The Road To $1M Portfolio

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Includes: CFR, CMI, HSY, SO, TGT
by: DGI Guy

Summary

I am reshaping my dividend education portfolio to speak more to my goals.

My goal is to earn a 3% yield with a 5% dividend growth.

My target is to have $1M in the portfolio in 2043.

Introduction

I am reshaping my dividend education portfolio to speak more to my goals. I think having that focus will be better than generically saying I want to get an education. Stating and publicly tracking the goal will assist me in making sure that I am always focused on that goal. Thus, I am calling it the Road to $1M Portfolio. The goal is to have $1M in the portfolio in 27 years or 2043. Lets do a quick recap on the portfolio.

This portfolio exists as a traditional IRA that was created as a roll over from a 401k when I left a job a few years back. I know long term, and specifically in retirement, I will be a full on dividend growth investor. Because of limitations in my current 401k, I cannot be fully committed to the idea now. The majority of my funds sit within a 401k in a low cost index fund. I had concerns that when I transitioned into retirement that I would have no education on how to be a successful DGI (or what I could realistically expect in terms of yield and return). So, when given the opportunity to give myself an education I took it.

Portfolio Overview

1) Funded with a 401k rollover Retirement

2) Timeline is roughly 27 years

3) Goal is to earn a 3% yield with a 5% dividend growth

4) My target is to have $1M in the portfolio in 2043.

5) This portfolio will provide me with a real time education on managing a dividend growth portfolio.

Holdings

Ticker

Shares

Price

Market Value

Quarterly Div

Annual Dividend

Expected Income

Yield

ABBV

50

66.54

$3,327

$0.57

$2.28

$114.00

3.43%

AFL

50

73.07

$3,654

$0.41

$1.64

$82.00

2.24%

AMGN

70

173.66

$12,156

$1.00

$4.00

$280.00

2.30%

AMP

110

$96.52

$10,617

$0.75

$3.00

$330.00

3.11%

BA

25

$131.73

$3,293

$1.09

$4.36

$109.00

3.31%

CMI

44

$125.34

$5,515

$1.02

$4.08

$179.52

3.26%

EMR

145

$53.79

$7,800

$0.48

$1.90

$275.50

3.53%

F

166

$12.19

$2,024

$0.15

$0.60

$99.60

4.92%

GILD

101

$80.41

$8,121

$0.47

$1.88

$189.88

2.34%

GM

242

$30.80

$7,454

$0.38

$1.52

$367.84

4.94%

GPS

130

$25.64

$3,333

$0.23

$0.92

$119.60

3.59%

JNJ

31

$124.24

$3,851

$0.80

$3.20

$99.20

2.58%

JPM

75

$66.30

$4,973

$0.48

$1.92

$144.00

2.90%

KO

150

$43.48

$6,522

$0.35

$1.40

$210.00

3.22%

MS

210

$29.01

$6,092

$0.15

$0.60

$126.00

2.07%

RY

50

$60.31

$3,016

$0.63

$2.52

$126.00

4.18%

SO

75

$52.64

$3,948

$0.56

$2.24

$168.00

4.26%

T

200

$43.16

$8,632

$0.48

$1.92

$384.00

4.45%

TGT

11

$74.94

$824

$0.60

$2.40

$26.40

3.20%

TUP

40

$63.94

$2,558

$0.68

$2.72

$108.80

4.25%

UTX

30

$107.74

$3,232

$0.66

$2.64

$79.20

2.45%

VZ

50

$53.64

$2,682

$0.56

$2.24

$112.00

4.18%

WFC

75

$48.68

$3,651

$0.38

$1.52

$114.00

3.12%

XOM

60

$87.56

$5,254

$0.75

$3.00

$180.00

3.43%

Cash

$5,442

Click to enlarge

Note: Price is based on market price as of market open on 8/8/16.

Q2 Sales

Anyone who has been following my portfolio will know that I have been attempting to simplify it over the past few months. That continues here this month. I made 3 sales: Cullen/Frost Bankers ((CFR)), Hershey ((NYSE:HSY)) and ½ of my Southern Company ((SO)) position.

First, the CFR was actually a buy in the previous update. I added it as a companion to another portfolio that I keep. I was already doing the research and so I wanted to add the position here. Once I started looking at it closely, I realized it was noise in this portfolio as well as the other. I decided to cut it from both to focus on the core holdings.

HSY was a sale that I documented in an article. The quick justification is that the shares popped because of a buyout offer and not something that the company did well. I took the quick money and ran. HSY is up roughly 1% since I sold. I still feel I made the right decision.

SO was an interesting sale. I documented the sale in this article. The basic play came down to the idea that the P/E currently is better than 99% of the historic P/E that the company offered. At that price, it does not have much room to run up. Earnings are not going to be jumping to match any time soon. I am booking some profit and moving it to cash. It is down 2.5% since I sold. I feel good about it.

As I mentioned at the start, my goal is to simplify the portfolio. I don't anticipate any more sales in the coming month, but I did not anticipate the HSY sale coming either! It is a constant battle to try and keep up with these portfolios.

Quarterly Buys

So what did I do with all the cash from the 3 sales? Nothing…yet! I have a limit order out on Verizon ((NYSE:VZ)) to expand my position. Outside of that, I am sitting around waiting for the next opportunity. With these sales I am only 4% cash. That doesn't concern me too much.

Dividend Increases

One of the things that I love about dividend investing is the clockwork in which things happen. So far, YTD, I have had 19 positions raise their dividends. 2 of those came in the last 30 days:

  • Cummins ((CMI)) - 5%
  • Target ((NYSE:TGT)) - 7%

The 19 positions that have raised their dividend this year make up 83% of the portfolios income and their increases represent a 7.8% increase in the overall income expectation. That is pretty good.

Conclusion

Category

Goal

Actual

Current Yield

3%

3.1%

Dividend Growth

5%

7.8% YTD

Click to enlarge

As I look at my YTD return, I take a look back at my specific goals. I want a 3% yield with 5% growth in the dividend. I also translate this into an income dollar goal of $3,888 this year. The portfolio is meeting my goals and producing about 5% more income than my goal even with the extra cash sitting around.

You will note that I did not mention anything about the value of my portfolio. This is because I do not really track it that closely. I am focused on income. This month, I had a value of ~$127k. Last month I had a value of ~$120k. As I mentioned in the beginning and title, there is a rough goal to have $1M in the portfolio in 27 years. That is derived from an income goal and a yield target more than specific market growth. The market fluctuates. The income does not! Stay focused on your goals and what you can (kind of) control and you will do just fine!

Disclosure: I am/we are long ALL STOCKS MENTIONED.

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.