I was born and raised in the city, San Francisco to be exact. My career brought me to the Southeastern United States a long time ago. I've lived in the South for the last 30 years and while I can appreciate all of the things that an urban environment has to offer, I have learned that the county life has a lot to offer as well.
One of the things that I have developed a taste for over the last 30 years is country music. Not the new stuff so much, but I do like the "classic" country songs. My I-Pod has quite the collection of classic songs by George Jones, Merle Haggard, Conway Twitty, Johnny Cash, and many other singers. One of my favorite artists is John Conlee. He had a number of country hits and one of his biggest was a song called "Common Man." In that song, he tells us:
I'm just a common man, drive a common van,
My dog ain't got a pedigree.
If I have my say, it's gonna stay that way
'Cause high-browed people lose their sanity
And a common man is what I'll be.
What You Should Know:
That about sums it up for me. I see myself as a "common man." Not all that sophisticated or complex. Just a working stiff who enjoys many of the simpler things that life has to offer.
I don't know a whole lot about the 4% Rule, Monte Carlo simulations, back testing, survivor bias, charts, graphs, bells or whistles. What I do know is what works and what doesn't. What I do know is that sometimes situations require that you change. Sometimes you have to take a look at something other than what you are currently doing. Sometimes that look gives you a different perspective on what's really happening in the world outside your own particular box.
I started investing because my company offered a program called a "401k" plan. I was working for Coca-Cola (NYSE:KO) and they allowed us the opportunity to select mutual fund investments as well as investing in shares of the company.
I started saving 6% of my salary and as I got raises, I began to increase the amount of my contributions to the 401k. Soon, I was contributing 15% of my salary on a regular basis.
What I really began to notice was how well my investment in Coca-Cola was doing relative to my mutual fund investments. That's when I decided that I should own more individual stocks and began to explore the available companies out there.
In the early years at Coke, I was a key account representative. As such, I made sales calls at the chain headquarter level. One thing you do as a KAR is spend a lot of time sitting in the lobby with other KARs. That's where friendships started and where I learned about companies like Procter and Gamble (NYSE:PG), Colgate Palmolive (NYSE:CL), Kimberly Clark (NYSE:KMB), Johnson and Johnson (NYSE:JNJ), and Abbott Labs (NYSE:ABT).
In the 1980s and 1990s is when I started assembling my stock portfolio. As I met more people and traded ideas, the portfolio grew. Today, the core holdings in that portfolio consist of 35 stocks. Many have been held since the beginnings of the portfolio and others are relatively new holdings. Over the years, I have added to my individual holdings and today, the portfolio has achieved the original goal of throwing off enough dividend income to fund my retirement years.
What I Know:
The portfolio that I am sharing with you today is one that is made up of Dividend Champions, Dividend Contenders, and Dividend Challengers. These are companies that have:
1. Paid and increased their dividends for at least 5 years in a row
2. Increased those dividends at a rate that is larger than inflation
3. Have the ability to continue raising those dividends in the future
These 35 stock represent a group of companies that for the most part has remained in place over the years and while there has been some trimming of the holdings, for the most part, they have been "set it and forget it."
That does not mean that I do not have other stocks in my portfolio that are there for one purpose and one purpose alone-capital gain. I am not adverse to buying both dividend payers and non-dividend payers and have done so for the entire time that I've been investing.
Every year, my income from this core Dividend Growth portfolio goes up. The income from dividends is largely reinvested back into the companies that I own, but on occasion, when I have a particular stock that is getting overweight in the portfolio, I will suspend dividend reinvestment to that particular stock and put that money in cash until I have enough money put aside to reinvest it in another holding or increase my holding in one of my core stocks.
Will this strategy work forever? I really don't know. My experience has been that the strategy has been working very nicely for a long time. Will I ever be selling a core position in my portfolio? Sure. I can see that happening.
My goal is to create an increasing income stream with Dividend Growth stocks and to also have an increasing total portfolio value with the purchase of stock positions that are priced at a value-that's the objective.
My Portfolio At A Glance:
Some Closing Thoughts:
If an investor replicated this portfolio today, with equal dollar amounts for each position, the portfolio would deliver a 3.47% return. My own holdings are not equally weighted. As these shares have grown in price, some at a faster rate than others, the portfolio has become relatively unweighted.
Three of my largest holdings are Coca-Cola (KO), Kimberly Clark, and Colgate Palmolive. Procter and Gamble, and Abbott Laboratories, and Lockheed Martin (NYSE:LMT) are not far behind, in terms of total shares owned. The reason? The impact of stock splits, over the years.
That being said, this portfolio has demonstrated that the dividend growth rates for the stocks in the portfolio have, for the most part, far and away exceeded the inflation rate over the last 10 years.
When we look at the column at the bottom of the portfolio chart, we find that the portfolio as a whole had a dividend growth rates of 13% for the last year, 11% over the last three years, 13% over the last five years, and 13% over the last 10 years.
DG investing is one strategy that investors can use, especially if their goal is to produce an income stream for their retirement years.
The stocks in this portfolio are companies that are widely held by investors who employ a number of different strategies.
The dividend growth rates for this portfolio have performed at a rate that is larger than inflation and is currently an actively managed portfolio in a tax deferred account.
As I approach my retirement years, I think that I will stick with this strategy and continue to look at opportunities to increase and enhance my income without taking unnecessary risks.
Disclosure: I am long ABT, AFL, MO, T, BDX, KO, CL, EMR, XOM, GPC, ITW, JNJ, KMB, LOW, MCD, PG, SYY, WAG, WMT, CVX, COP, HRS, SJM, BAX, HAS, INTC, LMT, MSFT, PCG, RTN, RAI, SRE, VZ, WM. 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.