Dividend Portfolio Analysis: Decent Yield, Dividend Growth Spell Quality Return

by: Dividend Partisan

When I updated my 'Portfolio' tab for the month of March, I also mentioned that I would do an in depth analysis of my Dividend Income Portfolio. From that assertion, this series began.

For this post, I will review the highlights from my first post, Dividend Portfolio Analysis: Part 1, and will then spend the rest of the article addressing my portfolio's dividends. As Dividend enthusiasts, I hope you enjoy it, and I look forward to your comments.

If you missed my portfolio's first analysis, on diversification, you can find it here. In that article I gave my portfolio a fictional 'B' grade: 11 stocks, 6 different sectors, 'Large Value' portfolio style, top five holdings making up over 55% of my portfolio. I also discussed some "pros" and some serious "cons" with my portfolio.

To start this article on dividends, here is a quick review of my current holdings:

Portfolio Quick Facts

Dividend Growth:
Out of 11 holdings:

  • 7 on 'US Dividend Champions List' (25+ yrs of dividend increases): ABT, ADP, CINF, JNJ, LEG, PEP, PG
  • 2 on 'US Dividend Challengers List' (5-9 yrs of dividend increases): SO (9 yrs), WM (8 yrs)
  • 2 not on a 'list': PAYX: raised dividend for 19 years straight - failed to raise in 2010; GE: decreased dividend in 2009 - first time GE failed to raise dividend since 1938.

Dividend Strength:

  • Average Portfolio Dividend Yield - 3.71%
  • All holdings yield greater than 2.5% - no yield greater than 5%
  • Each month, at least 3 companies pay a dividend into my portfolio. All twelve months are covered with an average of 3 checks per month.

Dividends Grade: A

Pros: Though I have two companies who either cut or failed to raise their dividend in the recent economic downturn, 64% of my portfolio's holdings have increased their dividends for more than 25 years. GE has begun to raise its dividend again, and PAYX (though it has not raised its dividend recently) continues to pay a healthy 3.95%. Finally, my portfolio yields 2% more than the S&P 500 yield, a mere 1.71%. Assessment - My portfolio consists of solid, dividend growing companies with decent yields.

Cons: None of my holdings' yields greater than 5%. Without decent capital appreciation, overall return may be low. Assessment - Expect my next purchase to be a "higher yielding" stock, but major portfolio tweaks are not necessary at this time.

: My portfolio's overall 'dividend strength' is favorable. A decent yield, combined with dividend growing companies, should provide for a quality return over the long run.