Last updated: April 1, 2016
Goal: The primary goal is to generate a steadily increasing stream of dividends paid by excellent, low-risk companies. Numerical objective: Deliver 10 percent yield on cost within 10 years of inception. The secondary goal is to deliver competitive total returns compared to the general market.
Portfolio inception date: June 1, 2008
1. Use the analytical methodology embodied in “Dividend Growth Stock of the Month” series to select (or reject) stocks.
2. Buy only stocks with “Fair” or better valuations.
1. Dividends are reinvested but not dripped.
2. Rather, when incoming cash accumulates to $1,000, select the best candidate at that time to buy.
3. When reinvesting dividends, try to improve the portfolio along one or more dimensions, such as yield, dividend growth, diversification, and the like.
4.Since the major focus is on income and not share prices, the portfolio will usually be 100% invested except for accumulating dividends.
1. Shoot for an eventual total of 20 – 25 stocks in the portfolio.
2. Aim for well-roundedness in the portfolio. Diversify across sectors, industries, and different ranges of yields and growth rates.
3. Hold no more than 10% of the portfolio’s value in a single stock.
3. Rebalance the portfolio when necessary to redress excessive size in a particular holding.
4. Otherwise, be agnostic on position sizing. There is no minimum size requirement. The weights of holdings will self-adjust as prices change and dividends are reinvested.
1. This portfolio is expected to have a low turnover rate. Unless there is a strong reason to sell, the default action is to hold.
2. However, investigate and seriously consider selling any stock for these reasons:
(a) It cuts, freezes, or suspends its dividend.
(b) It bubbles or becomes seriously overvalued.
(c) You become aware of significant fundamental changes impacting the company.
(d) It is going to be acquired.
(e) It announces plans to split itself or spin off a separate company.
(f) Its current yield rises above 9% or drops below 2.5%.
(g) Its size increases beyond 10% of the portfolio.
1. Conduct a thorough Portfolio Review twice per year.
2. Review this business plan at least once per year and amend it as appropriate.
Strategies and practices not used:
3. Options, futures, or other derivative investments.
4. Mutual funds or ETFs.