Dave Van Knapp's Dividend Growth Portfolio

Updated October 1, 2021

Big News of the Month

Seven companies (out of 30 in the portfolio) announced dividend raises in September.

Raises were declared by such companies as Lockheed Martin (LMT), McDonald’s (MCD), Phillip Morris (PM), Texas Instruments (TXN), and Verizon (VZ).

The size of the raises ranged from negligible (0.2% from Realty Income) to double-digits (11.1% from Microsoft and 12.7% from Texas Instruments).

The Portfolio

Changes in September:

  • Sales: None
  • Purchases: Bought 4 shares of AbbVie through dividend reinvestment.

The table below shows the complete portfolio as of the opening bell on October 1. The aqua highlights pertain to the AbbVie shares added. The yellow highlights indicate new dividend amounts from the seven stocks that announced increases in September.

What Happened in September

  • Seven of the portfolio’s 30 stocks announced dividend raises.
  • Collected $613 in dividends from 16 companies. More than half the companies in the portfolio paid in September.
  • The combination of new AbbVie shares + the dividend increases resulted in the portfolio’s annual dividend run-rate rising from $5088 to $5178, achieving a yield on cost of 11.1%.
  • Total value of the portfolio dropped about 5% along with the market in September. It is still up 8.4% this year.

Primary Goal: Generate Reliable, Growing Dividends Every Year

The chart above shows the DGP’s steady annual dividend growth. That relentless growth is the portfolio’s main goal.

At current run-rates, 2021’s total dividends will be $5195, which would be a 9% increase over 2020’s total.

I have added an estimated bar for 2022, using a modest increase of 8% over 2021 to make the initial projection for next year.

Why the Portfolio’s Dividend Stream Grows Each Year

There are three reasons that the DGP’s dividend stream goes up every year.

  • Dividend increases. The companies in the portfolio announce regular raises.
  • Dividend reinvestments. I collect the dividends and buy new shares each month.
  • Portfolio management. I occasionally make trims and replacements that result in dividend growth.

I benefited from 30 dividend raises in 2020. So far this year, 30 increases have been announced, and I expect one more by the end of the year.

In addition to those, the SCHD (an ETF) may also increase its annual dividend, but that won’t be known until it announces its December payout. ETFs have varying quarterly payouts, so whether an ETF has increased its payout on an annual basis is not known until it reveals its final payout of the year.

The DGP’s Growth Is Organic, Not Fueled by New Capital

All growth in the DGP – in both dividends and market value – is generated organically from within the portfolio. I have not added any new capital since I started the portfolio in 2008.

The absence of new outside money makes the DGP a great demonstration of the power of dividend growth investing by itself. No numbers are skewed by new capital coming in. All money coming in (dividends) comes from the portfolio, not from outside.

Transactions in September

Stocks sold: None.

Stocks bought: Added 4 shares each of AbbVie through dividend reinvestment.

Dividends collected: I received $613 from 16 companies. September is a heavy month for dividends in this portfolio.

Dividends Expected in October

This calendar from Simply Safe Dividends shows the dividend payments expected in October. They total $284 from seven companies.

October is the first month of the calendar quarter, which is the lightest month for payouts in this portfolio. The monthly variations are simply the result of the payment schedules of the particular companies that I own. They have no broader significance. I have never selected (or turned away from) a stock based on its payment schedule.

Dividends Expected Next 12 Months

The next display, from E-Trade, shows the portfolio’s annual dividend run-rate for the next 12 months, which stands at $5178/year. You can see the repetitive quarterly pattern of monthly payouts in the chart. October is a light month, November will be higher, and December will be still higher. Then in January the pattern starts over.

Dividend Increases in 2021

So far this year, 30 dividend increases have been declared among the DGP’s 30 companies. One more increase is expected by the end of the year, plus when the year is done, it may turn out that the single ETF in the portfolio also raised its total payout compared to 2020.

One dividend is frozen: Hasbro. I am now seriously considering selling it. It’s had a good run for me, but technically it is no longer a dividend-growth stock. At 3.1%, its yield would be easy to replace. Prior to its freeze, Hasbro had a 17-year dividend growth streak, but its last increase was in May 2019.

Over the past three years, the number of DGP’s increases has been 28, 29, and 30, with no cuts and a small number of freezes.

In the Increase Tracker below, new information recorded in August is highlighted in yellow. Hasbro’s frozen dividend is shaded orange.

Yield

I calculate the DGP’s yield in two ways.

Current yield is the yield from the portfolio right now, based on its current dividend run-rate and its current value. It is the yield you would get if you duplicated the portfolio today.

Here is the formula for current yield:

Projected 12-months’ dividends / Current value of portfolio

$5178 / $158,918 =

3.3% current yield

That is up 0.3% from last month.

