My K.I.S.S. Dividend Portfolio: 1st Quarter 2015 Update

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Includes: AFL, APD, ARLP, AVA, BA, BBL, BDX, BIP, BPL, CCC, CINF, COP, CSX, CVX, D, DE, DEO, DLR, DRI, EMR, FLIC, GD, GE, HAS, HRS, ITW, JNJ, KMI, LLL, LMT, MCD, MDT, MSFT, NHI, NLY, NSC, NUS, NVS, O, OHI, OKE, PAA, PAYX, PEP, PG, PTY, QCOM, RTN, SDY, SO, SPY, SYY, TGT, TUP, UGI, UTX, VDIGX, WBA, WEC, WFC, WMT, WPC, WPZ
by: The Part-time Investor

Summary

A successful DGI portfolio can be created using very simple criteria.

Just a couple of hours every quarter is all that is necessary to manage a well-designed DGI portfolio.

My KISS portfolio continues to provide acceptable (to me) dividend growth and total return.

Not much has happened with my portfolio this past quarter. There have been some ups and downs for the market, but overall it has been pretty flat since the beginning of the year. The same has been true for my portfolio. Some days up, some days down, but overall pretty flat. Still, even without much capital appreciation, the dividends keep rolling in. And since I am a dividend growth investor, that is what I care about the most. So it has still been a very satisfying quarter for me.

Since not much of interest has happened this quarter I don't have much to talk about. So I'll just go right ahead and present the data for my latest portfolio update. Just as a reminder, my purpose in revealing my portfolio to the whole world is to try to demonstrate that a successful dividend growth portfolio can be created and managed using very simple to understand criteria and rules, which can be executed in only an hour or two every quarter. In my opinion hours of in-depth analysis is not necessary (although it too can be effective).

Review of First-Quarter Contributions and Dividends

These are the total dividends I received over the past three months, and the comparison (in parentheses) to the same months during 2014:

Jan. $2,534.04 ($1,611.88) (+57.21%)

Feb. $2,787.79 ($2,479.61) (+12.43%)

Mar. $3.434.87 ($3,238.59) (+6.06%)

Total dividends collected in the first quarter of 2015: $8,756.70.

Total fourth-quarter 401K contributions added to the account - $0. (I have not yet received my first quarter pension contribution.)

So the total funds available for investment this past quarter was $8,756.70.

The K.I.S.S. System

Over the past two years, I have been developing and refining my Keep It Simple, Stupid (K.I.S.S.) system for creating a dividend growth portfolio. The system I developed has been discussed in my previous updates, but as a quick summary, my criteria for buying stocks are as follows:

For Purchase of Regular stocks

  • The stock is on the Dividend Champions, Contenders and Challengers (NYSE:CCC) list (as compiled by David Fish)
  • The Yield >3%
  • The Payout ratio < 60%
  • The Chowder Number (Dividend yield + 5yr dividend growth rate) >12%
  • A Quality Rating of A- or better from S&P
  • F.A.S.T. Graph shows a 10-year uptrend in earnings
  • F.A.S.T. Graph shows that the stock is not overvalued.

Recently, I increased my yield cut-off from 2.5% to 3%. I just turned 50, and as the time I have for dividend growth and compounding to work its magic is decreasing, I feel that I need to begin a transition to higher-yielding stocks. Since I'm getting closer to retirement, I don't have as much time as I once did to depend on low-yielding stocks with higher dividend growth. This doesn't mean I am going to sell my lower-yielding, higher-dividend growth stocks presently in my portfolio, but I will limit my new purchases to stocks yielding at least 3%.

For Purchase of MLPs, REITs, Utilities and Telecoms (High Yielders)

  • The stock is on CCC list
  • Yield > 4%
  • Chowder Number > 8%
  • DGR for all time periods (1-yr., 3-yr., 5-yr. and 10-yr.) at least 3.5%.
  • F.A.S.T. Graph shows a 10-year uptrend (or for the life of the company, if less than 10 years) in Funds From Operations (FFO).
  • F.A.S.T. Graph shows that the stock is not overvalued.

My criteria for selling a stock are also very simple. I will sell if the stock cuts its dividend. I do not look at anything else when deciding whether or not to sell.

Sales

None of my stocks cut their dividend, so I sold no stocks this quarter.

Purchases

As I have not yet received my 1st quarter pension contribution so I have not made any new purchases this past quarter. I have over $8000 in collected dividends sitting in my account waiting to be reinvested, but I always wait to receive my pension contribution before I make any new transactions, so I will continue to collect my dividends, allow them to build up, and then when I have my pension contribution I will put all that money to work.

