Updated December 1, 2019
Highlight of the Month
Final estimates show that this year the DGP will collect $4,287 in dividends, the highest annual total ever.
- The 2019 total will be 11% higher than last year’s total.
- The $4287 will represent a dividend return of 3.9% in 2019 (based on the portfolio’s value at the start of the year).
The table below is sorted alphabetically. Transactions in 2019 are highlighted in yellow. There were no buys or sells in November, and I don’t expect any in December.
I changed the last column to show the annual dividend dollars expected from each stock. The number shown is based on each stock’s current dividend rate. As each company raises its dividend, the dollar number, of course, will go up.
- Collected $356 in dividend payments from 8 companies.
- Yield on cost and current yield stayed the same as last month, at 9.6% and 3.3% respectively.
- The DGP will close the year owning 26 stocks that rendered 29 dividend increases in 2019, with no cuts.
Main Goal: Grow Dividends Each Year
The reason this is my favorite chart is because it illustrates how the portfolio is achieving its goals. The whole idea behind the DGP is to generate a reliable, steadily growing stream of dividends over many years.
The DGP’s dividend stream goes up for three reasons:
- Dividend increases. The companies in the portfolio announce regular raises.
- Dividend reinvestments. I collect the dividends and buy new shares when the kitty reaches $1000. The new shares then generate more dividends, increasing the annual run-rate of dividend collection. It’s like a snowball rolling down a hill, collecting snow and getting bigger the further it rolls.
- Portfolio management. I occasionally make swaps to get higher-yielding shares, as I did in May (see this article).
With no new money being added by me, all growth in the DGP is self-generated. The growth in dividends and total size are fueled entirely by what’s already in the portfolio.
The absence of new outside money makes the DGP a great case study for the power of receiving and reinvesting dividends from companies that are growing their dividends themselves. The dividend increases by the companies grow the dividend stream, and reinvesting the dividends makes it grow faster.
The estimated income for full-year 2019 is $4287, which is 11% more than I received in 2018. The projection is based on dividends already received + December’s dividends that have already been declared. (There was an arithmetic mistake in last month’s year-end estimate. I apologize for that error.)
For 2020, I’ve made a conservative forecast: 2019’s total dividends + 8%.
Transactions in November
All transactions were the receipt of dividends. There were no purchases or sales in November. I received $356 from 8 companies, which matched expectations.
Dividends Expected in December
I expect to receive $423 from 13 companies in December. Half the companies in the portfolio pay out this month!
Dividends Projected for Next 12 Months
This display from E-Trade shows that $4470 dividend dollars are expected over the next 12 months, based on current payout rates and payment schedules.
- Of course, with dividend-growth stocks, the actual dollars collected in the next 12 months will be more than the forecast.
- Plus I will add still more dividend dollars each time I reinvest dividends to purchase new shares.
The DGP’s current dividend run-rate of $4470 per year translates to an all-time high yield on cost of 9.6%. A year ago, the yield on cost was 8.5%, so it’s advanced more than a full percentage point over the past 12 months.
That illustrates the income power of owning dividend growth companies and reinvesting their dividends.
Dividend Increases in 2019
This year, 29 increases were declared by the portfolio’s 26 companies. There have been no cuts. Last year, the portfolio got 28 increases and no cuts.
Qualcomm failed to increase its dividend in 2019. In other words, its dividend is frozen. I will be keeping an eye on the company, hoping that they resume dividend increases in 2020.
The table below shows all of the dividend increases for 2019. The stocks are listed alphabetically. No more increases are expected for this year.
Yield on Cost Is Much Greater than Current Yield
Yield on cost (YOC) is the portfolio’s yield based on the original money invested when I started the portfolio in 2008.
Formula for Yield on Cost
Projected 12-months’ dividends / Original cost of portfolio
$4470 / $46,783
The 9.6% YOC is a record high for the DGP. A year ago it was 8.5%. It has moved up more than a percentage point over the past year.
YOC correlates directly to the dollar total of dividends received per year. It goes up when:
- Stocks announce dividend increases
- I add new shares through dividend reinvestments.
The DGP’s yield on cost shows that I am now collecting 9.6% of the original investment annually in cash dividends.
That kind of income power was the inspiration for the portfolio in 2008. My mental goal is to reach 10% YOC, and it’s getting closer and closer. If nothing horrible happens, 10% will be reached in the first half of next year.
Current yield is the portfolio’s yield calculated as a percentage of the current value of the portfolio. It’s the yield you would receive if you duplicated the portfolio today, at today’s prices.
Formula for Current Yield
Projected 12-months’ dividends / Current value of portfolio
$4470 / $135,575
That is unchanged from last month.
It is important to remember the difference between yield and the amount of dividend payouts. Yield is a percentage, while dividend payouts come in dollars.
So the current yield of your portfolio can stay flat, or go up or down, even though the dollar payouts always go up. That happens because of fluctuating market prices. While prices are volatile and move in both directions, dividend payments change slowly and usually only go up.
During its history, the DGP’s current yield has ranged from 3.3% to 4.2%. Over the long haul, variations in current yield within the DGP’s normal range are not very meaningful.
What is important is that the income measured in dollars goes up steadily. That is what is shown by My Favorite Chart displayed earlier.
