Updated February 1, 2019
Highlight of the Month
Three dividend increases announced in January bring the Yield on Cost for this portfolio to a new record high of 8.7%.
Eight dividend increases have already been announced for the 24 stocks in the portfolio, and 20 increases are still expected in the rest of the year.
January, 2019 Highlights
- Received $287 in dividends from 7 companies.
- Current yield is 3.5%, down from 3.7% last month. That’s the result of the 5.1% increase in the value of the portfolio in January. Price and yield are inversely related.
- Yield on cost rose to 8.7%, up 0.1% from last month. That’s the highest YOC ever recorded for this portfolio.
- I anticipate the next stock purchase via dividend reinvestment will occur late in February. February’s dividends will reach the $1000 trigger amount to buy more shares.
Dividends Received in January
The portfolio received $287 in dividends from 7 companies.
Dividends Expected in February
Dividends will arrive from 8 companies totaling $353. Per the portfolio’s policy, these will be allowed to accumulate to $1000 for the next dividend reinvestment, which will occur late in the month.
Dividends Expected in Next 12 Months
This display shows how many dividend dollars are expected over the next 12 months. The annual run-rate is currently $4057. That is about 5% higher than at the same time last year.
The projection, of course, does not yet include 20 dividend increases still to be announced this year, nor does it include dividends from shares that will be purchased when I reinvest dividends.
So the actual 12-month total should end up being higher. What’s shown above is a 12-month projection based on current payout rates and shares held.
Dividend Increases in 2019
Last year, the portfolio got 28 increases and no cuts.
This year, 8 increases have already been declared, including 3 in January.
An additional 19-20 increases are expected by the end of the year. (I can’t tell yet whether Realty Income’s unexpected February increase will replace April’s expected increase or become an “extra” increase this year.)
Yield on Cost and Current Yield
Yield on cost is the portfolio’s yield calculated as a percentage of the original money invested when I started the portfolio.
YOC is a backward-looking metric that shows what has been achieved so far with the original money invested. It’s like the scoreboard in a football game. It shows what the score is, not what it’s going to be.
Formula for Yield on Cost
Projected 12-months’ dividends / Original cost of portfolio
$4057 / $46,783 = 8.7%
That’s up 0.1% in a month and is a new record high for this portfolio.
What it means is that the DGP is now returning 8.7% of the original investment each 12 months in cash dividends.
That kind of income-generating power was the original inspiration for the portfolio back in 2008.
Current yield is the portfolio’s yield calculated as a percentage of the current value of the portfolio.
Formula for Current Yield
Projected 12-months’ dividends / Current value of portfolio
$4057/ $115,601 = 3.5%
That is down from 3.7% last month. The decrease is the result of the 5.1% increase in value of the portfolio in January. It does not suggest a decline in the dividend stream; indeed, the dividend payout rate went up last month.
Current yield is a forward-looking metric that forecasts what the percentage payout will be in the next 12 months assuming that no dividends are increased or cut.
Of course, with dividend-growth stocks, it is expected that the actual dollars collected in the next 12 months will be more than the current forecast.
Throughout its life, the DGP’s current yield has ranged from 3.4% to 4.2%. Over the long haul, variations within the range are not very meaningful. What’s important is that the income measured in dollars goes up steadily.
For comparison to this portfolio’s 3.5% yield, the S&P 500’s current yield is 2.0%. The 10-year Treasury yield (fixed income) is 2.6%. (Source)
Dividend Reinvestment Coming Up in February!
As described in the portfolio’s Business Plan, dividends are collected in cash and reinvested when they accumulate to $1000.
With $353 coming in February and $679 already sitting in cash, the $1000 trigger will be reached this month.
I love to go shopping for more shares for the portfolio. Since no new outside money is ever added to the DGP, buying new shares with dividends is how I generate compounding. See DGI Lesson 5: The Power of Reinvesting Dividends.
I expect to make 4 reinvestments in 2019, same as last year.
When I make the selection for February, I will write an article explaining what stock I picked and its impact on the portfolio.
Growing Dividends Each Year
Here’s my favorite chart:
The whole idea behind the DGP is to generate a steady stream of growing dividends over many years. That’s exactly what has been accomplished and continues to be accomplished.
The DGP’s dividend stream goes up mainly for 2 reasons:
- The companies themselves announce regular dividend increases. I pick companies for the likelihood that they will reliably do that.
- I reinvest the dividends. The new shares then generate dividends themselves. Those cause the portfolio’s income stream to rise just as surely as a dividend increase would.
In both cases, the dividend stream expands without the need for additional outside money. It’s organic growth. It does not need new contributions to fuel it.
I’ve included a SWAG estimate for 2019. It’s simply equal to the 2018 total +7%. That’s meant to be conservative, based on 5% in dividend increases plus 2% from the purchase of new shares.
It’s too soon yet to add a bar for 2020 to the chart. I’ll do that in the middle of the year, after 2019 has shaped up a little more.
The value of the portfolio has grown 147% from its original size in June, 2008. It started at $46,783. It is now worth $115,601.
The value rose, along with the rest of the market, in January. That value increase had no impact on the dividend flow. The dividend dollars did not change from what was expected. (See DGI Lesson 7: Dividends Are Independent from the Market.)
What did change is the portfolio’s current yield, which went down. Current dividend yield is inversely related to changes in portfolio value.
If the DGP’s original money had been invested in the S&P 500 Index via the tracking ETF called SPY, with dividends reinvested, it would have increased 140% to a total value of $112,279. That investment would be yielding 2.0% compared to the DGP’s 3.5%.
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.
–Dave Van Knapp
Dividend Growth Portfolio Articles
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