I usually want to put all my money to work producing dividends for me, but since the $8000 I have accumulated only accounts for .78% of my portfolio, in the long run it won't make much difference. I can afford to be patient.

DRIPs

About 10% of my portfolio is held in Optionsxpress accounts. For these stocks I have set up automatic DRIP plans. Therefore, during the past quarter, I received the following number of shares of these companies:

Alliance Resource Partners (NASDAQ:ARLP)

5.473

Annaly (NYSE:NLY)

34.35

Avista (NYSE:AVA)

4.29

General Electric (NYSE:GE)

3.294

Kinder Morgan (NYSE:KMI)

2.422

ONEOK (NYSE:OKE)

3.868

Pimco Corporate Opportunity (NYSE:PTY)

6.209

WP Carey (NYSE:WPC)

2.499

Following these transactions, this is the present composition of my portfolio (as of 4/1/15):

STOCKS

# Shares

PRICE

MARKET VALUE

ANN. DIV

EXPECTED DIVIDENDS

YIELD

% PORT.

AFLAC Inc. (NYSE:AFL)

245

$64.01

$15,682.45

$1.56

$382.20

2.44%

1.52%

Air Products & Chemicals Inc (NYSE:APD)

111

$151.28

$16,792.08

$3.24

$233.10

2.10%

1.63%

Alliance Resource Partners LP

376.542

$33.42

$12,584.03

$2.60

$979.01

7.78%

1.22%

Annaly

1250.17

$10.40

$13,001.77

$1.20

$1,500.20

11.54%

1.26%

Avista Corp

534.59

$34.18

$18,272.29

$1.32

$705.66

3.86%

1.77%

Becton Dickinson & CO (NYSE:BDX)

137

$143.59

$19,671.83

$2.40

$328.80

1.67%

1.91%

BHP Billiton PLC (NYSE:BBL)

210

$44.26

$9,294.60

$2.48

$520.80

5.60%

0.90%

Boeing Co (NYSE:BA)

130

$150.08

$19,510.40

$3.64

$473.20

2.43%

1.89%

Brookfield Infrastructure Partners LP (NYSE:BIP)

381

$45.54

$17,350.74

$2.12

$807.72

4.66%

1.68%

Buckeye Partners, L. P. (NYSE:BPL)

195

$75.52

$14,726.40

$4.55

$887.25

6.02%

1.43%

ChevronTexaco Corp Com (NYSE:CVX)

148

$104.98

$15,537.04

$4.28

$633.44

4.08%

1.51%

Cincinnati Financial Corp (NASDAQ:CINF)

310

$53.28

$16,516.80

$1.84

$570.40

3.45%

1.60%

Conocophillips Com (NYSE:COP)

223

$62.26

$13,883.98

$2.92

$651.16

4.69%

1.35%

Cracker Barrel Old Country State Inc. (NASDAQ:CBRL)

183

$152.14

$27,841.62

$4.00

$732.00

2.63%

2.70%

CSX Corp (NYSE:CSX)

560

$33.12

$18,547.20

$0.64

$358.40

1.93%

1.80%

Darden Restaurants, Inc. (NYSE:DRI)

303

$69.34

$21,010.02

$2.20

$666.60

3.17%

2.04%

Deere & CO (NYSE:DE)

140

$87.69

$12,276.60

$2.40

$336.00

2.74%

1.19%

Diageo plc ADS (NYSE:DEO)

62

$110.57

$6,855.34

$2.60

$161.20

2.35%

0.67%

Digital Realty Trust Inc. (NYSE:DLR)

281

$65.96

$18,534.76

$3.40

$955.40

5.15%

1.80%

Dominion Resources Inc. VA New (NYSE:D)

219

$70.87

$15,520.53

$2.59

$567.21

3.65%

1.51%

Emerson Elec Co (NYSE:EMR)

188

$56.62

$10,644.56

$1.88

$353.44

3.32%

1.03%

First Long Island Corp (NASDAQ:FLIC)

629

$25.50

$16,039.50

$0.76

$478.04

2.98%

1.56%

General Dynamics Corp (NYSE:GD)

162

$135.73

$21,988.26

$2.76

$447.12

2.03%

2.13%

General Electric Co

588.44

$24.81

$14,599.20

$0.92

$541.36

3.71%

1.42%

Harris Corp Del (NYSE:HRS)

253

$78.76

$19,926.28

$1.88

$475.64

2.39%

1.93%

Hasbro Inc (NASDAQ:HAS)

300

$63.24

$18,972.00

$1.84

$552.00

2.91%

1.84%

Illinois Tool Works Inc (NYSE:ITW)

