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I trade volatility ETPs (SVXY, XIV, UVXY), S&P 500 through SPY, UPRO, SPXU, and invest long term in Dividend Growth stocks with high dividend CAGR values. Individual stock picking is a waste of time to me unless the company pays out large and high growth dividends. Macro mixed with Volatility... More
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  • DIVIDEND CAGR PORTFOLIO 2014 22 comments
    Mar 7, 2014 12:21 PM

    I finally got around to taking a fresh look at the dividend data for all the companies that have increased their dividends for 10 straight years or more. The data I used is up to date as of Jan 31st 2014. The Cash generating CAGR (Compound Annual Growth Rate) Dividend portfolio has been tweaked some and a few new names were added.

    I don't get around to updating the list or the portfolio that often and that isn't a negative, that really is the point of the portfolio. To generate massive amounts of cash year in and year out that increases much faster than inflation. If you can get enough cash yield out of your stocks that on year 1 you can live off of the dividends then 30 years later you should not only still be generating enough cash to live off of you should be generating much more than you need. That is the power of CAGR Dividend Stocks, the ability to sleep well for the rest of your life no matter what is happening with the stock market. Very powerful.


    Some changes I made recently are - I sold Walmart and Pepsi. Walmart only increased dividend by 2.1% (18% last year) and Pepsi is up 30% (39% with reinvested dividends) since I bought it 2 years ago, it was in a transition period at the time - the recovery has happened and now the dividend increases are slowing down to 5.5% last year. I would rather own higher yielding and higher increasing dividend companies. Also trimmed some Kinder Morgan, it was over 10% of his holdings and I don't think any one company (except for the best of the best like Walgreens) should be more than 10% of anyone's holding. Trying to diversify more.

    Added to

    PSX - Phillips 66, 2% yield but growing like gang busters, stock up 130% since the spin off a year ago and increasing dividend over 20%/year. Yup, add to that one on any dips.

    TXN - Texas Instruments. Nice 2.7% yield and 20%/year dividend bumps.

    New Positions:

    WMB and WPZ - Williams Company / MLP - Oil and Gas company doing very well. Yields 3.8% and 7.3% respectively with 20% and 8% div growth rates. Diversifying out of KMP.

    NU - Northern Utility. Energy Utility company. 3.5% yield and 12% growth/year. Solid.

    GIS - General Mills - Food company. 3% yield and 10% growth/year. Nice swap from Pepsi

    IPCC - Infinity Property - Insurance Company. 1.6% Yield but 20%+/year growth. Small position




    % In Each Stock





    Alliance Resource Partners








    Cardinal Health Inc








    Cracker Barrel Old Country




    General Mills




    Infinity Property & Casualty












    Northeast Utilities








    Phillip Morris International




    Phillips 66








    Texas Instruments








    Williams Companies




    Williams Partners LP









    Current Dividend Portfolio Yield






    Yield Increase since July 2011


    The portfolio grew 22% last year (stocks themselves) plus over 4% in dividends paid that were reinvested for now for a nice 26%+ gain ~ the same gain as the Dow. Yield Vs Original investment is over 5% now.

    I am going to try to market time the pullback I expect this summer by selling all of the dividend stocks when I think the pullback has started and see if I can get back in at a nice lower cost at the bottom. If it is a 10%+ pullback and I time it right I could increase the dividend yield by 6% or more. We shall see if it works :)

    I hope this information helps you guys out! Never being worried about or forced to sell stock is a great luxury that I think is the whole purpose of saving and investing for retirement.

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Comments (22)
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  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » No comments? Isn't the point of investing to eventually let your money work for you? Just sit back and enjoy the cash coming in. :)
    10 Mar 2014, 09:26 AM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
    Hi Rock - This is great stuff! I have been a big believer in index funds, particularly Vanguard funds, over the years and am not much of an individual stock investor besides our adventure in the volatility ETP's. Probably fewer comments here because it's less exciting to sit-back and collect dividends than watch the swings in volatility.


    One cool thing you could do with this portfolio is load it up in Motif - then you could trade the whole thing for one commission and rebalance just as easily. That has always been one reason I have never messed with individual stocks - always seemed easier to buy VIG and be done with it. Obviously, picking great stocks should outperform VIG and any other broad based dividend ETF. Anyway, just opened an account there and thought of this portfolio because you can get people to follow your portfolio and make updates as you do.


