The information here is current as of June 30, 2014.

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.
That goal is being achieved.

  • Dividends  received through June, 2014 are ~20% higher than during the same
    period in 2013. I do not expect this wide a margin throughout the year, as a couple of sales and
    purchases of stocks with different payment schedules moved some income into the earlier part of the year.
  • The DGP generates twice as much cash as a similar investment in the S&P
    500. The current yield of the DGP is 3.8%, compared to 1.9% for the S&P 500
  • The DGP's dividend stream has more than doubled since its creation..


The Dividend Growth Portfolio is a real portfolio with real money. Its inception date  was
June 1, 2008. It is not a hypothetical or cherry-picked portfolio created with 20-20 hindsight. It has been managed in
real time with real money since its inception. It resides at E*Trade.

The opening amount was $46,783. No new money has been added since creation.

The DGP exists for demonstration purposes only. I do not suggest or recommend that anyone
exactly follow my purchases or sales. I do not present it as "best."

The DGP's specific numeric target is to achieve a 10% yield on cost within 10 years.
In other words, I want the DGP to be generating dividends at a rate of $4678 annually by June 1, 2018.

                                   DETAILED REPORT CARD

(1) Generation of reliable and growing dividend stream:

This portfolio is continuing to achieve its goals in 2014. Current projections are for dividends
in 2014 to exceed 2013's by about 1
3%, and I expect that projection will grow over the next
several months. By the end of the year, I would not be surprised
if the total dividends for 2014
exceed 2013's by 15% or more.

Here is a table of the dividends produced each year by the Dividend Growth Portfolio. Years
2008-2013 show the actual dollars received, while the numbers for 2014 and Next 12
Months are projections. I use the "Income Estimator" at E-Trade to make the projections.

Year       Dividends Received      Increase from Prior Year        Yield on Cost            
2008              $  998                                                                                       2.1%                             
2009              $1568                                        57%                                       3.4%
2010              $1799                                        15%                                       3.8%
2011              $1960                                          9%                                       4.2%
2012              $2179                                 
       11%                                       4.7%
2013              $2582                                        18%                                       5.5%

2014              $2
927 [projected]                     13% [projected]                    6.3% [projected]        
Next 12 Mo.  $29
56 [projected]                      NA                                         6.3% [projected]     

The Income Estimator currently projects a total of $2
927 in dividends for calendar year 2014.
This is an incomplete estimate for the year, as a few companies in the portfolio have not
announced their dividend increases for 2014 yet.

Not only do the dividends produced by this portfolio go up from dividend increases, they also
rise from reinvesting dividends. I purchase new shares when dividends accumulate to $1000.

In 2014, I have already made two such reinvestments (in January and May). I expect to make
one more before the end of the year. As these purchases are made, the new shares
generate dividends of their own, causing the cash stream from the DGP to go up.

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 at the end of 2008, as
well as the 57% jump in dividends from 2008 to 2009. Years beginning in 2010 are more representative of what one
may expect in annual dividend increases. Growth rates will usually be in the 10% to 15% range each year.

(2) Achieving 10% yield on cost within 10 years:

As dividends are increased and reinvested, the yield based on the original investment
. This is known as yield on cost (YOC). The portfolio's annual YOC is shown in the right-
hand column of the table above. Note how it rises each year in step with the dividends.

Mathematically, YOC rises steadily, because the "original price" in the equation
yield on cost = dividends / original price stays fixed at $46,783. But the numerator (the
dividend amount) increases over time for three reasons:

  1. Companies increase their dividends. The Estimator accounts for dividend
    increases as they are announced by each company. Therefore, dividend
    increases yet to be announced in 2014 are not included in the Estimator's
  2. 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. I expect to make a third purchase in 2014 as dividends
    flow into the account.
  3. Other changes may be made to the portfolio that will affect the dividend
    stream. Again, the effects of these changes are not known to the Estimator until
    they are made.

Here in graphical form is the history of the annual cash dividend payout rate of the Dividend
Growth Portfolio:

I estimate that the annual dividend rate on the day the portfolio began was $1400/year. The
goal (shown by the red
Goal line) is to reach 10% yield on cost at the end of 10 years, or an
annual rate of $4678 on June 1, 2018.

Notice that the red
Goal line curves upward. This is typical of compounding numbers. The
Run-Rate line is also curving upwards, demonstrating the compounding that results
from both dividend increases and reinvesting dividends.

The graph tells me that I am on track to meet the portfolio's goal, because the blue line is
basically running along with the red line through June 1, 2014. I have not projected a payout
rate for 2015 yet. I will wait a few months until I have more actual numbers to base it on.

(3) Portfolio reviews and reports:

I recommend conducting two formal strategic Portfolio Reviews per year. Here are articles
about the last two reviews:

I also write other occasional articles about the Portfolio. This is the most recent:
Dividend Growth Portfolio's 6th Birthday Report.

(4) Reinvestment of dividend in 2014:

Under the rules governing this portfolio, when the accumulated cash from dividends
reaches $1000, the cash is re-invested. 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.

I have made two dividend reinvestments so far in 2014.
  • In January, I purchased 27 shares of Microsoft (MSFT).
  • In May, I purchased 15 shares of Ventas (VTR).

I expect that incoming dividends will enable one more reinvestment in 2014. The two
purchases thus far were both new positions for the portfolio, bringing the total number of
stocks to 18.

(5) Portfolio changes in 2014:

  • In January, I made the first dividend reinvestment of the year, starting a new position in
    Microsoft (MSFT).
  • Also in January, I decided to sell Intel (INTC), because their dividend had been frozen
    for seven quarters, and I want stocks with rising dividends. With the proceeds from the
    sale, I made two purchases. I bought a new stock for the portfolio, Coca-Cola (KO) and
    also added to the portolio's stake in Philip Morris (PM).
  • In April, I sold the DGP's position in Darden Restaurants (DRI), because of general
    business deterioration. (You can get more detail about that sale in this article: I Just
    Sold This Stock. Recently, DRI froze its dividend; that possibility was one of the
    reasons that I sold it.) With the proceeds from the sale, I added to the position in Coca-
    Cola and also started a new position in Procter & Gamble (PG).
  • In May, I made the second dividend reinvestment of the year, starting a position in
    Ventas (VTR).

(6) Dividend Growth Portfolio as of June 30, 2014:

The DGP has 18 positions. The cash will be reinvested when it hits $1000 again later in the


(7) Total performance since inception:

As described earlier, the principal goal for this portfolio is to create a dividend stream that
grows to 10% yield on cost after 10 years (i.e., by June 1, 2018). All of my investment
decisions are made with that goal in mind.

But a secondary metric of interest is total return. Here is the total performance of the
Dividend Growth Portfolio compared to SPY (an ETF that tracks the S&P 500) since
inception. Both the DGP and SPY are shown with dividends reinvested.

As of June 29, 2014, the DGP has gained 66% in total returns compared to SPY's gain of
59% since the inception of the DGP.
Dedicated to the success of the individual investor
JULY, 2014 -- Dividend Growth Portfolio Update
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