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My First Year of Dividend Growth Investing: Not So Bad

Back in January of 2011 I decided to dip my toes in the Dividend Growth (NYSE:DG) investing waters.  I had been reading a good number of the articles written in the Investing for Income section of SeekingAlpha and it made sense to me.  Buy shares in well established and steadily expanding companies that make it a habit to share increasing profits with their stockholders via increasing dividends.

At the time I had some cash sitting in my brokerage account with no 'typical' stocks that I might normally buy to be found.  So, I thought, why not give this DG stuff a test run for a year and see how it goes?

Over the course of the year I kept reading and studying and every now and then I'd buy a DG stock that I found or read about which seemed attractive.  I bought my first DG shares in late January (NYSE:ABT).  Another in February (NYSE:MO), March (NYSE:AVA), June (NYSE:CTL), July (NASDAQ:INTC), August (more CTL on the market dip), and October (NYSE:NUE).

That gives me a modest portfolio of 6 DG stocks which make a habit of sending me dividends.

One of my annual chores is to review my portfolio at the start of each year.  So with the long holiday weekend, I sat down to look over my DG mini-portfolio and see how I did.

As of the close of 2011, my 6 stock DG portfolio is showing me a capital gain of 14.29%.  In comparison, the S&P 500 closed 2011 unchanged in price from the close in 2010.

The total of the current dividends over the course of a year produce a yield of over 5.5% on the total money used to purchase my shares (some of which is reinvested dividends).  Since I didn't get any dividends until Q2 of 2011 my actual income was only 3.4% of the money invested (4.5% annualized).  In comparison the current S&P 500 yield is 2.0%.

In summary:  DG portfolio = up 14.29%  /  S&P 500 = unchanged
....................   DG portfolio = 5.5% yield  /  S&P 500 = 2.0% yield

As 2012 progresses, I expect most of my shares will announce an increase in their dividend payment amount, which should drive further share price gains and increase my stream of income.

All in all, my DG experiment has proven to be very successful, even with the frequent whipsaws in the market over the past year.  I wish I had a lot more cash sitting around so I could buy more shares in DG companies.  Going forward, as my savings and dividends accumulate I plan to add more DG shares and continue to build my replenishing stream of income.  By the time I retire the income my stocks generate should be considerable.

If you're not sure about the method you might want to use for investing your savings, I'd encourage you to investigate the Dividend Growth approach.  Take a few months to read and learn on the Investing for Income section of SA.  There are several authors and commentors who are very knowledgeable and willing to share what they know to help you learn.

I'm glad I did.  It seems to be working very well for me.