For comparison to this portfolio’s 3.3% yield, the S&P 500’s current yield is 1.8%. The benchmark 10-year Treasury (fixed income) is also yielding 1.8%. [Source]
As described in DGI Lesson 10, dividends can be reinvested either by dripping them or letting them pile up in cash and then making larger targeted purchases.
I use the second method. I reinvest dividends when they accumulate to $1000.
In 2019, I made four reinvestments.
- October: Added to 3M position (see this article)
- August: Bought 3M as new position (see this article)
- May: Added to stake in Verizon (see this article)
- February: Added to stake in Verizon (see this article)
With the cash kitty now at $466, and based on dividends expected this month and next, I expect to make the DGP’s next reinvestment in January.
Secondary Goal: Total Returns
The dividend growth strategy also leads to good total returns.
The value of the DGP has grown +190% from its inception in June 2008. It started at $46,783. It is now worth $135,575.
For comparison, if the DGP’s original money had been invested in the S&P 500 index-tracking ETF called SPY, with dividends reinvested, it would have increased +184% to a total value of $134,067. [Source]
And that SPY investment would be yielding only 1.8% compared to the DGP’s 3.3%.
Background: What is the Dividend Growth Portfolio?
- To see the Business Plan for this portfolio, click here.
- To learn more about the origins of the portfolio, click here.
- To see a list of all the articles about the DGP, see the section below.
Remember, the DGP is not presented as best or a model. Rather, its purpose is to provide a live demonstration of what you can accomplish with dividend growth investing, and what it is like to run a real stock portfolio. I show what I do and explain why I do it.
–Dave Van Knapp
Dividend Growth Portfolio Articles
I Just Bought Shares of this World-Class Company for my Dividend Growth Portfolio– October 18, 2019
I Just Bought This Stock For My Dividend Growth Portfolio (DGP)– August 6, 2019
I Just Bought More Verizon (VZ) Stock– May 21, 2019
I Just Bought Shares of Altria (MO) and Dominion (D) For My Dividend Growth Portfolio (DGP)– May 20, 2019
I’m Seriously Considering Dominion (D) Stock as a New Position in My Dividend Growth Portfolio– May 8, 2019
These 3 Popular Dividend Growth Stocks Appear Way Overvalued Right Now– April 27, 2019
I Just Bought More Verizon (VZ) for My Dividend Growth Portfolio– February 20, 2019
Dividend Growth Portfolio – 2018 Review and 2019 Preview– January 7, 2019
I Just Bought Texas Instruments (TXN) For My Dividend Growth Portfolio– November 21, 2018
I Just Bought Procter & Gamble (PG) for My Dividend Growth Portfolio– August 17, 2018
Re-Introducing My Dividend Growth Portfolio– May 12, 2018
I Just Bought Shares of Atria (MO)- An Iconic, High-Yield Dividend Growth Stock– May 17, 2018
I Just Bought Verizon (VZ) for My Dividend Growth Portfolio– March 12, 2018
I Just Sold HCP (HCP) and Omega Healthcare Investors (OHI)– March 8, 2018
I Just Bought Amgen (AMGN) For My Dividend Growth Portfolio– February 26, 2018
I Just Bought Another $1,000 of Cisco (CSCO) for My Dividend Growth Portfolio– December 6, 2017
I Just Bought Realty Income (O) and Smucker (SJM) for My Dividend Growth Portfolio– November 4, 2017
I Just Bought Lowe’s (LOW) for My Dividend Growth Portfolio– August 28, 2017
I Just Bought Another 18 Shares of Qualcomm (QCOM)– May 18, 2017
I Just Bought 18 Shares of Qualcomm (QCOM) for My Dividend Growth Portfolio– February 21, 2017
I Just Bought Another $1,000 Worth of Cisco (CSCO)– November 3, 2016
I Just Bought Boeing (BA) For My Dividend Stock Portfolio– August 10, 2016
I Just Bought 45 Shares of Southern Company (SO)– May 6, 2016
I Just Bought 47 Shares of Ventas (VTR)– April 14, 2016
I Just Bought 60 Shares of Cisco (CSCO)– February 16, 2016
I Just Sold My Shares of Kinder Morgan (KMI)– December 14, 2015
I Just Bought Another 30 Shares of AT&T (T) – November 23, 2015
My Dividend Growth Portfolio Delivers a 7%-Plus Yield on Cost Already – October 17, 2015
I Just Reinvested $1,000 in Philip Morris International (PM) – August 27, 2015
I Just Bought Another 24 Shares of Coca-Cola (KO) – May 26, 2015
Why I Decided to Hold All 19 Stocks in My Dividend Growth Portfolio – April 15, 2015
Why I Sold Some Johnson & Johnson (JNJ) and Pepsi (PEP) – January 24, 2015
I Just Bought Another 30 Shares of AT&T (T) – January 14, 2015
This Portfolio Generates Dividend Income That Rises 15% Per Year – November 10, 2014
I Just Bought More Shares Of Procter & Gamble (PG) – October 1, 2014
I Just Sold Lorillard (LO) and Bought HCP Inc. (HCP) – July 16, 2014
This Real-Money Portfolio is a Cash Machine – July 10, 2014
I Just Bought Ventas (VTR) for My Real-Money Portfolio – May 28, 2014
I Just Sold Darden Restaurants (DRI) – April 11, 2014
Why I Sold All of My Shares of Intel (INTC) – March 31, 2014
An Introduction to My Real-Money Dividend Growth Portfolio – March 15, 2014