157

$97.14

$15,250.98

$1.94

$304.58

2.00%

1.48%

Johnson & Johnson (NYSE:JNJ)

159

$100.60

$15,995.40

$2.80

$445.20

2.78%

1.55%

Kinder Morgan Inc. Del Com

710.006

$42.06

$29,862.85

$1.80

$1,278.01

4.28%

2.90%

L-3 Communications Holdings Corp (NYSE:LLL)

146

$125.79

$18,365.34

$2.60

$379.60

2.07%

1.78%

Lockheed Martin Corp (NYSE:LMT)

144

$202.96

$29,226.24

$6.00

$864.00

2.96%

2.84%

McDonald's Corp (NYSE:MCD)

128

$97.44

$12,472.32

$3.40

$435.20

3.49%

1.21%

Medtronic Holdings Ltd (NYSE:MDT)

261

$77.99

$20,355.39

$1.22

$318.42

1.56%

1.98%

Microsoft Corporation (NASDAQ:MSFT)

495

$40.66

$20,126.70

$1.24

$613.80

3.05%

1.95%

National Health Investors, Inc. (NYSE:NHI)

242

$71.01

$17,184.42

$3.40

$822.80

4.79%

1.67%

Norfolk Southern Corp (NYSE:NSC)

174

$102.92

$17,908.08

$2.36

$410.64

2.29%

1.74%

Novartis AG ADS (NYSE:NVS)

200

$98.61

$19,722.00

$2.82

$564.00

2.86%

1.91%

NU Skin Enterprises Inc. (NYSE:NUS)

352

$60.21

$21,193.92

$1.40

$492.80

2.33%

2.06%

Omega Healthcare (NYSE:OHI)

449

$40.57

$18,215.93

$1.44

$646.56

3.55%

1.77%

Oneok Inc.

337.14

$48.24

$16,263.63

$2.42

$815.88

5.02%

1.58%

Paychex Inc (NASDAQ:PAYX)

438

$49.62

$21,733.56

$1.52

$665.76

3.06%

2.11%

Pepsico Inc (NYSE:PEP)

162

$95.62

$15,490.44

$2.62

$424.44

2.74%

1.50%

Pimco Corporate & Income Opportunity

885.21

$15.77

$13,959.76

$1.56

$1,380.93

9.89%

1.36%

Plains All American Pipeline LP (NYSE:PAA)

320

$48.77

$15,606.40

$2.70

$864.00

5.54%

1.52%

Procter & Gamble Co (NYSE:PG)

166

$81.94

$13,602.04

$2.57

$426.62

3.14%

1.32%

Qualcomm Incorporated (NASDAQ:QCOM)

175

$69.34

$12,134.50

$1.68

$294.00

2.42%

1.18%

Raytheon Co. (NYSE:RTN)

198

$109.25

$21,631.50

$2.68

$530.64

2.45%

2.10%

Realty Income Corporation (NYSE:O)

369

$51.60

$19,040.40

$2.27

$837.63

4.40%

1.85%

Southern Co (NYSE:SO)

341

$44.28

$15,099.48

$2.10

$716.10

4.74%

1.47%

Sysco Corp (NYSE:SYY)

372

$37.73

$14,035.56

$1.20

$446.40

3.18%

1.36%

Target Corp. (NYSE:TGT)

249

$82.07

$20,435.43

$2.08

$517.92

2.53%

1.98%

Tupperware Corporation (NYSE:TUP)

205

$69.02

$14,149.10

$2.72

$557.60

3.94%

1.37%

UGI Corp (NYSE:UGI)

568

$32.59

$18,511.12

$0.87

$494.16

2.67%

1.80%

United Technologies Corp (NYSE:UTX)

108

$117.20

$12,657.60

$2.56

$276.48

2.18%

1.23%

W. P. Carey Inc.

241.5

$68.00

$16,422.00

$3.81

$920.12

5.60%

1.59%

Wal-Mart Stores Inc (NYSE:WMT)

184

$82.25

$15,134.00

$1.96

$360.64

2.38%

1.47%

Walgreens Boots Alliance Inc. (NASDAQ:WBA)

229

$84.68

$19,391.72

$1.35

$309.15

1.59%

1.88%

Wells Fargo & Co. (NYSE:WFC)

246

$54.40

$13,382.40

$1.40

$344.40

2.57%

1.30%

Williams Partnership LP New (NYSE:WPZ)

255

$49.22

$12,551.10

$3.40

$867.00

6.91%

1.22%

Wisconsin Energy Corporation (NYSE:WEC)