In its 13-year history, the DGP’s current yield has ranged between 3.0% and 4.2%. Over the long haul, those variations are not significant. They primarily reflect prices going up and down.

For comparison to the DGP’s 3.0% current yield, the S&P 500’s current yield is 1.3%, and the benchmark 10-year Treasury (fixed income) is 1.6%. (Source)

Yield on cost (YOC) is the portfolio’s yield based on the original money invested when I started the portfolio in 2008. Here’s the formula:

Projected 12-months’ dividends / Original cost of portfolio

$5178 / $46,783 =

11.1% yield on cost

This is up 0.2% since last month, which is the result of reinvesting dividends to buy more of AbbVie + the slew of dividend raises that were announced in September. YOC mirrors the dollars in the dividend stream. As they go up, YOC goes up in tandem.

YOC is a “scoreboard” metric, meaning that it shows how the game has gone up until now. In contrast, current yield shows where you would start out if you were buying the portfolio right now.

As a scoreboard metric, YOC reflects the impact of every decision I have made – to reinvest, what to buy, when to trim, etc. – since I started the portfolio in 2008.

At 11.1% YOC, the portfolio is now sending me – in cash each year – dividends at the rate of  11.1% of my original investment.

That kind of income-generating power was the inspiration for the portfolio in 2008.

I hope that these real-world results are inspirational for younger investors who can appreciate the possibilities of large amounts of future income flowing from modest investments made today.

Dividend Growth through Portfolio Management

Portfolio management refers to the decisions that you make as the Chief Investment Officer of your portfolios: What stocks to buy, how much to pay for them, reinvesting dividends, and making occasional adjustments.

Let’s talk about reinvesting dividends. As described in DGI Lesson 10, dividends can be reinvested either by dripping them or  letting them accumulate in cash for larger “bulk” purchases.

I use the second method. I collect the dividends in cash, then reinvest them monthly.  So far this year, here are my reinvestments:


The reinvestment in September – increasing the size of my AbbVie position – is highlighted. Overall, I’ve increased my dividend-run-rate by 3.2% so far this year simply by reinvesting the dividends that have come in.

There will be three more reinvestments this year, so by the end of the year my dividend income will have increased by more than 3.5% through dividend reinvesting.

Portfolio management decisions like selling or trimming a holding and picking what to buy with the money received also impact dividend income. Here is what I have done in 2021.

This year has been more active than usual. In some years, I make no changes at all. But in 2021, I have trimmed Microsoft twice, Johnson & Johnson once, and sold out of AT&T.

Usually, portfolio adjustments result in a net increase in income, but the sale of AT&T caused a drop. The overall combined impact of these moves has reduced my annual dividend income by $62, but also made it safer going forward.

Secondary Goal: Total Returns

For its lifetime, the total value of the DGP has grown +240% from its inception in June 2008. It started at $46,783. It is now worth $158,918.

For comparison, if the DGP’s original money had been invested in the S&P 500 index via the ETF called SPY, with dividends reinvested, it would have increased 301% to a total value of $187,600. (Source) The SPY investment would be yielding less than half of the DGP’s current yield (1.3% vs. 3.3%).

All of the DGP’s deficit in total returns compared to SPY has taken place in the past 17 months. At the end of April, 2020, my portfolio’s lifetime total return was more than SPY’s.

But since the end of the pandemic crash in February, 2020, tech and other fast-growth stocks have been on a price rampage that has caused a massive increase in the value of the S&P 500. My portfolio, which emphasizes dividends and a value tilt, has not kept up with that price explosion.

In September, both my portfolio and the S&P 500 fell about 5%.

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

For a list of all of my articles about my portfolio, see below.

Dividend Growth Portfolio Article Archive

 

