Updated June 1, 2019
Highlight of the Month
I made 6 changes to the DGP in May:
- Trimmed 3 stocks (McDonald’s, Realty Income, and Alliant Energy)
- Bought 2 stocks with the proceeds from those 3 sales (added to Altria and initiated a position in Dominion Energy)
- Reinvested dividends to add more Verizon
Those moves combined to increase the portfolio’s annual cash flow by 5%.
The DGP’s current yield went from 3.3% to 3.5%. Its yield on cost jumped from 8.9% to 9.3%.
The portfolio is sorted this month by position size, largest to smallest.
Activities in 2019 are highlighted in yellow. With the addition of Dominion, there are now 25 companies in the DGP.
May, 2019 Highlights
- Five portfolio management moves + one dividend reinvestment combined to increase the DGP’s annual income by 5%. I got that raise even though no individual stock in the portfolio announced an increase.
- The DGP now has 25 companies and a 9.3% yield on cost, both new highs.
- Received $368 in dividends from 8 companies.
- Current yield is 3.5%, up from 3.3% last month.
DGP Activities in May
I made 6 buys/sells in May:
- Trimmed McDonald’s, Alliant Energy, and Realty Income, because all of them were overvalued large positions.
- Used the proceeds from those sales to start a new position in Dominion Energy and increase my stake in Altria.
- Reinvested dividends in high-yield Verizon.
This screenshot shows the six transactions:
The three trims are marked by red dots; the two buys with green dots; and the dividend reinvestment by the maroon dot. See this article for a complete discussion of these moves, why I made them, and their impact on the portfolio.
The DGP received $368 in dividends from 8 companies. Receipts ranged from a low of $6 from Lowe’s to a high of $118 from AT&T.
Dividends Expected in June
June will be a bigger month for dividends. I expect to receive $453 from 13 companies, including Dominion, which I just acquired. All of June’s dividends have been declared.
Per the portfolio’s policy, I will allow those dividends to accumulate in cash until I have $1000. Then I will reinvest them.
There is $118 in cash in the portfolio, so the next reinvestment will occur in August.
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 $4343. That is about 12% higher than at the same time last year.
The projection, of course, does not include dividend increases yet to be announced, nor does it include dividends from shares that I will purchase when I reinvest dividends later in the year.
So the actual 12-month dollar total will probably be more than shown. The projection is based on current payout rates and shares held.
Dividend Increases in 2019
Last year, the portfolio got 28 increases and no cuts.
This year, 18 increases have already been declared, although none were announced in May. There have been no cuts.
An additional 11 increases are expected by the end of the year for stocks currently held.
The table below shows the full calendar of dividend increases both made and expected in 2019. The stocks are sorted alphabetically.
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 in 2008.
YOC is a backward-looking metric that shows what has been achieved so far. It’s like the scoreboard in a football game: It shows what the score is, based on events that have already happened.
Formula for Yield on Cost
Projected 12-months’ dividends / Original cost of portfolio
$4343 / $46,783 = 9.3%
The 9.3% YOC is a new record high for the DGP. Last month it was 8.9%, and a year ago it was 8.2%.
What YOC means is that the DGP is now returning 9.3% of the original investment annually in cash dividends.
That kind of cash-machine power was the original inspiration for the portfolio in 2008. My mental goal is to reach 10% YOC, and it’s getting closer and closer.
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
$4343/ $122,931 = 3.5%
That is up from 3.3% 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. As discussed earlier, I expect 11 more dividend increases this year.
I also expect to make two more dividend reinvestments, which will purchase new shares, which will generate their own dividends, upping the annual total.
During its history, the DGP’s current yield has ranged from 3.3% to 4.2%. Current yield is as much a result of market prices as the dividend stream. 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.
For comparison to this portfolio’s 3.5% yield, the S&P 500’s current yield is 2.0%. The benchmark 10-year Treasury (fixed income) is yielding 2.1%. [Source]
As described in DGI Lesson 10: Two Ways to Reinvest Your Dividends to Enhance Your Returns, dividends can be reinvested either by dripping them or by letting them pile up in cash and then making larger targeted purchases.
As described in the portfolio’s Business Plan, I use the second method. I reinvest dividends when they accumulate to $1000.
I expect to make 4 reinvestments in 2019, same as last year. At the rate dividends are coming in, the next reinvestment will be made in August, and the final reinvestment of 2019 will come in November.
Growing Dividends Each Year
Here’s my favorite chart.
Here’s why that’s my favorite: The whole idea behind the DGP is to generate a reliable, steady stream of growing dividends over many years. That’s exactly what the chart shows has been – and is being — accomplished.
The DGP’s dividend stream goes up mainly for 2 reasons:
- Dividend increases. The companies themselves announce regular raises.
- Dividend reinvestments. I use accumulated dividends to buy new shares. The new shares then generate more dividends themselves.
My activities in May illustrated a third reason that happens less frequently: I swapped shares of 3 stocks for shares of 2 others that have higher yields. That caused the annual dividend stream to jump up.
All three factors occur without the need for additional outside money. With no new money being contributed, all growth in the DGP is organic growth. It is fueled entirely by what’s already in the portfolio.
I have never added an additional dollar to the DGP since its inception. The companies themselves, of course, have added many dollars by sending me dividends, and I have occasionally generated other dollars by selling or trimming positions.
The estimated income for 2019 is now $4300. That’s based on dividends already received + projected dividends for the rest of the year. It’s a conservative estimate, because it excludes:
- the 11 dividend increases I still expect from stocks currently in the portfolio;
- the additional dividends that will come from shares to be purchased via two more dividend reinvestments in 2019.
Next month, I’ll add an estimate bar for 2020 to the chart. I think I’ll have enough information to make an intelligent projection.
The value of the portfolio has grown +163% from its inception in June 2008. It started at $46,783. It is now worth $122,931.
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 +146% to a total value of $115,086. [Source]
That investment would be yielding only 2.0% compared to the DGP’s 3.5%.
Total returns are only of secondary interest to me in the DGP. The primary goal is to build its dividend cashflow at a decent rate and total amount
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 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