"DGI For The DIY" is a real-life portfolio that was created in early 2013 when I liquidated the mutual funds in my retirement account and used the proceeds to invest in a collection of dividend paying individual stocks.
I've written quarterly updates on the portfolio ever since as a way to share my experiences in learning about the dividend growth investing "DGI" strategy as a do-it-yourself "DIY" investor.
Like many of my generation, we have a mortgage, student loans (getting close to being done!), daycare expenses, and everything else that goes along with raising a family.
Of course, what makes those financial struggles completely worth it are the priceless moments like the one pictured above, which was my daughter's first taste of cake at her recent first birthday.
However, despite having little left at the end of the month, my experience has shown that even with just a few hundred dollars a month of savings, one can build a successful portfolio that throws off ever increasing amounts of dividends.
This series of articles is a way for me to document my decisions, maintain discipline by sharing them publicly, and learn more about investing through the discussion that follows them. My hope is that by sharing my journey as a DIY investor, I can help others learn about investing, and give them the courage to take control of their own path to retirement.
The stock market continued its march higher during Q3, as the three major indices all printed new all-time highs. NASDAQ lead the way with a 5.79% increase over the quarter, while S&P had the smallest gain at 3.96%.
The portfolio was also higher during the quarter, gaining just over 4% (less cash contributions). On a total dollar basis, the portfolio increased by 5.03%, from $63,936 to $67,149.
Here is the quarterly progress of the portfolio since its inception in early 2013:
The portfolio continues to move higher in both total value and in dividends collected. The $530 in dividend payments is a new record for the portfolio, and is 22.2% more than what was collected during Q3 of 2016.
This has been a recurring trend for the portfolio, as Q1 income was up 26.6% YOY and Q2 increased by 18.9%.
Dividends should could continue to grow in Q4 as well, as there were ten new dividend increase announcements made by my holdings.
|Announce Date||Company||Ticker||Previous Payout Rate||New Payout Rate||Sequential Increase||Year Ago Payout Rate||YoY Increase||Dividend Yield|
|7/12/2017||Walgreens Boots Alliance Inc||(WBA)||$0.3750||$0.4000||6.67%||$0.375||6.67%||2.37%||LINK|
|7/13/2017||Occidental Petroleum Corporation||(OXY)||$0.7600||$0.7700||1.32%||$0.760||1.32%||4.76%||LINK|
|7/13/2017||Omega Healthcare Investors Inc||(OHI)||$0.6300||$0.6400||1.59%||$0.600||6.67%||8.01%||LINK|
|8/24/2017||Altria Group Inc||(MO)||$0.6100||$0.6600||8.20%||$0.610||8.20%||4.07%||LINK|
|9/13/2017||Philip Morris International Inc.||(PM)||$1.0400||$1.0700||2.88%||$1.040||2.88%||3.80%||LINK|
|9/13/2017||Realty Income Corp||(O)||$0.211500||$0.2120||0.24%||$0.2020||4.95%||4.46%||LINK|
|9/28/2017||Lockheed Martin Corporation||(LMT)||$1.8200||$2.0000||9.89%||$1.820||9.89%||2.51%||LINK|
The announced increases averaged 5.13% sequentially and 6.11% annually, which is the smallest increase in some time for the portfolio.
The average was brought down by small increases from Occidental Petroleum (1.32%) and Philip Morris International (2.88%). However, even outside of those, there wasn't a single double-digit increase announcement in the group.
Lockheed Martin had the biggest increase at 9.89%, and Altria had a respectable 8.2% increase, but growth was fairly limited otherwise.
On the bright side, 6.11% average growth still far outpaces the inflation rate. Also, when adding in the reinvestment of dividends at an average 3.71% yield and taking into account new cash contributions to the portfolio, I will still easily exceed my 10% income growth goal for the quarter.
My lack of activity on the trading front continued during the quarter, as there were just one sale and two purchases made during Q3.
This has been the norm of late, as ~$300 per month in contributions and ~$500 per purchase allows for just one or two buys per quarter. Beyond that I am a reluctant seller and generally don't like trading, so my portfolio turnover has been pretty low.