Date Article Title
11/19/2021 I Just Bought More Shares of Lockheed Martin (LMT) for My Dividend Growth Portfolio
10/30/2021 I Just Sold Hasbro (HAS) and Replaced It with Prudential (PRU) and NASDAQ-100 Covered Call ETF (QYLD)
10/21/2021 I Just Bought More Shares of Schwab U.S. Dividend Equity ETF (SCHD) for My Dividend-Growth Portfolio
9/16/2021 AbbVie (ABBV) Just Dropped, So I Bought It
8/20/2021 I Just Bought More Merck (MRK) for My Dividend Growth Portfolio
8/11/2021 I Just Trimmed Microsoft (MSFT) and Replaced It with U.S. Dividend Equity ETF (SCHD) and Merck (MRK)
7/17/2021 I Just Bought the First ETF for My Dividend Growth Portfolio: Schwab U.S. Dividend Equity ETF (SCHD)
7/12/2021 I Just Sold AT&T (T) and Bought Pinnacle West (PNW) and AbbVie (ABBV) to Replace It
6/18/2021 I Just Bought More Shares of Merck (MRK)
5/21/2021 I Just Bought Lockheed Marting (LMT) and Merck (MRK)
4/15/2021 Verizon (VZ) is Perfect for My Dividend Growth Portfolio – So I Bought Some More
3/17/2021 I Just Bought More Pinnacle West Capital (PNW)
2/19/2021 I Just Bought More General Dynamics (GD)
1/20/2021 I Just Sold Some JNJ and MSFT and Bought These 3 Stocks
1/11/2021 Dave Van Knapp’s Dividend Growth Portfolio Exceeds 10% Yield on Cost – What’s Next?
11/20/2020 I Just Bought Lockheed Martin (LMT) Stock
8/21/2020 I Just Bought More Shares of General Dynamics (GD)
8/14/2020 Reviewing My “Mature” Dividend Growth Portfolio
7/9/2020 I Just Sold Dominion Energy (D) and Bought Pinnacle West Capital (PNW)
5/21/2020 I Just Bought General Dynamics (GD) Stock
5/13/2020 I Just Bought More Shares Of Texas Instruments (TXN) Stock
1/20/20 I Just Bought Enbridge (ENB) and Texas Instruments (TXN) And Kicked Ventas (VTR)
1/7/20 Dave Van Knapp’s Dividend Growth Portfolio – 2019 Review and 2020 Preview
12/20/19 I Just Bought Enbridge (ENB) and 3M (MMM) Stock After Selling Boeing (BA)
10/18/19 I Just Bought More Shares of 3M (MMM)
8/6/19 I Just Bought 3M (MMM)
5/21/19 I Just Bought More Verizon (VZ)
5/20/19 I Just Bought Shares of Altria (MO) and Dominion (D) Stock
5/8/19 I’m Seriously Considering Dominion (D) Stock
4/27/19 These 3 Popular Dividend Growth Stocks Appear Way Overvalued Right Now
2/20/19 I Just Bought More Verizon (VZ) Stock
1/7/19 Dividend Growth Portfolio – 2018 Review and 2019 Preview
11/21/18 I Just Bought Texas Instruments (TXN)
8/17/18 I Just Bought Procter & Gamble (PG)
5/17/18 I Just Bought Shares of Atria (MO)- An Iconic, High-Yield Dividend Growth Stock
5/12/18 Re-Introducing My Dividend Growth Portfolio
3/12/18 I Just Bought Verizon (VZ) 
3/8/18 I Just Sold HCP (HCP) and Omega Healthcare Investors (OHI)
2/26/18 I Just Bought Amgen (AMGN)
12/6/17 I Just Bought Another $1,000 of Cisco (CSCO)
11/4/17 I Just Bought Realty Income (O) and Smucker (SJM) Stock
8/28/17 I Just Bought Lowe’s (LOW)
5/18/17 I Just Bought Another 18 Shares of Qualcomm (QCOM)
2/21/17 I Just Bought 18 Shares of Qualcomm (QCOM)
11/3/16 I Just Bought Another $1,000 Worth of Cisco (CSCO)
8/10/16 I Just Bought Boeing (BA)
5/6/16 I Just Bought 45 Shares of Southern Company (SO)
4/14/16 I Just Bought 47 Shares of Ventas (VTR)
2/16/16 I Just Bought 60 Shares of Cisco (CSCO)
12/14/15 I Just Sold My Shares of Kinder Morgan (KMI)
11/23/15 I Just Bought Another 30 Shares of AT&T (T)
10/17/15 My Dividend Growth Portfolio Delivers a 7%-Plus Yield on Cost Already
8/27/15 I Just Reinvested $1,000 in Philip Morris International (PM)
5/26/15 I Just Bought Another 24 Shares of Coca-Cola (KO)
4/15/15 Why I Decided to Hold All 19 Stocks in My Dividend Growth Portfolio
1/24/15 Why I Sold Some Johnson & Johnson (JNJ) and Pepsi (PEP)
1/14/15 I Just Bought Another 30 Shares of AT&T (T)
11/10/14 This Portfolio Generates Dividend Income That Rises 15% Per Year
10/1/14 I Just Bought More Shares Of Procter & Gamble (PG)
7/16/14 I Just Sold Lorillard (LO) and Bought HCP Inc. (HCP)
7/10/14 This Real-Money Portfolio is a Cash Machine
5/28/14 I Just Bought Ventas (VTR)
4/11/14 I Just Sold Darden Restaurants (DRI)
3/31/14 Why I Sold All of My Shares of Intel (INTC)
3/15/14 An Introduction to My Real-Money Dividend Growth Portfolio