SUMMARY REPORT
This Dividend Growth Portfolio (DGP) exists to demonstrate the results that can be
achieved by following sound dividend growth investing principles.
The main goal of the DGP is to generate reliable growing dividends. The dividend
stream has increased each year since the Portfolio was created in 2008. In 2012, the
Portfolio's dividends exceeded 2011's by about 11%. I expect an increase of more than
17% in 2013.
A secondary goal of the DGP is to generate acceptable total returns. The Portfolio is
up 50% in total value since inception. It has beaten the S&P 500 Index since its inception.
DIVIDEND GROWTH PORTFOLIO BACKGROUND
DETAILED REPORT CARD
(1) Generation of reliable and growing income stream:
2013 is off to a good start, with projections that this year's dividends will exceed 2012's by
17%.
Here is a table of the dividends produced each year by the Dividend Growth Portfolio:
Year Dividends Received Increase from Prior Year
2008 $ 998
2009 $1568 57%
2010 $1799 15%
2011 $1960 9%
2012 $2179 11%
2013 $2542 [projected] 17% [projected]
Next 12 months $2627 [projected]
As of the beginning of May, 2013, E-Trade's Income Estimator projects a total of $2542 in
dividends for calendar year 2013. That would suggest that the dividend stream in 2013
will increase by about 17%.
This projection probably underestimates what the actual total will be. Hopefully, the number
will rise as companies raise their dividends throughout the year, and as I add shares to the
Portfolio by reinvesting dividends. (One such reinvestment has already been made in 2013.)
(2) Achieving goal of 10% yield on cost within 10 years:
rises. This is known as yield on cost. As stated earlier, the principal goal of the Dividend
Growth Portfolio is to achieve a yield on cost of 10% within 10 years of inception.
Here is the same table of dividends as above, except the last column shows each year's
yield on cost. Note how the rising dividends each year keep the yield on cost
marching higher every year toward the eventual goal of 10% in 2018.
Year Dividends Received Yield on Cost
2008 $ 998 2.1%
2009 $1568 3.4%
2010 $1799 3.8%
2011 $1960 4.2%
2012 $2179 4.7%
2013 $2542 [projected] 5.4% [projected]
Next 12 mo. $2627 [projected] 5.6% [projected]
"Projected" means that the forward dividend stream is estimated based on the most recent
dividend payout rates. The projection assumes that no stock will cut its dividend, but it does
not anticipate any dividend increases that have not been announced.
As the months pass and dividend increases are announced, the projections will probably
increase.
The numbers through 2012 are actuals. You can see how the dividend stream from the
Portfolio has gone up each year.
Mathematically, yield on cost goes up steadily, because the "original price" in the equation
yield on cost = dividends / original price is fixed at $46,783 (the original amount in the
portfolio). But the "dividends" in the equation increase over time for three reasons:
Thus, actual dividends to be received should be greater than those currently projected for the
three reasons just stated.
Note on the dividends in 2008: Because I created the Portfolio during the first half of 2008, the dividends for 2008 are
less than they would have been for the entire year. That accounts for the low 2.1% yield on cost for 2008, as well as
the high 57% jump in dividends from 2008 to 2009. Later years are more representative of what one may expect in
annual dividend increases. Growth rates will usually be in the 7% to 10% range.
(3) Portfolio reviews:
I recommend conducting two formal strategic "Portfolio Reviews" per year. In 2012,
reviews were completed in April and October. I am slightly overdue for the review for April,
2013. I expect to complete it in May. Here are articles about the two 2012 reviews:
I published an article in February, 2013 describing a couple of changes that I made to this
portfolio as part of a program to make it more diversified. I trimmed positions in two stocks
(McDonald's and PepsiCo) and used the proceeds to start positions in two higher yielding
stocks (Darden Restaurants and Omega Healthcare Investors). The changes created
immediate boosts to the dividend stream, the Portfolio's yield, and its yield on cost. Read all
about it here: Rebalancing My Dividend Growth Portfolio for Diversification and More
Yield.
In March, 2013 I also made my first dividend reinvestment of the year. I purchased 25 shares
of Lorillard (LO) on March 18. I reinvest dividends when they accumulate to $1000 in my
account. There will be at least one more reinvestment later this year. Current cash in the
account has grown to $217 since that purchase.
Earlier this year, I wrote a year-end wrap-up article about this Portfolio that you may enjoy:
Rising Dividends: My Dividend Growth Portfolio 2012-2013 Report. My next article
about this Portfolio will come after the April/May, 2013 Portfolio Review.
(4) Reinvestment of dividends:
Under the rules governing this portfolio, when the accumulated cash from dividends reaches
$1000, the funds are re-invested. The goal is always to purchase a stock that will improve
the Dividend Growth Portfolio in some way. The purchase may be of more shares in a
company already owned, or it may be used to initiate a position in a brand-new stock.