    Also, I agree that is the point of investing - to 'own' the companies and collect your share of the income instead of 'working' for the companies to help make money for the people not doing anything. Gotta get on the easy-street side of that deal, hopefully sooner rather than later.
    23 Mar 2014, 07:01 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Tortoise - Thanks for the response. Never seen Motif before, interesting stuff. I hope to one day have my own Dividend CAGR Fund. I will look into it thanks for the idea.


    I don't really trade this account (usually) but I am thinking about dumping it all, going all in AGG, wait for the 10% correction and then get back in. Normally I hold and if one stock gets to high I trim and disperse to others or sell the stock if the dividend increase or the stocks story falls apart. Over 2 years I have probably made less than 20 trades including re balancing.


    VIG is not going to cut it unless you have mucho dinero. My Port has beaten VIG by over 10% since inception with a significantly higher Yield. It isn't that hard to do it just takes some time, a few good sites of info and crunching some numbers. The problem with a lot of these Div funds is they chase hot runners and own cyclicals and financial companies that get slaughtered in downturns. I skip all the high risk companies. The cash just keeps flowing like a river. A nice peace of mind.
    27 Mar 2014, 07:56 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Motif - There are a few "funds" that use similar styles but none that combines Dividend Champs + High CAGR + Low Risk (no cyclicals, financials, etc.).


    This is the closest to mine as far as returns go.


    In fact they have a higher Yield. The downside to theirs is they own Financials (yikes in a recession) and Utilities barely grow their dividend each year. So snapshot today their portfolio looks just as good as mine (possibly better because of slightly higher yield). But fast forward a few years and my Port will have higher yield AND lower beta/not get slaughtered in the next recession.


    Some of the stats look sketchy. Graph doesn't match stated return, current 1 year return on individual names are no where near the ~25% return it claims for the last year. Me thinks they spike the punch bowl on their own Motifs...
    27 Mar 2014, 10:29 PM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
    Great idea on the fund Rock! I agree on the dividend funds - the yield is almost comical - 1.85% currently for VIG - a whole $18,500 of annual income for every million dollars - ouch! That would make for one sad retirement.


    Interesting on the bond idea as well. I have been considering TLT myself as it seems ready to break-out. Either it breaks out and stocks tank, or it crashes and stocks rally. My other worry is both stocks and bonds tanking together which I remember happening in the 08/09 crash. With worries about rates rising I wonder if this will be another 'cash is king' situation. While I'm still not convinced that the correction is coming, I am up to 75% cash across all accounts right now. End of March and markets are going nowhere YTD.
    27 Mar 2014, 10:37 PM Reply Like
  • thetortoise
    , contributor
    Comments (102) | Send Message
    I can see the similarities in the motif fund versus yours as far as yield, but yes that is pretty heavily weighted to financials! Probably a better choice than a generic dividend fund at any rate. The cool thing is you could load up your fund with the exact percentages from your table and compare against their or anyone else's funds. A lot of potential for that site but I do agree on the trends, they seem off, I think some of the trends are modeled rather than being actuals. The really terrifying part is how the 'top performing' funds might induce chasers to buy into the 'solar-biotech-ipo-tesla' fund which returned 150% last year but will lead the way into the ground when things go south.


    Some new ideas in the dividend arena that I found interesting include the 'dividend aristocrats' type funds. NOBL is one of the tickers of these funds. I'm sure the yield is lower and again we have the problem of cyclicals (16%) and financials (11%). Maybe more promising than the generic dividend funds out there, but hard to compete with quality research and a fund concentrated on the best of the best.
    27 Mar 2014, 11:15 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Tortoise - I like TLT better as well. If there is a 2008 style crash coming soon I am in Cash, 20% UVXY and another 10-20% in my High Beta Puts. No bonds for me! All the major corrections since 2004 has bounds going up (minus the crash), I looked in to it. My view is that interest rates won't rise significantly until the bond market believes there is real growth and/or inflation reading pick up. Headline inflation is tiny and I don't believe the Fed for one second that we will have 3-4% growth this year. Not one single second! The one thing the Fed is good at is being wrong and always on the high side. The bond market doesn't believe the Fed.


