year from $18.3 billion. Operating profit was $2.6 billion, down 4.9% year over year from $2.7 billion.

During the quarter, PepsiCo returned $1.9 billion to shareholders via dividends and $183 million via share repurchases.

Snap-on Incorporated (SNA) declared a regular quarterly dividend of $2.14 per share, in line with the prior declaration. The dividend is payable on June 10, to shareholders of record as of May 20. The stock will trade ex-dividend on Tuesday, May 20.

Tractor Supply Co. (TSCO) reported first-quarter 2025 diluted earnings of $0.34 per share, down 8.1% from $0.37 per share in the prior-year quarter. Earnings were 8.1% lower than the S&P Global consensus estimate of $0.37 per share. Net sales were $3.5 billion, up 2.1% year over year from $3.4 billion. Operating income was $249.1 million, down 5.3% year over year from $263.1 million.

During the quarter, Tractor Supply returned $122.4 million to shareholders through dividends and $94.0 million via share repurchases.

Texas Instruments (TXN) reported first-quarter 2025 diluted earnings of $1.28 per share, up 6.7% from $1.20 per share in the prior-year quarter. Earnings were 16.8% higher than the S&P Global consensus estimate of $1.096 per share. Revenues were $4.1 billion, up 11.1% year over year from $3.7 billion. Operating profit was $1.32 billion, up 3.0% year over year from $1.28 billion.

During the quarter, the company returned $1.2 billion to shareholders through dividends and $653 million through share repurchases.

Portfolio Calendar from April 30 to May 07, 2025

Here is quick summary:

• The DI Ideas list is a good place to start looking for stocks to add to your portfolio; it is suggested that investors focus on the stocks marked as held in the DI…

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