Dave Van Knapp's Dividend Growth Portfolio

Updated March 1, 2020

Big News of the Month

The coronavirus-inspired crash of the stock market at the end of February is obviously the big story this month.

After closing at its all-time high of 3386 on February 19, the S&P 500 fell every trading day for the rest of the month, closing at 2954 on February 28. That was a drop of 13% in a little over a week.

Few stocks were spared. Of the 500 stocks in the S&P 500, 493 fell in value. Last month, when reporting that the DGP had become a 3-bagger (meaning it had reached 3-times its original value), I also said this:

Prices are ephemeral in the stock market. They come and they go. [The 3-bagger] milestone…may be gone next month.

And that’s what happened. My Dividend Growth Portfolio’s (DGP) total value backed up about 9%, taking it back to where it was last July.

But of course, dividend growth investing is not focused primarily on prices. It is focused on generating reliable growing income. That hasn’t changed. The DGP’s income went up in February, as did its current yield (because of the price drops).

The Portfolio

I did not buy or sell any stocks in February.

February Highlights

  • Collected $371 in dividend payments from 8 companies, as expected.
  • Five new dividend increases were announced, bringing the total to 12 for the year.
  • Yield on cost stayed at its record high of 9.9%.
  • Current yield rose 0.3% to 3.6%. This was primarily the result of the drop in stock prices.

Primary Goal: Pay Reliable, Growing Dividends Each Year

This is my favorite chart, because it illustrates how the portfolio generates reliable, growing dividends each year.

And there’s every reason to believe that it will continue to do so. The DGP’s dividend stream goes up for three reasons:

  • Dividend increases. The companies in the portfolio announce regular raises. Every stock is selected for the probability that it will do that. Twelve raises have already been declared for 2020.
  • 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.
  • Portfolio management. I occasionally make swaps to get higher-yielding shares or shares with more reliable dividend growth.

I run the DGP as a business – what Benjamin Graham would have called an investment operation.

The sign over the DGP’s front door might read, “Dividend Growth, Inc.” The company’s “product” is literally a growing dividend stream.

I get to that goal by selecting, buying, and owning companies that regularly raise their dividends; collecting dividends from them; and reinvesting those dividends to buy more shares in the same kind of companies.

All growth in the DGP – in both dividends and market value – is generated from within the portfolio. I have not added a dime of new money to the portfolio since I started it in 2008.

The DGP is a cash-generating machine. My job is to keep it running smoothly: Select excellent companies, reinvest dividends to get more shares, and occasionally trim or replace one stock with another.

The absence of new outside money makes the DGP a great case study for the power of dividend growth investing. The dividend increases announced by the companies grow the dividend stream, and reinvesting the dividends makes it grow even faster.

In 2019, the portfolio received $4287 in total dividends, which was a new record high, 10.7% more than 2018.

My estimate as of now for 2020 is to generate $4713, which would be 9.9% more than 2019’s total. More than likely, what with dividend raises and shares to be purchased via dividend reinvestment, we’ll end up higher than that by the end of the year.

I won’t make a projection for 2021 until later in the year, when more information is available.

Transactions in February

Collected dividends: I received $371 from 8 companies, which matched expectations.

Buys and sells: None.

Dividend reinvestments: None. The cash kitty is up to $828. When it tops $1000 in mid-March, I will make my next reinvestment.

Dividends Expected in March

I expect to receive $549 from 14 companies in March. This money will be added to the DGP’s existing cash, which will hit $1000 around March 10. That’s when I will make the next dividend reinvestment.

Here’s the March schedule for dividends.

Dividends Expected in Rest of 2020

The calculator at E-Trade shows that $4022 is expected to be received in the rest of this year, based on information known at this time.

Added to the $691 that has already been received, that makes the 2020 projection for dividends $4713, which would be 9.9% more than last year’s total.

Since more dividend increases are expected throughout the year, plus three more dividend reinvestments will probably be made, the actual total for 2020 will likely be higher than that. For now, I am using the $4713 estimate as the full-year projection for 2020.

Dividends Expected in Next 12 Months

Based on information known now, $4631 dividend dollars are expected in the next 12 months. That is the annual dividend “run rate” of the DGP at the moment.

Of course, with dividend-growth stocks, the actual dollars collected in the next 12 months will be more than the forecast. Plus I will create still more dividend dollars each time I reinvest dividends to purchase new shares.

Dividend Increases in 2020

In 2019, 29 increases were paid by the portfolio’s 26 companies, with no cuts. The year before, in 2018, we got 28 increases and no cuts.

So far this year, 12 increases have been announced by the portfolio’s 25 companies, five of them in February.

Two dividends are frozen.

  • Qualcomm (QCOM) failed to increase its dividend in 2019. For now, I am simply monitoring the company. I have no current plans to sell it. (In the DGP, a frozen dividend is a reason to consider selling a stock.)
  • Hasbro (HAS) bypassed its typical increase announcement for May, 2020. I also have this stock under watch, with no plans to sell it.

In the following table, the five increases announced in February are highlighted in yellow.

What Does the DGP Yield?

There are two answers to this question, depending on what yield you are looking for.

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

$4631 / $46,783

= 9.9%

The 9.9% YOC remains at its record high for the DGP. A year ago it was 8.8%. It has moved up more than a percentage point over the past year.

YOC goes up when:

  • Companies announce dividend increases.
  • I add new shares through dividend reinvestments.
  • I make trades that increase the portfolio’s income stream.

The DGP’s yield on cost shows that I am now collecting 9.9% of the original dollar investment annually in cash dividends.

That kind of income-generating power was the inspiration for the portfolio in 2008. My mental goal for several years has been to reach 10% YOC. If nothing horrible happens, the 10% goal will be reached in a couple of months. We’ll have a party.

Current yield is the portfolio’s yield calculated as a percentage of the current value of the portfolio.

Current yield is the starting yield you would receive if you duplicated the portfolio today.

Formula for Current Yield

Projected 12-months’ dividends / Current value of portfolio

$4631 / $129,051

= 3.6%

That is up 0.3% from last month, mostly because the decline in the total value of the DGP reduced the denominator in the equation above.

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 My Favorite Chart (displayed earlier) illustrates. It doesn’t show yield as a percentage; it shows dollars received, which is what we are all interested in.

For comparison to this portfolio’s 3.6% yield, the S&P 500’s current yield is 2.0%. The benchmark 10-year Treasury (fixed income) has plunged to 1.1%. [Source]

Dividend Reinvesting

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 collect the dividends in cash, then reinvest them when they accumulate to $1000.

I made my first 2020 reinvestment in January, adding to the portfolio’s stake in Texas Instruments (TXN).

The kitty now has $828, and it is building toward the next $1000 reinvestment, which will happen this month (March).

Secondary Goal: Total Returns

The dividend growth strategy also leads to good total returns. Along with the rest of the stock market, the DGP declined in value in February.

Overall, the value of the DGP has grown +176% from its inception in June 2008. It started at $46,783. It is now worth $129,051.

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 +169% to a total value of $125,846. [Source]

And that SPY investment would be yielding only 2.0% compared to the DGP’s 3.6%.

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 Articles

I Just Bought More Shares Of This Dividend Growth Stock– March 13, 2020
I Just Bought These Two Stocks for My Dividend Growth Portfolio – And Kicked One Out!– January 20, 2020
Dave Van Knapp’s Dividend Growth Portfolio – 2019 Review and 2020 Preview– January 7, 2020

I Just Bought These Two Stocks (After Selling Boeing)– December 20, 2019
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