    So rates aren't running away anytime soon. Plus Fed target increase of ZIRP is still a ways out (and the goal post keeps moving further out....). Go look at June 2004 (the last time we raised rates) until June 2006. A few months before rate increase the bond market sold off ~ 4% - they priced in the rate increase before it happened. Then the bond market rose for ~ 1 year and at about the 3.25% to 3.5% interest rate it reached a peak and started selling off from there as the Fed kept increasing rates (gee, I wonder if the bond market was trying to tell the Fed what the proper interest rate should be...hmm...).
    30 Mar 2014, 01:47 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » My strategy is a Dividend Aristocrats strategy on steroids (optimized). I only use companies with 10+ years of increasing dividends plus all the things I mentioned earlier. I use a simple formula weighing the 1, 3, 5 and 10 year dividend growth and then do a CAGR calculation out to 10 and 20 years. I use the best of the best from there factoring in I have to buy some "slow" growth guys to help jack the overall yield.


    I ran the numbers more exact.
    Rise since 7/7/11 (when I started my "Fund")
    VIG - 31% with a current 1.93% Yield
    ME - 40% with a current 4.11% Yield


    Theoretical Holdings
    Oct 9th 2007 to March 9th 2009
    VIG (based on VDAIX) -47.2%
    My Fund -36.5%


    My average yield would have gone UP 20.4% from Oct 2007 to March 2009. I didn't run VIGs yield numbers but even if they were comparable to mine (doubt it) I have larger yield to start and smaller drawdown over great recession and
    larger rise since I started.


    Higher yield, lower draw in crisis and a solid increase in dividend yield during that crisis. If you had enough cash flow Oct 2007 then you had 20% more cash flow in March 2009. Who cares what the underlying stock price did?! :) That is peace of mind. I don't know why every retiree doesn't try to do this. Blows my mind paying people to under perform the market and potentially running out of money. Silly world.


    And knowing which stocks were punished most/least of the best dividend stocks means when I see/think things are going south I can rotate out of the 50% losers from last time and go into the 30% losers until things blow over while balancing my yield to be exactly the same or even better if I work at it a bit. When things bottom go back into the best of the best for the ride back up.
    30 Mar 2014, 08:00 PM Reply Like
  • Christian1980
    , contributor
    Comments (12) | Send Message
    Hi, could you update this with a September 2014 Portfolio update? and give us your analysis of these stocks with high div growth: ps. Do you still like WMB and TXN?


    IBM, COP, WMB, PSX, TXN (23% growth rate div 5 yr), McD (11,4 div growth 5 yr, 3,5% yield og 2,3% buy back)
    JNJ (2,5 yield, 7,4% divgrowth rate)
    PSA (23% div growth 5 yr, 3,43% div yield)19,1% growth rate 3 yrs.
    OHI (div growth rate 10 yr, 10%), yield 5%.
    SPG 5 yr: 67% growth rate (div growth rate 10 yr: 3,7%, yield 3,1% )
    25 Sep 2014, 08:38 AM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Sure thing. I will try to get to it this weekend. I have a meaningful position in cash since Fed meeting (anticipating this drawdown) but I will say what I will buy once the draw completes.
    25 Sep 2014, 03:18 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Life gets in the way sometimes. I will try for sometime this week to update this. Did a lot of research. Dumping IPCC, CBRL, ABBV, might sell MCD depending on how much they raise dividend. Sold KMP after it popped from the parent company buyout. The parent Yield is to low so I added to other higher yield ones.


    New Stocks added: CVX, TGT and KO. Stocks I already owned but hadn't mentioned yet (in my Roth IRA) CLX, CVS and SYK.


    Adding to: WMB, WPZ, TXN, GIS and ARLP.


    I should make a Motif so everyone can see it.
    28 Sep 2014, 11:06 AM Reply Like
  • offroadguy
    , contributor
    Comments (55) | Send Message
    excellent articles and commentary
    i am getting back in the game now and look forward to following your thoughts closely
    thanks for the insight
    3 Oct 2014, 11:11 AM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Thanks for the comment offroadguy. I will update this CAGR info when I can. Looking to time my buying on this drawdown.
    7 Oct 2014, 08:47 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » I created a Motif (ETF) so people can follow how I am positioned for Dividend CAGR stocks. I like 100% transparency so people can see the results for themselves.

    12 Oct 2014, 09:54 AM Reply Like
  • Christian1980
    , contributor
    Comments (12) | Send Message
    thanks. Please let us know if you updated the Motif and why - your reasoning.. - do you have any REITs on the radar ? and do you have more cash now? there is a lot of nervousness in the markets this February, people expecting a large correction..
    14 Feb 2015, 05:16 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » I did update the motif, I sold a bunch of energy stocks on this bounce that I think will not last for long. The reason is either the dollar will strengthen more (good US data) and oil will fall further or the dollar will fall (bad US data) and oil will go up more but not for long as the US will go towards recession along with the rest of the world. So either way oil is going lower (in my view) over the next year or so.


