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I trade volatility ETPs, occasionally S&P 500 through SPY or UPRO 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.
  • DIVIDEND CAGR PORTFOLIO 2014 14 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 (14)
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  • Rock228
    , contributor
    Comments (758) | 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, 09:26 AM Reply Like
  • thetortoise
    , contributor
    Comments (109) | 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, 07:01 PM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 07:56 PM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 10:29 PM Reply Like
  • thetortoise
    , contributor
    Comments (109) | 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, 10:37 PM Reply Like
  • thetortoise
    , contributor
    Comments (109) | 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, 11:15 PM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 01:47 PM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 08:00 PM Reply Like
  • Christian1980
    , contributor
    Comments (3) | 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, 08:38 AM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 03:18 PM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 11:06 AM Reply Like
  • offroadguy
    , contributor
    Comments (14) | 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, 11:11 AM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 08:47 PM Reply Like
  • Rock228
    , contributor
    Comments (758) | 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, 09:54 AM Reply Like
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