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| Dividend Growth Portfolio Strategy |
For illustrative and demonstration purposes, I maintain a public, real-time, real-world,
real-money Dividend Growth Portfolio (DGP). I created the portfolio in 2008, and I maintain
it according to a high-level document that I call its "constitution."
The DGP's strategies come straight from the annual eBooks that I have written since 2008. The
first edition contained the original constitution for the DGP. It has been slightly modified each
year as part of a routine annual process of reviewing and updating the portfolio's strategies
and operation every year.
The DGP's performance is tracked monthly. Click here to see the latest report on the
DGP's results.
Below is the current version of the DGP's constitution as amended January 15, 2013. For 2013,
the constitution is essentially the same as last year’s with only one significant change: I have
broadened the portfolio’s diversification objective by increasing the target number of stocks it
can hold and reducing the maximum size of any one holding.
The Constitution for My Dividend Growth Portfolio
Goal for My Dividend Growth Portfolio:
The goal of the Dividend Growth Portfolio is to generate a steadily increasing stream of
dividends paid by excellent, low-risk companies. The numerical target is for the portfolio to
deliver 10 percent yield on cost within 10 years of inception. I am more interested in the ability
of this portfolio to produce income than its sheer size.
Strategies to attain the goal:
• Use the current Top 40 Dividend Growth Stocks as my shopping list. The list may be
modified during the year by adding or dropping particular stocks after thorough analysis.
• Buy only stocks with “Fair” or better valuations.
• Reinvest dividends, but not automatically in the company that issued them. Rather,
reinvest when the incoming cash accumulates to $1000, selecting the best candidate at that
time. Select stocks for reinvestment as carefully as original purchases.
• When reinvesting dividends, try to improve the portfolio along one or more dimensions:
yield, dividend growth, diversification, and the like.
• Shoot for an eventual total of 20 to 25 stocks in the portfolio.
• Aim for well-roundedness in the portfolio. Diversify across sectors, industries,
geographies, and different ranges of yields and growth rates.
• Hold no more than 15 percent of the portfolio’s value in a single stock. Rebalance the
portfolio when necessary to redress excessive size that may have developed in a particular
holding.
• Make opportunistic switches from one stock to another if such a swap will upgrade the
portfolio. The expected frequency of such exchanges is low.
• Since the major focus is on dividends and not share prices, the portfolio will usually be
100% invested (except for accumulating dividends). Don’t “sit out” bear markets. Cash does not
generate dividends.
• Aside from the maximum size limit, be agnostic on position sizing. Investing an equal initial
amount in each stock is fine. Adjustments in proportion will occur as prices change, dividends
are reinvested, and sales are made in the normal maintenance of the portfolio.
• Investigate and seriously consider selling any stock for these reasons:
(1) It cuts, freezes, or suspends its dividend.
(2) It bubbles or becomes seriously overvalued.
(3) You receive news of significant changes impacting the company.
(4) It is going to be acquired.
(5) It announces plans to split itself or spin off a separate company.
(6) Its current yield rises above 9 or 10 percent or drops below 2.7 percent.
(7) It underperforms the market in total returns (price + dividends) for three years
running.
(8) Its size increases beyond 15 percent of the portfolio.
• Conduct a thorough Portfolio Review twice per year.
• Review this constitution at least once per year and adjust it for changed circumstances,
new knowledge, and the like.
Strategies and Practices Not Used:
• Margin.
• Shorting.
• Options, futures, or other derivative investments.
• Mutual funds or ETFs.
• Trailing sell-stops. Exception: If I have determined to sell a stock and it is in a price
uptrend, I may use a tight trailing sell-stop to milk capital gains out of the stock before selling it.
real-money Dividend Growth Portfolio (DGP). I created the portfolio in 2008, and I maintain
it according to a high-level document that I call its "constitution."
The DGP's strategies come straight from the annual eBooks that I have written since 2008. The
first edition contained the original constitution for the DGP. It has been slightly modified each
year as part of a routine annual process of reviewing and updating the portfolio's strategies
and operation every year.
The DGP's performance is tracked monthly. Click here to see the latest report on the
DGP's results.
Below is the current version of the DGP's constitution as amended January 15, 2013. For 2013,
the constitution is essentially the same as last year’s with only one significant change: I have
broadened the portfolio’s diversification objective by increasing the target number of stocks it
can hold and reducing the maximum size of any one holding.
The Constitution for My Dividend Growth Portfolio
Goal for My Dividend Growth Portfolio:
The goal of the Dividend Growth Portfolio is to generate a steadily increasing stream of
dividends paid by excellent, low-risk companies. The numerical target is for the portfolio to
deliver 10 percent yield on cost within 10 years of inception. I am more interested in the ability
of this portfolio to produce income than its sheer size.
Strategies to attain the goal:
• Use the current Top 40 Dividend Growth Stocks as my shopping list. The list may be
modified during the year by adding or dropping particular stocks after thorough analysis.
• Buy only stocks with “Fair” or better valuations.
• Reinvest dividends, but not automatically in the company that issued them. Rather,
reinvest when the incoming cash accumulates to $1000, selecting the best candidate at that
time. Select stocks for reinvestment as carefully as original purchases.
• When reinvesting dividends, try to improve the portfolio along one or more dimensions:
yield, dividend growth, diversification, and the like.
• Shoot for an eventual total of 20 to 25 stocks in the portfolio.
• Aim for well-roundedness in the portfolio. Diversify across sectors, industries,
geographies, and different ranges of yields and growth rates.
• Hold no more than 15 percent of the portfolio’s value in a single stock. Rebalance the
portfolio when necessary to redress excessive size that may have developed in a particular
holding.
• Make opportunistic switches from one stock to another if such a swap will upgrade the
portfolio. The expected frequency of such exchanges is low.
• Since the major focus is on dividends and not share prices, the portfolio will usually be
100% invested (except for accumulating dividends). Don’t “sit out” bear markets. Cash does not
generate dividends.
• Aside from the maximum size limit, be agnostic on position sizing. Investing an equal initial
amount in each stock is fine. Adjustments in proportion will occur as prices change, dividends
are reinvested, and sales are made in the normal maintenance of the portfolio.
• Investigate and seriously consider selling any stock for these reasons:
(1) It cuts, freezes, or suspends its dividend.
(2) It bubbles or becomes seriously overvalued.
(3) You receive news of significant changes impacting the company.
(4) It is going to be acquired.
(5) It announces plans to split itself or spin off a separate company.
(6) Its current yield rises above 9 or 10 percent or drops below 2.7 percent.
(7) It underperforms the market in total returns (price + dividends) for three years
running.
(8) Its size increases beyond 15 percent of the portfolio.
• Conduct a thorough Portfolio Review twice per year.
• Review this constitution at least once per year and adjust it for changed circumstances,
new knowledge, and the like.
Strategies and Practices Not Used:
• Margin.
• Shorting.
• Options, futures, or other derivative investments.
• Mutual funds or ETFs.
• Trailing sell-stops. Exception: If I have determined to sell a stock and it is in a price
uptrend, I may use a tight trailing sell-stop to milk capital gains out of the stock before selling it.
| 2013 EDITION NOW AVAILABLE |
| 2013 EDITION NOW AVAILABLE |
|
Price $40.00
|
Price $40.00