2016 is now in the books, and it turned out to be quite the year for me, both personally and professionally.
In October, my wife and I welcomed a new little girl to our family. Her birth offers some balance to the family dynamics by complementing her two older brothers, who are already doing their best to watch out for her. We now have three kids aged 5 and under, so to say the household is busy is the understatement of the year, but I wouldn't give it up for the world.
Portfolio-wise it was another stellar year, which I suppose is to be expected with the positive gains seen in the overall market. The total value of my portfolio has now more than doubled since it was introduced in the beginning of 2013, and my dividend income grew by another 15.6% year over year.
My Seeking Alpha career has also continued to grow, as this update marks my 100th article on the site! This is unbelievable to me, as my wildest dreams wouldn't have seen this coming. I was hesitant to put myself out there when I penned my first article back in 2013, but am so happy that I made the plunge. To those of you out there contemplating doing the same: Just do it, you won't regret it!
If that all wasn't enough, I decided to take things one step further before 2016 came to a close, and I created a new website to share my portfolio's moniker: www.DGIfortheDIY.com. This is an exciting development for me and something I've been considering doing for some time. Fortunately I have a very supportive wife who encouraged me to go for it, and although it's been a lot of work getting it going, I am excited about the possibilities for it.
Now enough about that stuff. Let's get to the portfolio!
The market started out the year slow, with a big swoon to begin January, but it overcame the fall and ended up with double-digit gains for 2016.
The portfolio put up similar numbers, as it grew by 15.5% after taking out contributions made during the year. On a total dollar basis the portfolio increased by 24.1%, growing from $47,790 to $59,308.
Here are the numbers since the portfolio's inception:
Focusing in on dividends, you can see that Q4 saw a slight dip against Q3, which is mostly the result of Digital Realty paying its Q4 dividend in January rather than December.
Despite the fourth-quarter decline, the year over year number was still pretty good, as the annual dividends increased by 15.6%.
The 15.6% income increase comes from a combination of reinvestment of dividends, new purchases of stock from cash deposited into the account, and through the increased dividends paid out by companies.
It's noticeable that as the portfolio has grown, and the cash contributions have a smaller effect on a percentage basis, the growth rate of dividend income has declined. I suspect that the annual income growth will settle in to the 12-14% rate over the next few years, which would come from roughly 3% dividend reinvestment, 3% of new contributions, and 6-8% of organic dividend growth.
Speaking of organic growth, here are the increases announced in Q4:
|Date||Company||Previous Quarterly Rate||New Quarterly Rate||Sequential Increase||Year Ago Dividend||YoY Increase||Dividend Yield|
|10/10/2016||Thor Industries, Inc.||(NYSE:THO)||$0.3000||$0.3300||10.00%||$0.3000||10.00%||1.30%||LINK|
|10/16/2016||Omega Healthcare Investors Inc||(NYSE:OHI)||$0.6000||$0.6100||1.67%||$0.5600||8.93%||7.50%||LINK|
|11/3/2016||Stag Industrial Inc||(NYSE:STAG)||$0.115833||$0.1167||0.72%||$0.115833||0.72%||5.89%||LINK|
|11/17/2016||Union Pacific Corporation||(NYSE:UNP)||$0.550000||$0.6050||10.00%||$0.550000||10.00%||2.31%||LINK|
|11/18/2016||MDU Resources Group Inc||(NYSE:MDU)||$0.187500||$0.1925||2.67%||$0.187500||2.67%||2.69%||LINK|
|11/21/2016||Becton Dickinson and Co||(NYSE:BDX)||$0.660000||$0.7300||10.61%||$0.660000||10.61%||1.68%||LINK|
|12/1/2016||WEC Energy Group Inc||(NYSE:WEC)||$0.495000||$0.5200||5.05%||$0.495000||5.05%||3.54%||LINK|
|12/9/2016||General Electric Company||(NYSE:GE)||$0.230000||$0.2400||4.35%||$0.230000||4.35%||3.06%||LINK|
|12/14/2016||Realty Income Corp||(NYSE:O)||$0.202000||$0.2025||0.25%||$0.191000||6.02%||4.08%||LINK|
|12/14/2016||CVS Health Corp||(NYSE:CVS)||$0.425000||$0.5000||17.65%||$0.425000||17.65%||2.42%||LINK|
|12/16/2016||Dominion Resources, Inc.||(NYSE:D)||$0.700000||$0.7550||7.86%||$0.700000||7.86%||4.01%||LINK|
It was another solid quarter for increases, with an average of 8.07% for quarter-over-quarter declarations and 8.75% on a year-over-year basis. As expected, Starbucks and Visa led the way, as they announced increases of 25% and 17.86%. CVS Health and Amgen were also generous, providing boosts of 17.65% and 15%.