Altria is a company that I've wanted to add for a while now, and when an opportunity to buy it on a big sell-off presented itself, I couldn't resist taking the plunge. If you are interested in reading the play-by-play on the buy, check out my article: Altria: Buying 'Big MO' At A 4% Yield.
Here is the info on the GameStop sale:
GameStop was a position I struggled with for some time, and considered selling for the last couple of years. As you can see, the share price has continued to trend lower as EPS growth stagnated in 2017 and now is in decline.
The other transaction was the purchase of 6 additional shares of Dominion Energy (D), which brings it up to a full position in the portfolio.
I see Dominion Energy as one of the most attractive dividend growth opportunities in the utility sector, so I was happy to add more shares at a near 4% yield.
For my rationale behind the purchase, please read: Recent Buy: Dominion Energy.
Here is how the portfolio stands as of the end of Q3.
The portfolio continues to do well, bolstered by some outstanding capital gains from the likes of Apple, Digital Realty, Lockheed Martin, Microsoft, and Thor Industries.
Not only has Lockheed Martin been a great capital gains story, but it has provided tremendous dividend growth as well. With its recent dividend increase it crossed the 10% yield on cost mark, making it the first to do so in the portfolio. Omega Health will also hit that mark with the next dividend reinvestment.
Not bad at all considered both were purchased in 2013!
Here is a breakdown of the portfolio by total value and income by sector:
At my age of thirty-nine, I still have 25+ years until retirement, so I like having some "growthier" names in the portfolio. At the same time, I think the portfolio has a nice core of stable companies as well, with utilities, healthcare, and consumer staples taking up about 1/3 of the value of the portfolio.
On The Radar
The portfolio will actually be seeing a big change next month, as it will soon be seeing its last cash contribution made to the account. The small engineering company I've worked at for the last 15 years was recently acquired by a larger regional firm, so with that my Simple IRA will end and a new 401k will begin.
My goal is to hit $25,000 in dividend income from this portfolio by the age of 65, and to do so requires annual income growth of around 10%. With cash contributions stopping, I may need to move out of some slower growers into higher ones to keep up the pace.
At this time I intend to continue reinvesting dividends and running the portfolio just like I always have, but with no fresh cash coming in, I will only be able to add new positions by selling old ones.
I don't plan to become a trader by any means, but there are still several companies that I would like to own, and I have some potential targets to sell to make room for them.
Some of the names I'm still interested in owning include: NextEra Energy Inc. (NEE), American Water Works Company (AWK), MasterCard Inc. (MA), Johnson & Johnson (JNJ), UnitedHealth Group Inc. (UNH), Pepsico Inc. (PEP), McCormick & Company Inc. (MKC), and The Home Depot Inc. (HD).
Some of the names I've considered selling to free up cash include: AmerisourceBergen Corp. (ABC), Chatham Lodging Trust (CLDT), General Electric Co. (GE), The Coca-Cola Company (KO), MDU Resources Group Inc. (MDU), Polaris Industries Inc. (PII), Tanger Factory Outlet Centers Inc. (SKT), and Wells Fargo & Company (WFC).
Obviously I won't sell all of those names, and might not sell any of them, but I can find a reason to consider doing so with each of them.
Feel free to chime in with your thoughts in the comments section below, I love hearing other people's thoughts on what I'm thinking about.
Changes outside of my control will be ending the cash contributions coming into this portfolio, but it is comforting to know that dividends will keep rollin' on in despite the change.
As we head down the stretch run of 2017, the portfolio remains on an excellent trajectory. Through Q3, dividend income is up 22% over 2016's numbers, and should easily pass the $2,000 mark for the year.
Hopefully this update finds you well, and you are having similar success with your portfolio. Happy Investing in Q4!
Disclosure: I am/we are long AAPL, ABBV, ABC, ABT, AMGN, AMP, BDX, CBRL, CHD, CLDT, CMI, CVS, CVX, D, DLR, DPS, EOG, FLO, GE, GILD, GIS, IBM, KMI, KO, LMT, LOW, MCD, MDU, MO, MSFT, NKE, NSC, O, OHI, OXY, PII, PM, QCOM, ROST, SBUX, SKT, STAG, T, TGT, THO, UNP, V, WBA, WEC, WFC, WSO, XEL, XOM, HD.
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.