    The stocks I sold I simply reallocated to the existing ones I owned. This has dropped the yield for now and once I see a bottom in oil I will go back in and bump the yields back up. I don't do REITs or financial companies as they tank during recessions - except for OHI because Health Care never really goes into a recession especially with the boomers retiring. I do need to hunt around for a few other companies to go into during defensive times like a recession.


    I agree we are getting close to a top but I don't see one yet. I have a lot of data analyzed and feel confident I can "call" the market top or close to it and get out if need be.


    Not sure exactly how to play the next market top as interest rates are so low - you usually pile into bonds - TLT and AGG to ride it out but maybe that isn't the best play with rates so low?.... For the conservative and nervous type I would recommend looking into using the Permanent or Basic Portfolio allocation - 25% SPY, 25% GLD, 25% TLT, 25% SHY (short term paper). It has returned about 9%/year for the last 30 years with few draws. It beats 90%+ of the people you pay to manage your money over long periods of time.
    14 Feb 2015, 10:10 PM Reply Like
  • Christian1980
    , contributor
    Comments (12) | Send Message
    Great - I have noted your comments. I don't see my self as a nervous type though. But here is an idea we can debate - do you know Jeremy Siegel's research? His books "Stocks for the Long Run and "The Future for Investors" has insights into the best performing stocks since 1957-2014.
    It turns out that some of them are still doing great:
    Altria Group, Abbott (and Abbvie), Colgate, Pepsico and Coca-Cola to name a few. Back to your portfolio. Do you use the CAGR as a key criterion for selecting stocks? If so, how do you screen for high CAGR EPS? does not have it. PS.
    Siegel's top 20 is below with the annual percentage return (with dividends reinvested) - any thoughts? :


    1 MO Altria Group 19,40%
    2 ABT Abbott Labs 15,20%
    3 KO Coca-Cola 14,90%
    4 CL Colgate-Palmolive 14,60%
    5 BMY Bristoll Myers Squibb 14,40%
    6 PEP Pepsico 14,10%
    7 MRK Merck & Co 13,90%
    8 HNZ/BRK Heinz/Berkshire 13,60%
    9 CVS CVS Caremark 13,60%
    10 TR Tootsie Rolls 13,60%
    11 CR Crane 13,50%
    12 HSY Hershey 13,50%
    13 PFE Pfizer 13,30%
    14 EQT EQT Corp 13,10%
    15 GIS General Mills 13,10%
    16 OKE Oneok Inc 13,04%
    17 PG Procter and Gamble 13,00%
    18 DE Deere and Co 12,80%
    19 KR Kroger Company 12,70%
    20 MHP McGraw Hill Co 12,60%
    21 Feb 2015, 07:18 AM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » That is a great list of companies but you still have to say "what have they done for me lately" and that is why using the DRIP Dividend Champions excel sheet, doing a simple calc on the 1,3,5,10 year dividend returns will tell you who is the best NOW vs the best then or over 50 years.


    The best now and the best then may overlap but we need to evaluate that in my opinion and keep evaluating every year. For instance Altria is still one of the top 5 stocks (in my opinion) in the world to own. And while I agree CVS is a great one too it has only 12 years in a row of Increase dividends, I think WBA (Walgreens) is even better with its rock solid 39 years in a row. Both are worth owning, WBA gives you more security and that is why in my mind it is the best stock in the world to own.


    And for instance DE didn't raise its dividend for at least 5 years according to the excel file, I would have rather jumped out of them during that time and owned more MO, KO, etc. Even though over time they did well I want to skip the low years and be in the great years.


    My father owns CVS, CLX and SYK in his Roth IRA.
    21 Feb 2015, 03:48 PM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Christian - I know of Jeremy Siegel but have not read his research. It sounds like a similar core idea of holding large cap great companies that grow consistently over time. I know how well that idea works, my father retired early as a P&G employee (at one time you were forced to have 50%+ of your portfolio in company stock and until 2011 he was very overweight in P&G stock).


    My style is I Macro trade the market while I am still working and until I make enough money to live off of my dividends because I believe with enough effort one can not only beat every investing adviser over long periods of time but also beat the market bench marks consistently over time and more importantly get out of dodge when the inevitable stock market collapses come - conserving your capital. Even if your active management of your account can't beat the Pros net of fees if you are able to get out at a reasonable time during the down turn (you know the Pros are going to stay way too long the whole way down) you are way ahead of the game.


