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Smarty_Pants
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I am an electrical engineer currently employed in the defense industry. I have been a minor partner in a local business for the past eleven years, where I keep the books. I have followed and studied the stock market for over 20 years, developing a trading style which suits my personality. My... More
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lewrockwell.com
  • Dividend Growth Portfolio Update - 6/22/12 11 comments
    Jun 24, 2012 1:08 PM | about stocks: MO, NUE, NLY, HAS, AM-OLD, TGH, AGNC, MTGE, COP, PG, WAG

    Back in January 2011 I undertook developing an experimental Dividend Growth (DG) portfolio after several months of learning about that approach in the Dividend & Income section of Seeking Alpha. In the 18 months since that time, I have been adding and trimming various stock holdings from my DG portfolio as I've continued to learn.

    Here's how my 15 stock DG portfolio stands now:

    Stock% of holdingsStock% of holdings
    ABT6.9%MO11.2%
    AGNC3.3%MTGE3.3%
    AM6.3%NLY5.7%
    AVA5.8%NUE4.1%
    COP3.0%PG13.2%
    CTL4.3%TGH5.9%
    HAS7.5%WAG6.5%
    INTC8.9%cash4.1%

    Total = 100.0%

    My original plan was to establish 15 or 16 equally weighted positions of around 6% each. Since then I have decided to expand the number of holdings to around 30 over time, with each position being roughly 3.3% of the total. I am currently in the process of trimming and reallocating my holdings as conditions warrant. I am still looking for solid, undervalued DG stocks to add and will determine which shares to sell once a good buy candidate is found.

    Since beginning my DG portfolio I have experienced capital gains on closed positions of about 12% of the initial portfolio value for positions I have already trimmed.

    The remaining open positions have unrealized capital gains of about 9.9% of their cost (some of which are reinvested capital gains from above).

    And the dividends I am receiving are 6.02% of the cost of the shares I still hold. That number will certainly grow as this year's crop of dividend increases comes in.

    I have to say that for someone who has spent nearly 20 years chasing capital gains this DG investing stuff is noticeably easier. The profits I've generated using this approach have seemed too large and too easy for the amount of effort I've put in, especially in a lackluster market like we've experienced in the last few years.

    I guess it boils down to a simple formula. Find great companies with a history of performance and growing dividends, then buy them at a good price and let them do the heavy lifting.

    It doesn't get any better than that in my book. You can be sure I'll be adding more money to this DG portfolio in the future.

    Many thanks to the numerous authors and contributors of the Dividend & Income DG articles on Seeking Alpha. They have saved me countless hours of work and helped me to find an investing methodology in which I can have great confidence.

    Stocks: MO, NUE, NLY, HAS, AM-OLD, TGH, AGNC, MTGE, COP, PG, WAG
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Comments (11)
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  • Smarty Pants...

     

    Looks like a great start my friend. I'm long 9 of your 15 and have two more on my watch list. The remaining four look good but are too high beta for my disposition. NLY has become too erratic for my taste over the past year.

     

    Take care
    Bob
    24 Jun 2012, 04:13 PM Reply Like
  • Author’s reply » Thanks for the kind words Bob. I have money in the mREITs mostly as a substitute money market fund. I limit the amount I keep in there based on dividend flow changes when I exchange one stock for another and while I'm looking for a new stock to fill the gap. If/when I find another good stock I'll probably wind up selling some AGNC to help fund the purchase. Until then, I can't turn down 15+% on a temporary basis for a bit of my cash.
    24 Jun 2012, 04:24 PM Reply Like
  • Smarty, nice-looking portfolio. :)

     

    Like you, I had no clear goals almost a year ago when I decided to get back into investing. Of course, finding SA has changed all that. Even though I still have a ways to go to be where I want to be, it does seem too easy at times, doesn't it?

     

    I'm with you in holding the high-yielders in lieu of adding cash. Just can't pass that up for now. Keep on keepin' on!

     

    Miz
    24 Jun 2012, 06:24 PM Reply Like
  • Author’s reply » Thanks Miz. In addition to having a clearer end goal (sufficient retirement income), I have also found that using a DG approach has made it a whole lot easier to watch the market drop 3% in a day and find myself thinking which stocks might be worth buying now instead of worrying about how much my portfolio value has dropped. It makes a world of difference!
    24 Jun 2012, 07:07 PM Reply Like
  • Yes it does! I find I don't bat an eye now when the portfolios end up in the red for the day. I just keep looking around for loose change. :)

     

    Miz
    24 Jun 2012, 08:48 PM Reply Like
  • Thanks Smarty_Pants for sharing your portfolio. I like AGNC and MTGE of your mREITs and am still actively investing in MTGE. Those 2 are now 12.54% of my portfolio. The best part is that they go up when the market goes down. I have recently added more INTC @4% yield point. My allocation to PG is only 6.6% of portfolio, but my allocation to telecomms is 15.97%. I have recently bought CAT, due to it's low P/E and my underweight position in industrials. I only hold a 2% position in NUE, but think it will grow in the next 2 years.

     

    You have a great start on your retirement portfolio.
    29 Sep 2012, 10:40 AM Reply Like
  • Author’s reply » Thanks Norman.

     

    If you are looking to diversify a bit you might want to look into TGH. I found it in one of 5+'s articles a while back. It's cyclical (shipping containers) but the business is doing well and the stock has recently dropped to a good value point at a P/E under 8.

     

    Payout ratio is 43% and their last dividend increase was about 13% and the current yield is nearly 5.5%.

     

    Beta is 1.25 so it's a bit of a wild ride. Still, the high beta is what produces the occasional value point for purchases, and every now and then you get a chance to trim your holdings at overvalued points too.
    29 Sep 2012, 10:58 AM Reply Like
  • Thanks Smarty_Pants. I have casually looked at it before, but now I am more into cyclical stocks. I think we are coming to a downturn globally, but it may be an opportunity for shipping stocks and container stocks. You can't beat the dividend and P/E.
    29 Sep 2012, 11:11 AM Reply Like
  • Author’s reply » Economic slowdowns are the times when best-of-breed companies absorb market share and position themselves for future gains. TGH is quite profitable and is selling new shares to raise money for use in buying more containers.

     

    Even if the world economy does slow down, things have to move between continents and it appears that TGH is well positioned to pick up where lesser companies slack off due to hard times.

     

    I may have just talked myself into buying more as a (temporary) replacement for the shares in AM I sold on Friday. LOL! Like you said it's tough to beat a P/E of 8, a yield of 5.5%, and a DG rate of over 10% in the past year.
    29 Sep 2012, 11:38 AM Reply Like
  • Author’s reply » This just in on 11/6/12.

     

    TGH announced 3Q numbers and bumped the dividend again to 44 cents for Q4, up from 42 cents per quarter in Q3 (+4.76% QoQ). Dividend has increased from 35 cents per quarter in Q4 2011 to 44 cents in Q4 2012 (+25.7% YoY).

     

    Revenues were up 11.7% YoY and EBITDA was up 12.4% YoY. The company seems to be firing on all cylinders and is still yielding 5.54%!

     

    TGH has managed to increase its dividend for 11 straight quarters (every quarter since their IPO).
    6 Nov 2012, 07:17 PM Reply Like
  • Very cool, Smarty! You just gave yourself a lovely raise by holding this DG stock! :)

     

    Miz
    6 Nov 2012, 10:00 PM Reply Like
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