OVERVIEW

The Dividend Portfolio is not a hypothetical or model portfolio. It contains real
stocks purchased with real money. It includes the frictional effects of commissions
and other transaction costs. No money has been added to or removed from the portfolio
since it was created, other than dividends received. This is a demonstration portfolio
designed to illustrate the results that can be achieved by applying the principles in THE
TOP 40 DIVIDEND STOCKS series.

SUMMARY REPORT CARD

The Dividend Portfolio is ahead of the S&P 500 since its creation in 2002. It has
gained 12% in total value vs. the S&P 500's gain of 2% in the same time period.

But its real purpose is to generate growing dividends. It is doing that: In 2009, the
portfolio took in 19% more dividends than in 2008. In 2010, it is on pace to take in
more than 13% more than in 2009.

Its yield will continue to rise as dividend increases are declared, new shares are
purchased with incoming dividends, and occasional stock swaps are made.

DETAILED REPORT CARD

This portfolio was originally begun in 2002 with $40,000. In the beginning, it was
somewhat unfocused, with no unifying strategy. It was gradually aimed toward generating
increasing dividends, which has become its permanent mission. Author Dave Van Knapp
completely re-built this portfolio in 2008 using the precepts of THE TOP 40 DIVIDEND
STOCKS series.

A dividend portfolio has two key metrics. One, of course, is total performance. The other,
perhaps more important, is its ability to generate reliable and growing income streams
from dividends and distributions.

Total performance since origination:
  • Origination date: April 1, 2002: $40,000
  • S&P 500 at origination date: 1147
  • Current value of portfolio (April 1, 2010): $44,671 (+12%)
  • Current value of S&P 500: 1169 (+2%)
  • Performance vs. S&P 500: +10%

Dividend generation / Income stream:
  • Total dividends received YTD in 2010: $364
  • Indicated dividends over next 12 months: $1778 (Source: E*Trade's Income
    Estimator)
  • The actual dividends received in 2010 will be higher, for three reasons.
  • The Income Estimator does not include dividend increases until they are
    declared by each company. Therefore, dividend increases still to be declared
    in 2010 are not included yet.
  • Dividends on additional shares that will be purchased with accumulating
    dividends are not included yet.
  • I may make a couple of changes to the portfolio to increase its yield. The
    impact of these changes is not reflected yet.
  • Based on E*Trade's $1778 indicated dividends over the next 12 months...
  • Yield on present value of portfolio ($44,671): 4.0%  
  • Yield on original value of portfolio ($40,000): 4.4% = "yield on cost"
  • For comparison, S&P 500's current yield is about 2.0%

As dividend increases are declared and dividends are reinvested, the yield on the
original investment will rise over time. This is known as yield on cost.
Mathematically, yield on cost goes up because the divisor in the equation, Yield =
Dividends / Price, is fixed at the original $40,000. But the numerator will increase steadily
for the three reasons listed above.

Stocks held in Dividend Portfolio as of April 1, 2010:
  • Abbott Labs (ABT)
  • Alliant Energy (LNT)
  • AT&T (T)                        
  • Chevron (CVX)                  
  • Diageo (DEO)              
  • Emerson Electric (EMR)  
  • Kinder Morgan Energy Partners (KMP)
  • McDonalds (MCD
  • Realty Income (O)   
  • Pepsico (PEP)   
  • Royal Bank of Canada (RY)   
  • Sherwin Williams (SHW)  
  • Telefonica (TEF)  

The Dividend Portfolio contains almost no cash, as the accumulated dividends were used
in February to begin a new position in Alliant Energy (LNT). Under the rules governing this
portfolio, when the accumulating cash reaches $1000, the funds are re-invested in a
company from the current edition of  THE TOP 40 DIVIDEND STOCKS. In 2009, I
purchased more shares of Abbott Labs with accumulated dividends, and in 2010, a new
position in Alliant was started. I expect one other opportunity in 2010 to add to the
portfolio's holdings by re-investing accumulated dividends.

It is by means of such re-investments, along with annual dividend increases, that the yield
on cost will rise as described above.

Dividend History for Dividend Portfolio:
Year        Dividends Received                Yield on Cost                Increase from Prior Year
2008                $1316                                        3.3%                                        
2009                $1568                                        3.9%                                19%
2010                $1778 [indicated]                     4.4% [indicated]              13% [indicated]

The numbers for 2010 are all indicated values, meaning that they are based on current
dividend rates and increases already announced. As more dividend increases are
announced, and as additional shares are purchased with accumulated dividends, the
actual numbers for 2010 will go up.

The 2010 edition of my dividend e-book, THE TOP 40 DIVIDEND STOCKS FOR 2010:
How to Generate Wealth or Income from Dividend Stocks, is now available. Click
the cover image to the right for more information. The Dividend Portfolio here is run
entirely according to the principles and stocks presented in THE TOP 40 DIVIDEND
STOCKS series.
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April, 2010 Portfolio Update
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