A Real Dividend Growth Machine: 2012 Review

Jan. 15, 2013 4:51 AM ETABBV, ABT, ADM, CMI, CVX, GIS, HRL, INTC, JNJ, MCD, NSC, NVS, PG, T, VOD88 Comments


The start of a new year is a time when many investors evaluate how they did during the previous year. The purpose of this article is to review my investing performance in 2012, which was the first full year in which I followed a dividend growth investing strategy.

Dividend growth investing involves buying the stocks of companies that consistently pay and grow their dividends, then reinvesting those dividends to produce compounding of the dividend income stream. I consider it to be a sensible approach that can work well for investors of all ages, but especially those with long time horizons, such as myself (I recently turned 31 years old).

My primary goal as a dividend growth investor is to create my own dividend growth machine, a diversified portfolio of stocks that produces a sustainable and rising dividend income stream that handily beats inflation over time. My secondary goal is to achieve a satisfactory total return on my investments, regardless of what happens in the market. As discussed in my very first article on Seeking Alpha, I prefer to define my investing success in terms of dividends, not whether I "beat the market" in a given year.

In the following sections, I review how my dividend growth machine fared in 2012. I will be presenting actual results from a real portfolio involving real money.

Input To The Machine

In a previous article I showed how regular investment of new capital can help accelerate the growth of a dividend income stream. New capital represents the input to my dividend growth machine and allows me to buy dividend-paying stocks. Where does new capital come from? It reflects savings of my job income, which can be achieved only by living below my means. I naturally live a relatively frugal lifestyle that allows me to save and invest a

This article was written by

I am a 40-year-old investor and a professor at a university. I have been following a value-oriented dividend growth investing strategy since 2012. I have written occasional reviews on Seeking Alpha about my portfolio and investing progress.

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