As mentioned above, I made my first dividend reinvestment of 2013 in March, purchasing
shares of Lorillard. This is a new position, thus further diversifying the Portfolio, which I am
doing as part of a deliberate program to make it less concentrated.
(5) Stocks (15) held in the Dividend Growth Portfolio as of May 1, 2013:
Trades made in April, 2013: None.
(6) Total performance since inception:
As stated earlier, I believe that the most important metric for a dividend growth
portfolio is its ability to generate reliable and growing income streams. That is
because the eventual goal of most individual dividend growth investors is to fund their
retirement with steadily growing income.
But a secondary metric of interest is total return. Here is the total performance of the
Dividend Growth Portfolio. It has beaten the S&P 500 since inception.
The 2013 edition of my dividend-growth e-book, TOP 40 DIVIDEND
GROWTH STOCKS FOR 2013, was published in January. For complete
information, please click on the cover image to the right.
This Dividend Growth Portfolio (DGP) exists to demonstrate the results that can be
achieved by following sound dividend growth investing principles.
The main goal of the DGP is to generate reliable growing dividends. The dividend
stream has increased each year since the Portfolio was created in 2008. In 2012, the
Portfolio's dividends exceeded 2011's by about 11%. I expect an increase of more than
17% in 2013.
A secondary goal of the DGP is to generate acceptable total returns. The Portfolio is
up 50% in total value since inception. It has beaten the S&P 500 Index since its inception.
DIVIDEND GROWTH PORTFOLIO BACKGROUND
- The Dividend Growth Portfolio is a real portfolio with real money. It was created
June 1, 2008. It is not a hypothetical nor "back-tested" portfolio selected with 20-20 hindsight. It has been
running in real time with real money since its creation. - It resides at E*Trade.
- The opening amount on June 1, 2008 was $46,783. No money has been added or removed
since creation, except for dividends received. - The DGP exists for demonstration purposes only. I do not suggest or recommend
that anyone exactly follow my purchases or sales. Everyone should lay out their goals and
objectives, which may be different from mine. - The DGP's primary goal is to achieve a 10% yield on cost within 10 years. In
other words, I want the Portfolio to generate $4678 in annual dividends by 2018. Note
that a 10% yield on cost would mean that the Portfolio was outperforming the historical total return of the
market via dividends alone by 2018.
DETAILED REPORT CARD
(1) Generation of reliable and growing income stream:
2013 is off to a good start, with projections that this year's dividends will exceed 2012's by
17%.
Here is a table of the dividends produced each year by the Dividend Growth Portfolio:
Year Dividends Received Increase from Prior Year
2008 $ 998
2009 $1568 57%
2010 $1799 15%
2011 $1960 9%
2012 $2179 11%
2013 $2542 [projected] 17% [projected]
Next 12 months $2627 [projected]
As of the beginning of May, 2013, E-Trade's Income Estimator projects a total of $2542 in
dividends for calendar year 2013. That would suggest that the dividend stream in 2013
will increase by about 17%.
This projection probably underestimates what the actual total will be. Hopefully, the number
will rise as companies raise their dividends throughout the year, and as I add shares to the
Portfolio by reinvesting dividends. (One such reinvestment has already been made in 2013.)
(2) Achieving goal of 10% yield on cost within 10 years:
rises. This is known as yield on cost. As stated earlier, the principal goal of the Dividend
Growth Portfolio is to achieve a yield on cost of 10% within 10 years of inception.
Here is the same table of dividends as above, except the last column shows each year's
yield on cost. Note how the rising dividends each year keep the yield on cost
marching higher every year toward the eventual goal of 10% in 2018.
Year Dividends Received Yield on Cost
2008 $ 998 2.1%
2009 $1568 3.4%
2010 $1799 3.8%
2011 $1960 4.2%
2012 $2179 4.7%
2013 $2542 [projected] 5.4% [projected]
Next 12 mo. $2627 [projected] 5.6% [projected]
"Projected" means that the forward dividend stream is estimated based on the most recent
dividend payout rates. The projection assumes that no stock will cut its dividend, but it does
not anticipate any dividend increases that have not been announced.
As the months pass and dividend increases are announced, the projections will probably
increase.
The numbers through 2012 are actuals. You can see how the dividend stream from the
Portfolio has gone up each year.
Mathematically, yield on cost goes up steadily, because the "original price" in the equation
yield on cost = dividends / original price is fixed at $46,783 (the original amount in the
portfolio). But the "dividends" in the equation increase over time for three reasons:
- Companies increase their dividends. The Estimator accounts for dividend
increases as they are announced by each company. Therefore, dividend
increases still to be announced in 2013 are not yet included in the Estimator's
projection. - Additional shares to be purchased with reinvested dividends will pay
dividends themselves. Until the new shares are purchased, the Estimator
does not know about them. - Other changes may be made to the portfolio--such as swaps into higher-
yielding stocks--that will increase the dividend stream. Again, the effects of
these changes are not known to the Estimator until they are made.
