SUMMARY REPORT FOR FEBRUARY
The reason for the Dividend Growth Portfolio's existence is to demonstrate the
results that can be achieved by following sound dividend growth investing
principles.
The goal of the Portfolio is to generate growing dividends. The stream of dividends
has increased each year since the Portfolio was created in 2008. The total collected in 2011
was $1960. That's about 9% more than in 2010. The Portfolio has a higher current yield than
the S&P 500, and its income is rising faster.
Secondary goals of the Portfolio are to preserve capital and generate acceptable
total returns. The Portfolio has beaten the S&P 500 Index since its inception.
DIVIDEND GROWTH PORTFOLIO BACKGROUND
DETAILED REPORT CARD
The Dividend Growth Portfolio's key metric is the amount and growth of its
dividend stream.
(1) Generation of reliable and growing income stream:
Here is a complete annual history of the dividends produced by this portfolio since it was
created in 2008. Note how the dividends and yield on cost keep marching higher.
Year Dividends Received Yield on Cost Increase from Prior Year
2008 $ 998 2.1%
2009 $1568 3.4% 57%
2010 $1799 3.8% 15%
2011 $1960 4.2% 9%
2012 $2225 [projected] 4.8% [projected] 14% [projected]
Next 12 mo. $2225 [projected] 4.8% [projected] 14% [projected]
"Projected" means that the numbers are estimates based on currently known dividend rates.
As the months pass and more dividend increases are declared, the numbers in the last two
lines will increase.
As dividends are increased and reinvested, the yield based on the original
investment rises. This is known as yield on cost.
Mathematically, yield on cost goes up steadily, because the denominator in the equation
yield on cost = dividends / original price is fixed at the original $46,783. But the
numerator increases nearly month for three reasons:
For these reasons, the projected dividends from the Estimator are called "indicated"
dividends. Actual dividends will be greater than those currently projected.
Note on the dividends in 2008: Because I restructured the Portfolio during the first half of
2008, the dividends for 2008 are less than they would have been had the Portfolio been in
place 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 8% to 10%
range or a little higher.
(2) Tracking the increasing dividend estimates:
As explained above, the Estimator's projections go up as dividend increases are declared
and new shares are purchased. For example, in 2011 the actual dividends received were
about 7% more than the Estimator's first projection for the year. That additional 7% came
from the three reasons explained above.
Once again this year, I will track month-by-month the Estimator's projections for the following
12 months. As dividend increases are declared and new shares are purchased by
reinvesting the dividends, we will see how the Estimator's 12-month projection for dividends
grows.
2011
End of Year Est. Dividends Next 12 Months Yield on Cost
$2221 4.7%
2012
End of Month Est. Dividends Next 12 Months Yield on Cost
January $2225 4.8%
February
March
April
May
June
July
August
September
October
November
December
(3) Portfolio reviews:
I recommend reviewing a dividend portfolio twice per year. I reviewed this Portfolio in
April and October, 2011.
(4) Reinvestment of dividends:
Under the rules governing this portfolio, when the accumulated cash from dividends reaches
$1000, the funds are re-invested in a company from the current edition of TOP 40
DIVIDEND-GROWTH STOCKS. The particular stock for reinvestment is selected as a
good investment at that time. The object is always to improve the Portfolio in some way.
In late November, 2011, I used accumulated dividends to purchase more shares of AT&T,
adding to shares originally purchased in 2009. That was the third reinvestment of dividends
in 2011. Earlier in the year I purchased shares of Abbott Laboratories in January and June.
(5) Stocks held in Dividend Growth Portfolio as of February 1, 2012:
Here is the Portfolio's current makeup:
(6) Total performance since origination:
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 investors is to fund their retirement. The most important
measure for a retirement portfolio is not its total worth, but rather the income that it
generates.
That said, here is the total performance of the Dividend Growth Portfolio. It has beaten the
S&P 500 since inception.
THE TOP 40 DIVIDEND GROWTH STOCKS SERIES
The 2012 edition of my dividend-growth e-book, TOP 40 DIVIDEND
GROWTH STOCKS FOR 2012, is now available. Click on the cover image
to the right to learn more!
The reason for the Dividend Growth Portfolio's existence is to demonstrate the
results that can be achieved by following sound dividend growth investing
principles.
The goal of the Portfolio is to generate growing dividends. The stream of dividends
has increased each year since the Portfolio was created in 2008. The total collected in 2011
was $1960. That's about 9% more than in 2010. The Portfolio has a higher current yield than
the S&P 500, and its income is rising faster.
Secondary goals of the Portfolio are to preserve capital and generate acceptable
total returns. The Portfolio has beaten the S&P 500 Index since its inception.
DIVIDEND GROWTH PORTFOLIO BACKGROUND
- The Portfolio was created June 1, 2008. It is a real portfolio with real money. It is
not a hypothetical "model" portfolio nor a "back-tested" portfolio selected with 20-20
hindsight. - 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 Portfolio exists for demonstration purposes only. I do not suggest nor
recommend that anyone exactly follow my purchases or sales. Everyone should
do their own due diligence before investing in anything. They should also lay out their
goals and objectives, which may be different from mine. - The Dividend Growth Portfolio's goal in regard to dividends is to achieve a 10% yield
on cost within 10 years. The same goal stated in dollars is that I want the Portfolio to
generate at least $4678 in dividends in 2018.
DETAILED REPORT CARD
The Dividend Growth Portfolio's key metric is the amount and growth of its
dividend stream.
(1) Generation of reliable and growing income stream:
- Total dividends received in 2011: $1960 ($180 in December).