336

$49.50

$16,632.00

$1.69

$567.84

3.41%

1.61%

CASH

   

$10,587.40

     

1.03%

TOTALS

   

$1,029,910.99

 

$35,490.67

   

Results and Portfolio Review

My portfolio's value has increased this quarter from $1,014,388.81 to $1,029,910.99. This equals a return of 1.53%

Even though it has been suggested by some that it is foolish for a DGIer to do so, I compare my K.I.S.S. portfolio to benchmarks for two reasons. I want to know that the efforts I am putting into running my own portfolio are worthwhile. If I'm not doing as well as these benchmarks, then it would make more sense for me to simply buy SPY or SDY and save the effort I'm putting into my portfolio. Secondly, one of the reasons I post my portfolio for all to see is so that others can learn how well DGI can work. I believe that DGI will deliver superior results, both in terms of total income AND total return over the long term. But to get people unfamiliar with DGI to believe that DGI can be successful, I have to show them the results compared to what they could otherwise be doing. By showing my results compared to some common benchmarks, I can demonstrate how effective DGI can be.

Based on articles written and comments made on SA, I have chosen to use three different entities as my benchmarks; the SPDR S&P 500 Trust ETF (NYSEARCA:SPY), the SPDR S&P Dividend ETF (NYSEARCA:SDY), and the Vanguard Dividend Growth Fund (MUTF:VDIGX). By using these benchmarks I can compare my portfolio to the market as a whole, to a dividend growth ETF, and a dividend growth mutual fund. These are the indices most often mentioned on SA as the ones that DGIers should be putting their money into by those who don't believe that individuals can beat an index. If I can't beat any of these indices over the long term, or at least come pretty close to them, then it would make more sense to just put my money into one of them.

To make the comparisons accurate, I run three paper portfolios made up of each of the three indices above. For each of these portfolios, whenever I have cash contributions put into my real-life account, I also put the same amount into the paper portfolios and "buy" more shares of the individual indices. And when SPY, SDY, or VDIGX pays a dividend, it gets reinvested into more paper shares, just like I reinvest my real-life dividends in my portfolio. As far as I can tell, this is the most accurate way I have to compare their performances.

As compared to the 1.53% return of my portfolio, this is the return of each of my benchmarks for this quarter:

SPY : 0.88%

SDY : -0.24%

VDIGX : 0.68%

Dividend Growth

The following stocks in my portfolio have increased their dividend this past quarter. The number in parentheses shows the % increase.

ARLP (1.96%)*

AVA (3.77%)

CINF (4.55%)

D (8.33%)

GD (11.29%)

KMI (2.27%)*

LLL (8.33%)

NHI (10.39%)

NSC (3.51%)

NUS (1.45%)

OHI (1.92%, 1.89%)**

O (3.22%, 0.53%)**

OKE (2.54%)*

PAA (2.27%, 1.48%)**

QCOM (14.29%)

RTN (10.74%)

UTX (8.47%)

WEC (7.69%)

WFC (7.14%)

WMT (2.08%)

* The stock usually raises its dividend every quarter, not just yearly.

** The stock has already made more than one dividend increase this year.

So one-third of my stocks (20/60) have increased their dividend already this year. The average increase has been 6.02%. This is a little lower than I would like, but as mentioned, some of the increases are by stocks that raise their dividends every quarter, so the year over year dividend growth will actually be higher than this quarter's dividend increase. Also, with 40 stocks yet to announce increases, my average DGR may still improve over the rest of the year.

Conclusion

My portfolio continues to perform well, both on an absolute basis, and in comparison to my benchmarks. It also continues to perform well on a dividends produced basis, and on a dividend growth basis. At this time last year my portfolio was expected to produce $30,389.08 in dividends over the next 12 months. But going forward my portfolio is now expected to produce $35,490.67 in dividends. This is an increase of 16.79%. It should be mentioned that this is due to a combination of both organic dividend growth of my individual holdings, and the dividends produced from new money added to the portfolio over the past year.

So my plan going forward is to continue to focus on the dividends and to follow my simple K.I.S.S. rules. They have been working very well so far. I believe my results continue to support my hypothesis: that by using simple, straightforward, easy-to-understand criteria for buying and selling, and by using the hard work of other people (Thank you David Fish (CCC list), Chuck Carnevale (F.A.S.T. Graphs), S&P and all the wonderful SA contributors I have learned from!), that someone can achieve excellent investment results without having to put an inordinate amount of time into the process.

Thank you for reading my article. I welcome your comments and criticisms.

Disclosure: The author is long ARLP, NLY, AVA, GE, WPC, KMI.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.