Dividend Growth Portfolio: March Update

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Includes: AAPL, ABBV, AFL, BA, COP, CSCO, CVS, CVX, GE, GILD, GIS, JPM, KO, LUV, MA, MMM, MSFT, O, PEP, PG, PM, SBUX, T, TGT, V, VTR, VZ, XOM
by: The Dividend Bro

Summary

Dividend income for March was up almost 30% compared to the same time period in 2015.

Dividend income for 2016 is up 37% compared to the same time period in 2015.

Using our updated purchasing guidelines, we added to our position in Aflac.

March Portfolio Results

My wife and I continue our march towards financial independence with our dividend growth portfolio. As the case has been through the early months of the year, we once again outperformed the S&P 500. Our portfolio is up 5.28% from the beginning of 2016 through the end of March while the S&P 500 is up just 0.77%. For the month of March, the S&P 500 gained 6.6% compared to our portfolio's gain of 6.04%. While I am more concerned with dividends and dividend growth then comparing our investments to market indexes, it is nice to see that our portfolio of stocks is doing well compared to the market average.

Realty Income (NYSE:O) continues to be our best performer, up more than 21% for the year. Verizon (NYSE:VZ), AT&T (NYSE:T) and Target (NYSE:TGT) continue to be top performers for us as well, up 17%, 13.83% and 13.32% respectively for 2016. Philip Morris (NYSE:PM) is the lone newcomer in our top five performing stocks for the year, up 11.60%. Philip Morris is up almost 8% in March alone. While we'll always appreciate a share price gain, all of these companies, aside from AT&T, are not yet full positions for us; therefore, a pullback in price would allow us to purchase more shares at a better price.

Our laggards so far this year include ConocoPhillips (NYSE:COP), down 13.75%, Boeing (NYSE:BA) down 12.21%, JPMorgan (NYSE:JPM) down 10.31%, Gilead (NASDAQ:GILD) down 9.22% and AbbVie (NYSE:ABBV) down 3.58%. Even though these companies are still down for 2016, they have made quite the comeback since the start of the year. ConocoPhillips in particular has staged a rather sizeable rebound, cutting their losses in half since the last portfolio update. Even with the partial recovery in share price, these companies except for ConocoPhillips, are on our watch list as they are undervalued by our guidelines. We don't anticipate adding to ConocoPhillips due to the recent dividend cut. We are taking a "wait and see" approach to this position.

March Stock Purchase

As stated in a previous article, we have made an adjustment to our stock purchasing criteria. In addition to using Morningstar's fair value and S&P Capital's twelve-month price target and fair value, we are now including F.A.S.T Graphs in our analysis. We will compare the company's current price to earnings ratio to its five-year average to see how over or undervalued shares currently are. Using this updated strategy, which you can see here, we purchased shares in the supplemental life and health insurance company Aflac (NYSE:AFL).

There was enough capital to make a second purchase, but we decided to hold onto to the cash. We have quite a few positions we'd like to add to, such as Realty Income, Verizon and Target. These companies have had such impressive gains in share price that they are now all overvalued by our criteria. We'd like to own more shares, but we are waiting for a pullback in these types of names. For now, we are content to sit on some cash.

Current Positions

Our portfolio consists of the following companies:

3M (NYSE:MMM), AbbVie, Aflac, Altria, Apple (NASDAQ:AAPL), AT&T, Boeing, Chevron (NYSE:CVX), Cisco (NASDAQ:CSCO), Coca-Cola (NYSE:KO), ConocoPhillips, CVS Health (NYSE:CVS), Exxon Mobil (NYSE:XOM), General Electric (NYSE:GE), General Mills (NYSE:GIS), Gilead, Johnson & Johnson, JPMorgan, MasterCard (NYSE:MA), Microsoft (NASDAQ:MSFT), Pepsi (NYSE:PEP), Philip Morris, Procter & Gamble (NYSE:PG), Realty Income, Southwest Airlines (NYSE:LUV), Starbucks (NASDAQ:SBUX), Target, Ventas (NYSE:VTR), Verizon and Visa (NYSE:V).

March Dividends

The whole point of our investment strategy is to use dividends to replace our salaries in retirement. We strive to have a steadily increasing income, and the results for March were simply fantastic. This was our best month for dividends ever. Dividend income for the month was up 57.89% compared to March of 2015 and 161.24% for March of 2014. For the year, our dividend income is up 37% compared to 2015 and 87% for 2014. While these numbers are probably not repeatable forever, they do show what can happen when you invest in companies that pay and raise their dividends each and every year.

Companies that paid us dividends for the month of March are: Visa, Aflac, ConocoPhillips, Boeing, Johnson & Johnson, Chevron, Exxon Mobil, Target, Microsoft, 3M, Realty Income, Southwest Airlines, Gilead, Ventas and Pepsi.

Conclusion

Our dividend growth portfolio continues to power along. We were able to pick up some additional shares in the Dividend Champion Aflac, and we will be monitoring our watch list for opportunities to add to the smaller positions in our portfolio. March dividends were a record and give us confidence that we will be able to execute our investment strategy going forward.

Disclosure: I am/we are long AAPL, ABBV, AFL, BA, COP, CSCO, CVS, CVX, GE, GILD, GIS, JNJ, JPM, KO, LUV, MA, MMM, MO, MSFT, O, PEP, PG, PM, SBUX, T, TGT, V, VTR, VZ, XOM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are not investment professionals. Please do your own research prior to making an investment decision.