    Then when you have enough to live off of with dividends and retire (don't want to trade much anymore, relax, etc.) then you do Dividend CAGR Investing.


    I use the Dividend Champions worksheet to look at 1,3, 5, 10 year Dividend CAGR of the dividends for companies and then assign a % value of importance to each - use the excel sheet to pump out a value for each stock with my simple weighting equation and then I have a way of quickly scanning through which stocks have the highest value - CAGR - that I trust. I really don't even look at earnings, earnings don't matter to me only Dividend growth does because most companies won't raise dividend unless they know earnings will pay for it. To mitigate that risk I also keep an eye on Payout Ratio with Fidelity although that can be tricky with REITs, MLPs, etc. I prefer companies with at least 10 years raising dividends in a row. And when I originally built my fathers portfolio I looked to balance out growth and yield - I had a certain yield goal and made sure I weighted the Portfolio to meet that goal.


    Now that his core account has moved up considerably the yield isn't as important (he has plenty to live on) it is more important to stay in quality and try to stay away from potential crack ups like Financials/REITs of the past and Energy stocks today (I still think Oil is going down further).

    21 Feb 2015, 03:37 PM Reply Like
  • Christian1980
    , contributor
    Comments (12) | Send Message
    thanks for this. I would guess that the very best stocks are those you now have in your portfolio? But WBA is not there.. Did you not include WBA in your retirement Dividend CAGR portfolio because it is not high yield? I think it is an interesting question how we should balance high yield stocks with low yield/high div growth stocks like V, MA, AXP, CVS, WBA, WAB, GILD, etc. - I am guessing that one way would be to have a 65% percentage in high yield stocks and 35% in high growth/low yield dividend stocks. - I have noted that in Berkshire's latest filing there are several companies that are high growth dividend stocks such as Visa, Mastercard. But another interesting aspect about his investment style that we could debate is the idea of the "concentration portfolio". Did you know that 75% of Berkshire's holdings are in only 6 stocks? Did you know that often highly concentrated portfolios do better than large, highly diversified stock portfolios? If you were to choose only 6 stocks, what would they be? Personally, Iam not certain that I have the mentality and investor confidence right now to have such a concentrated portfolio.
    Christian - from Denmark (a stock market which is doing great, with Novo Nordisk (insuline,pharma) and Vestas -( wind turbines)
    22 Feb 2015, 01:45 AM Reply Like
  • Rock228
    , contributor
    Comments (845) | Send Message
    Author’s reply » Walgreens absolutely is in my portfolio with a 11.5% weighting. I am up well over 200% since 2011 on WBA (used to be WAG) when I took over my dads port and made him buy a ton of it (I traded it well, selling when Express Scripts issue came up and bought after a nice 25% pullback, plus a few other smaller trades).


    About growth stocks vs yield - If you are still trying to grow the nest egg then yes you will want to add more growth than yield. I still would only buy stocks with dividends growing each year. From my perspective I only care that I yield enough cash to live off of and that yield grows as much as possible each year - in other words growth stocks are overrated to me because they have more risk because they don't have 20+ years of dividend increases behind them. Even with all the slow growth stocks my father owns he still adds 7%-12% yield (average dividend growth) per year.


    So growth vs yield to me is a question to where you are in your investing life. Ready to retire or still trying to earn the nest egg to retire. Growth stocks = slightly higher risk and higher potential returns.


    Personally I wouldn't mind owning only 6 companies and I think my fathers returns would be even better if we did that but that is a tough sell to many so I stick to the whole diversify theme and no stock should be more than 10% (although i let that slide with Altria and Walgreens for sure-my two best stocks on the planet picks). So my 6 stock picks would be:
    WBA, PSX, NVO, LOW, UNH, WLK (maybe FAST)


    WBA, MO, TXN, OHI, WEC, CLX (maybe LMT, I just refuse to own military contractors for my own reasons)
    22 Feb 2015, 01:39 PM Reply Like
  • Christian1980
    , contributor
    Comments (12) | Send Message
    thanks. I am considering taking bigger positions in fewer stocks,
    Good to know your top picks. I will reflect on mine. ps. Glad to see you have NVO there. C
    22 Feb 2015, 04:33 PM Reply Like
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