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

The purpose of this Dividend Growth Portfolio (DGP) is to demonstrate the results that can
be achieved through dividend growth investing principles.
The main goal of the DGP is to
generate reliable growing dividends.

That goal is being achieved:

  • Dividends  received through September, 2014 are ~14% higher than during the
    same period in 2013.
  • The DGP generates twice as much cash as a similar investment in the S&P
    500. The current yield of the DGP is 4.0%, 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:

Current projections are for dividends in 2014 to exceed 2013's by about 14% -15%.

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.

The Income Estimator currently projects a total of $29
33 in dividends for 2014. This is an
incomplete estimate, as a few companies in the portfolio have not yet announced their
dividend increases for 2014.

Not only do the dividends produced by this portfolio go up from dividend increases, they also
rise from reinvesting dividends. I reinvest cash dividends when the total gets to $1000.

In 2014, I have made t
hree reinvestments, in January, May, and September. As these
have been made, the new shares generate dividends of their own, causing the
cash stream from the portfolio to go up
at a faster rate than just through dividend increases

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 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
dividends) increases over time for three reasons:

  1. Companies increase their dividends. The Estimator updates 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.
  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 is the annual cash payout rate of the Dividend Growth Portfolio as of June 1 each year:

I estimate that the rate on the day the portfolio began was $1400/year, or 3.0% yield on cost.
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 the payout
rate for June 1, 2015 yet. I will wait until the end of the year so that I have more actual
numbers to base it on.
At the current time, the YOC for the next 12 months' projected payouts
is 6.6%.

(3) Portfolio reviews and reports:

I conduct two formal Portfolio Reviews per year. Here are articles about the last two

he next portfolio review will be this month, and I will write an article about it when it is

(4) Reinvestment of dividends 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
three dividend reinvestments in 2014.
  • In January, I purchased 27 shares of Microsoft (MSFT).
  • In May, I purchased 15 shares of Ventas (VTR).
  • In September, I purchased 12 shares of Procter & Gamble (PG).

first two purchases were both new positions for the portfolio, bringing the total number of
stocks to 18.
The purchase of PG in September added more shares to an existing position.

(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.) 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).
  • In July, I sold Lorillard (LO) and replaced it with HCP (HCP), a healthcare REIT.
    Lorillard is in negotiations to be purchased by another tobacco firm. I did not like the
    uncertainty created by the merger negotiations. (The complete rationale for the swap is
    found here: I Just Sold this Stock.)
  • In September, I made the third dividend reinvestment of the year, purchasing more
    shares of Procter & Gamble.

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

The DGP has 18 positions. The cash will be reinvested when it hits $1000 again, which will
probably be in January, 2015.


(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. 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 September
30, 2014, the DGP has gained 65% in total returns compared to SPY's
gain of
62% since the inception of the DGP. The DGP's total value is $77,267. Had the
same amount been invested in SPY, it would currently be worth $7
5,555, and it would be
generating half the cash flow that the DGP generates.
Dedicated to the success of the individual investor
Dividend Growth Portfolio Update
Price $40.00
Price $40.00
Price $40.00
2014 (projected)
Next 12 Months
2018 GOAL