Thus, actual dividends to be received should be greater than those currently projected for the
three reasons just stated.
Note on the dividends in 2008: Because I created the Portfolio during the first half of 2008, the dividends for 2008 are
less than they would have been for the entire year. That accounts for the low 2.1% yield on cost for 2008, as well as
the high 57% jump in dividends from 2008 to 2009. Later years are more representative of what one may expect in
annual dividend increases. Growth rates will usually be in the 7% to 10% range.
(3) Portfolio reviews:
I recommend conducting two formal strategic "Portfolio Reviews" per year. In 2012,
reviews were completed in April and October. I am slightly overdue for the review for April,
2013. I expect to complete it in May. Here are articles about the two 2012 reviews:
- The October review is discussed in this article: Dividend Growth Portfolio: Semi-
Annual Portfolio Review. The highlight of the review was the sale of long-time
position Abbott Laboratories (ABT) because of its break-up into two companies. I
used the cash from the Abbott sale to start new positions in BHP Billiton and Hasbro,
plus added to an existing position in Intel. - The April, 2012 review is discussed in this article: Spring Cleaning My Dividend
Growth Portfolio. Among the subjects discussed are the swap of a stock that had cut
its dividend; the pending split of Abbott into two companies; and the high valuation
(and therefore low current yield) of McDonald's.
I published an article in February, 2013 describing a couple of changes that I made to this
portfolio as part of a program to make it more diversified. I trimmed positions in two stocks
(McDonald's and PepsiCo) and used the proceeds to start positions in two higher yielding
stocks (Darden Restaurants and Omega Healthcare Investors). The changes created
immediate boosts to the dividend stream, the Portfolio's yield, and its yield on cost. Read all
about it here: Rebalancing My Dividend Growth Portfolio for Diversification and More
Yield.
In March, 2013 I also made my first dividend reinvestment of the year. I purchased 25 shares
of Lorillard (LO) on March 18. I reinvest dividends when they accumulate to $1000 in my
account. There will be at least one more reinvestment later this year. Current cash in the
account has grown to $217 since that purchase.
Earlier this year, I wrote a year-end wrap-up article about this Portfolio that you may enjoy:
Rising Dividends: My Dividend Growth Portfolio 2012-2013 Report. My next article
about this Portfolio will come after the April/May, 2013 Portfolio Review.
(4) Reinvestment of dividends:
Under the rules governing this portfolio, when the accumulated cash from dividends reaches
$1000, the funds are re-invested. The goal is always to purchase a stock that will improve
the Dividend Growth Portfolio in some way. The purchase may be of more shares in a
company already owned, or it may be used to initiate a position in a brand-new stock.
As mentioned above, I made my first dividend reinvestment of 2013 in March, purchasing
shares of Lorillard. This is a new position, thus further diversifying the Portfolio, which I am
doing as part of a deliberate program to make it less concentrated.
(5) Stocks (15) held in the Dividend Growth Portfolio as of May 1, 2013:
- Alliant Energy (LNT)
- AT&T (T)
- BHP Billiton (BBL)
- Chevron (CVX)
- Darden Restaurants (DRI)--New position begun in 2013
- Hasbro (HAS)
- Intel (INTC)
- Johnson & Johnson (JNJ)
- Kinder Morgan Energy Partners (KMP)
- Lorillard (LO)--New position begun in 2013
- McDonald's (MCD)
- Omega Healthcare Investors (OHI)--New position begun in 2013
- Realty Income (O)
- PepsiCo (PEP)
- Shaw Communications (SJR)
- Cash <1%. This is the cash accumulating from incoming dividends. The total currently
stands at $217. I will let it build up to $1000, then make another purchase.
Reinvestments can used either to purchase more shares of a stock already owned or
to start new positions.
Trades made in April, 2013: None.
(6) Total performance since inception:
As stated earlier, I believe that the most important metric for a dividend growth
portfolio is its ability to generate reliable and growing income streams. That is
because the eventual goal of most individual dividend growth investors is to fund their
retirement with steadily growing income.
But a secondary metric of interest is total return. Here is the total performance of the
Dividend Growth Portfolio. It has beaten the S&P 500 since inception.
- Origination date: June 1, 2008: $46,783
- S&P 500 at origination date: 1400
- Current value of portfolio (May 1, 2013): $70,343 (+50% since inception)
- Current value of S&P 500: 1558 (+14% since inception)
- Performance vs. S&P 500: Since inception, the Portfolio's total-return performance
has been about 32% better than the S&P 500. This out-performance is consistent with
many studies that show that dividend-growth stocks "beat the market” in total returns
over time.
The 2013 edition of my dividend-growth e-book, TOP 40 DIVIDEND
GROWTH STOCKS FOR 2013, was published in January. For complete
information, please click on the cover image to the right.
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