- Therefore, based on the Portfolio's value at the beginning of 2011, it yielded 4.0% in
2011. - E*Trade's Income Estimator projects $2225 in dividends in 2012 and the same
amount over the next 12 months. That would suggest...
- Projected yield: 4.0%. This is calculated as the dividends projected for 2012
divided by the Portfolio's value at the beginning of 2012. For comparison, the
S&P 500's current yield is about 2.0% - Yield on cost: 4.8%. This is the projected yield based on the original amount
in the account when it was converted to the Dividend Growth Portfolio in 2008.
Here is a complete annual history of the dividends produced by this portfolio since it was
created in 2008. Note how the dividends and yield on cost keep marching higher.
Year Dividends Received Yield on Cost Increase from Prior Year
2008 $ 998 2.1%
2009 $1568 3.4% 57%
2010 $1799 3.8% 15%
2011 $1960 4.2% 9%
2012 $2225 [projected] 4.8% [projected] 14% [projected]
Next 12 mo. $2225 [projected] 4.8% [projected] 14% [projected]
"Projected" means that the numbers are estimates based on currently known dividend rates.
As the months pass and more dividend increases are declared, the numbers in the last two
lines will increase.
As dividends are increased and reinvested, the yield based on the original
investment rises. This is known as yield on cost.
Mathematically, yield on cost goes up steadily, because the denominator in the equation
yield on cost = dividends / original price is fixed at the original $46,783. But the
numerator increases nearly month for three reasons:
- Companies increase their dividends. The Estimator accounts for dividend
increases as they are declared by each company. Therefore, dividend increases
to be declared during the rest of 2012 are not yet included in the Estimator's
projection. - Additional shares purchased with reinvested dividends will pay
dividends themselves. Until the new shares are purchased, the Estimator
does not know about the dividends that will come from those shares. - 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.
For these reasons, the projected dividends from the Estimator are called "indicated"
dividends. Actual dividends will be greater than those currently projected.
Note on the dividends in 2008: Because I restructured the Portfolio during the first half of
2008, the dividends for 2008 are less than they would have been had the Portfolio been in
place 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 8% to 10%
range or a little higher.
(2) Tracking the increasing dividend estimates:
As explained above, the Estimator's projections go up as dividend increases are declared
and new shares are purchased. For example, in 2011 the actual dividends received were
about 7% more than the Estimator's first projection for the year. That additional 7% came
from the three reasons explained above.
Once again this year, I will track month-by-month the Estimator's projections for the following
12 months. As dividend increases are declared and new shares are purchased by
reinvesting the dividends, we will see how the Estimator's 12-month projection for dividends
grows.
2011
End of Year Est. Dividends Next 12 Months Yield on Cost
$2221 4.7%
2012
End of Month Est. Dividends Next 12 Months Yield on Cost
January $2225 4.8%
February
March
April
May
June
July
August
September
October
November
December
(3) Portfolio reviews:
I recommend reviewing a dividend portfolio twice per year. I reviewed this Portfolio in
April and October, 2011.
- The April review resulted in significant changes to the Portfolio. They are described in
this article: "Dividend Growth Portfolio Review: Sherwin Williams Is Out." - On the other hand, the review in October produced no changes. See "Dividend
Growth Portfolio Semi-Annual Review: Pretty Boring Stuff... The Dividends
Just Keep Increasing (Yawn)."
(4) Reinvestment of dividends:
Under the rules governing this portfolio, when the accumulated cash from dividends reaches
$1000, the funds are re-invested in a company from the current edition of TOP 40
DIVIDEND-GROWTH STOCKS. The particular stock for reinvestment is selected as a
good investment at that time. The object is always to improve the Portfolio in some way.
In late November, 2011, I used accumulated dividends to purchase more shares of AT&T,
adding to shares originally purchased in 2009. That was the third reinvestment of dividends
in 2011. Earlier in the year I purchased shares of Abbott Laboratories in January and June.
(5) Stocks held in Dividend Growth Portfolio as of February 1, 2012:
Here is the Portfolio's current makeup:
- Abbott Labs (ABT)--This long-time holding is under scrutiny, as the company has
announced plans to split itself at the end of 2012. See this article: "Abbott: Still A
Dividend Growth Stalwart?" - Alliant Energy (LNT)
- AT&T (T)
- Chevron (CVX)
- Johnson & Johnson
- Kinder Morgan Energy Partners (KMP)
- McDonalds (MCD)
- Realty Income (O)
- PepsiCo (PEP)
- Telefonica (TEF)
- Cash ~ 1%. The current amount of accumulated dividends is $364. It will be reinvested
when it reaches $1000.
(6) Total performance since origination:
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 investors is to fund their retirement. The most important
measure for a retirement portfolio is not its total worth, but rather the income that it
generates.
That said, 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 (February 1, 2012): $55,716 (+19% since inception)
- Current value of S&P 500: 1312 (-6% since inception)
- Performance vs. S&P 500:The Portfolio's total-return performance has been about
27% better than the S&P 500 over the same time span. This out-performance
comports with the many studies that show that dividend-growth stocks significantly
beat “the market” in total returns over time.
THE TOP 40 DIVIDEND GROWTH STOCKS SERIES
The 2012 edition of my dividend-growth e-book, TOP 40 DIVIDEND
GROWTH STOCKS FOR 2012, is now available. Click on the cover image
to the right to learn more!
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Price $40.00
| 2012 EDITION NOW AVAILABLE |
| Click on the cover image below to learn more about the publication |
|
Price $40.00
| 2012 EDITION NOW AVAILABLE |