Dave Van Knapp's Dividend Growth Portfolio

Updated October 1, 2019

Highlight of the Month

Seven dividend increases were announced in September for stocks in the Dividend Growth Portfolio (DGP).

The increases pushed the DGP’s yield on cost to 9.5%, its highest value ever.

The Portfolio

This table is sorted alphabetically. Transactions in 2019 are highlighted in yellow.

September Highlights

  • Received $462 in dividend payments from 14 companies.
  • Yield on cost grew to 9.5%, the highest value ever. This resulted from 7 companies announcing dividend increases during the month.
  • Yield on cost is a proxy for annual total dividends. The expected annual income grew to $4436, the highest it has ever been.
  • Current yield is 3.3%, same as last month.
  • The portfolio’s month-end total value reached its highest level ever.

Main Goal: Grow Dividends Each Year

Here’s my favorite chart.

The whole idea behind the DGP is to generate a reliable, steady stream of growing dividends over many years.

That’s exactly what has happened and continues to happen, more than 11 years after the portfolio was created. The DGP’s dividend stream goes up for three reasons:

  • Dividend increases. The companies themselves announce regular raises. We got 7 such declarations in September.
  • Dividend reinvestments. I use accumulated dividends to buy new shares. The new shares generate more dividends. I have made three such purchases in 2019.
  • 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 organic. It is fueled entirely by what’s already in the portfolio. That makes the DGP a great case study for the power of dividend growth investing.

The estimated income for 2019 is now $4334, which is 12% higher than the actual total collected in 2018. The projection is based on dividends already received + projected dividends for the rest of the year.

Looking ahead to 2020 on the bar graph above, I’ve made a conservative forecast: 2019’s projected dividends + 8%. Each month, I refine my estimates as more facts become known.

DGP Activities in September

All of September’s activities were the receipt of dividends. The portfolio collected $462 from 14 companies. More than half the DGP’s companies paid in September.

The $7.20 from 3M was the first payout since 5 shares were purchased in August. I know that’s not much, but that’s how dividend growth investing works: Relentless growth in income.

Dividends Expected in October

I expect to receive $283 from 6 companies in October.

That will push my cash kitty above $1000, so I’ll be able to buy more shares for the portfolio this month. I expect that purchase will be made on or about October 12.

Dividends Expected in Next 12 Months

This display from Simply Safe Dividends shows how many dividend dollars are expected over the next 12 months, based on current payout rates and payment schedules.

The DGP’s annual dividend run-rate is currently $4435. That translates to an all-time high yield on cost for the DGP of 9.5%. A year ago, the yield on cost was 8.5%, so it’s advanced a full percentage point over the past 12 months.

The projection, of course, does not include dividend increases that will be announced over the next 12 months, nor the dividends from shares that I will purchase when I reinvest dividends.

Therefore, the actual 12-month dollar total will be more than shown.

Dividend Increases in 2019

This year, 29 increases have been 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 as expected in June, and it has already declared an unchanged dividend for September. QCOM’s dividend still might be raised in December, but I have seen no indication of that from the company.

This chart shows Qualcomm’s payments over the past 4 years. I circled the un-increased dividend payments for June and September.

If Qualcomm fails to increase its dividend this year, it will not lose its 16-year streak of consecutive increases in its annual payouts. That’s because the timing of its last increase (paid in June 2018) means that its total payout in 2019 will exceed its total payout in 2018. I expect Qualcomm’s next dividend declaration to come around the end of this month.

The table below shows the full calendar of dividend increases for 2019. The stocks are listed alphabetically. The 7 dividend increases announced in September are highlighted.

Altria (MO) and Phillip Morris (PM) have scrapped their exploration of a possible merger.

Yield on Cost Is Now Much Greater than 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.

Formula for Yield on Cost

Projected 12-months’ dividends / Original cost of portfolio

$4435 / $46,783 = 9.5%

The 9.5% YOC is a record high for the DGP. A year ago it was 8.5%. It has moved up a full percentage point over the past year.

YOC goes up when stocks announce dividend increases as well as when I add new shares through dividend reinvestments.

The DGP’s yield on cost shows that the portfolio is now sending me 9.5% of the original investment annually in cash dividends.

That kind of cash-generating 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. If nothing horrible happens, 10% will be reached 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

$4435/ $135,850 = 3.3%

It’s important to remember the difference between yield and the amount of dividend payouts. Yield is a percentage, while dividend payouts are 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 the fluctuating market value of your holdings. While prices are volatile and move in both directions, dividend payments move more slowly and usually only go up.

Think of current yield as a forward-looking estimate of the percentage payout over the next 12 months, based on current information.

Of course, with dividend-growth stocks, it is highly probable that the actual dollars collected in the next 12 months will be more than the current forecast.

In reality, I expect around 29 dividend increases over the next 12 months in the DGP, as well as four new purchases.

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.

For comparison to this portfolio’s 3.3% yield, the S&P 500’s current yield is 1.9%. The benchmark 10-year Treasury (fixed income) is yielding 1.7%. [Source]

Dividend Reinvesting

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.

I use the second method. I reinvest dividends when they accumulate to $1000.

So far this year, I have made three such reinvestments.

With the cash kitty now at $805, October’s dividends will push it over the $1000 trigger amount. Therefore, I expect to make the year’s fourth reinvestment purchase this month.

Secondary Goal: Total Returns

The report so far has discussed how dividend growth investing yields increased dividend income over time.

The dividend growth model also leads to higher total returns. That’s because, in addition to the inherent dividend growth of specially-selected stocks, the investing strategy purchases more shares when dividends are reinvested.

That leads to capital appreciation in a growing number of shares over time, meaning that total return grows faster than it would if the dividends weren’t reinvested.

The value of the DGP has grown +190% from its inception in June 2008. It started at $46,783. It is now worth $135,850. That is the highest month-end total ever for the portfolio.

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 +168% to a total value of $125,378. [Source]

Another way to look at it is to compare the total gains of the two investments. If I had put the same $46,783 into SPY when I started the DGP, I would now have $10,472 less in total value than the DGP has achieved.

And that SPY investment would be yielding only 1.9% compared to the DGP’s 3.3%. So the DGP has produced more in total returns on top of its superior annual income.

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 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