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Dividend Portfolio Rebalancing Smarty-Style

|Includes:Aflac Incorporated (AFL), ARLP, BMY, MSFT, NSC, NUE

2014 is underway and I sat down to look over my Dividend Growth portfolio to see how things were going.

As an engineer, I can't seem to leave anything alone if there appears to be a way to make it a little 'better', so it's not unusual for me to make some changes. Truth be told, I could probably make no changes and watch things turn out just fine, but my engineer gene often gets in the way.

My portfolio is meant to generate and grow income, so that's what I try to optimize.

After a quick review of my holdings and some possible replacement stocks, I decided to sell some of my lower yielding / slower growing / cyclical stocks and replace them with higher paying / faster growing DGI stocks.

Here's what I finally settled on:

Sold Shares Value Income 1 Yr DGR %
AFL 50 $3,114.50 $74.00 6.0
BMY 30 $1,528.20 $43.20 2.9
NSC 50 $4,480.50 $108.00 5.2
NUE 50 $2,438.00 $74.00 0.7
Totals   $11,561.20 $299.20  
Bought Shares Value Income 1 Yr DGR %
ARLP 40 $3,080.00 $188.00 9.7
MSFT 80 $2,940.00 $89.60 16.9
RCI 70 $2,965.00 $114.80 9.5
WEC 70 $2,900.00 $109.20 20.4
Totals   $11,885.00 $501.60  

As you can see I will have to add roughly $325 in order to complete these transactions and pay taxes on my capital gains in the original shares. In return, I will increase the total income generated by about $200 annually (~80%) and the rate of growth of that income should also increase going forward.

In a strict dollars and cents analysis, I am paying $325 (plus taxes) now to receive $200 per year forever. That seems like a reasonable deal to me. The faster growth of those payments is icing on the cake.

Disclosure: I am long AFL, BMY, NSC, NUE.

Additional disclosure: I will be initiating positions in ARLP, MSFT, RCI WEC shortly. I am not an investment advisor. Do your own due diligence before buying or selling any stocks. You are responsible for your own holdings and I am not.