I was a bit surprised to see an increase from General Electric, as I expected the dividend to remain frozen until the end of 2017. Union Pacific was also a pleasant surprise, as I was expecting just a few penny increase rather than the 10% increase it announced.
One of the smaller increases came from Chevron, which gave a token $0.01 increase to keep the dividend growth streak alive. The smaller increases from Abbott Labs and STAG Industrial were also notable but weren't surprising as Abbott is working through the St. Jude acquisition while STAG is working to lower its payout ratio a bit from previous levels.
In all I'm quite happy with the overall numbers, as the 8.75% growth along with dividend reinvestment gets me to a nearly 12% earnings growth rate for the portfolio.
It was a relatively quiet quarter on the trade front, as I had just one sale and seven buys in the portfolio.
The lone sale occurred in October, when I cashed out my lone non-dividend paying company with the sale of NXP Semiconductors (NASDAQ:NXPI).
NXPI was a very profitable investment for me, as I realized an 88% gain after nearly three years of owning it. I sold my shares after QCOM announced it was acquiring the company, and I used a portion of the proceeds to add to my QCOM position. I like the deal for QCOM's future growth prospects, as it adds diversification to its current business and is expected to be accretive to future earnings considering it is an all-cash acquisition that won't dilute the share count.
On November 10th I took advantage of the selloff in Omega Healthcare and picked up an additional 17 shares of the company when they were yielding nearly 8.6%. That has worked out well so far, as shares have rebounded by more than 10% and the company announced another increase to the dividend.
Finally, I rounded out the year by adding to my holdings in Abbott Labs and AbbVie, bringing them both to full positions in the portfolio. I like Abbott as an alternative to the pharma companies in my portfolio, and think the St. Jude acquisition should help solidify its position in the medical devices market. I also think AbbVie a nice opportunity at a 4%+ yield following its October dividend hike.
Here are the prices I paid for my new shares:
With those trades now recorded, here is how the portfolio sits as 2016 comes to a close:
Here is a more detailed breakdown of the portfolio based on sector weighting and income:
With the recent pullback in the healthcare sector, I took advantage of the opportunity and added to my positions. I have been wanting to bring up my weighting in the sector, and with the recent purchases it is now over 10% of the portfolio. Additionally, companies like Walgreens Boots Alliance, CVS Health, and Omega Healthcare reside in the consumer staples and REIT sectors, further adding to my exposure to the industry.
I'm now pretty happy with the balance in the portfolio, and I don't see any glaring things that need to be done at this time.
On The Radar
I don't have any immediate candidates to sell at this time, although I'll admit my patience for GameStop Corp. and Polaris Industries is beginning to wear thin. Despite the underperformance, I remain content to let them work through their issues, especially considering they are only half-sized positions in the portfolio.
For potential purchases, I still have plenty of "want to owns" on the wish list, with NextEra Energy, Inc. (NYSE:NEE), VFC Corp. (NYSE:VFC), and Nike, Inc. (NYSE:NKE) bringing the most interest at this time. However, with just $54.70 in cash in the account to begin the year, I must bide my time until I have enough built up again for another buy.
With the portfolio at record highs in both income and value, I can't find much to complain about right now. My income growth remains on a good trajectory, and I feel like I have a really solid group of companies, lessening my urge to tinker with positions.
I hope this update finds you well. Best wishes and Happy Investing in 2017!
Disclosure: I am/we are long AAPL, ABBV, ABV, ABT, AMGN, AMP, BDX, CBRL, CHD, CLDT, CMI, CVS, CVX, D, DLR, DPS, EOG, FLO, GE, GILD, GIS, GME, IBM, KMI, KO, LMT, LOW, MCD, MDU, MSFT, NSC, O, OHI, OXY, PII, PM, QCOM, ROST, SBUX, STAG, T, TGT, THO, UNP, V, WBA, WEC, WFC, WSO, XEL, XOM.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am an engineer by trade and am not a professional investment adviser or financial analyst. This article is not an endorsement for the stocks mentioned. Please perform your own due diligence before you decide to trade any securities or other products.