Nicholas Ward's Dividend Growth Portfolio

Summary

• Readers have been asking about my actual holdings.  Here's an updated review.
• I've provided a graph showing my monthly passive income other the last 5 years or so.
• I've also included all of 63 my holdings, including cost basis and overall gain/loss.

Every few months, followers new and old ask me about my actual portfolio. Because I’ve spread my holdings out across multiple brokerages, it’s a lot of spread sheeting work to combine all of the data and typically I shy away from these pieces because frankly, I have better things to do with my time than data input into Google sheets. However, I published a couple of litany articles (my top 5 DGI stocks for younger investors and my 5 top undervalued DGI stocks) and in the comments I had numerous requests for a list of my own holdings. In the spirit of Jaylen and Jacoby, I decided to “give the people what they want.”

I’ve divided the portfolio up into a handful of sections to make it easier to digest. Also, I decided to format it with cost basis and overall gain/loss to give a sense of what can be achieved with DGI investing in a relatively short period of time (I began building this portfolio ~6 years ago and in certain instances, I’m already sitting on massive gains). Some of the cost basis are misleading because typically, over time, as you add to high quality holdings you end up having to average up. Also, I have a habit of selling shares when they’re expensive and then buying them back cheaper. Because of this and a handful of FIFO trades, my cost basis on a handful of these holdings is much lower in my mind than what my brokerage account actually shows.

But, in the end, none of that matters much. Really, the only thing that matters to me is the information provided in the graph below. As you can see, over the past 5 years or so since I began tracking monthly dividend income, I’ve taken significant steps towards reaching my goal of financial freedom. I discussed this in more specific detail in a recent piece here at Seeking Alpha. Here’s a link, in case you missed it.

So, without further adieu, I introduce you to my current holdings.

First off, we have what I’ve called “Core Dividend Growth”. What this means is companies with very reliable yields that I expect to grow in the 5-10% range over the short-medium term. When managing my portfolio, I typically shoot for double digit Chowder Numbers (divided yield + 5-year DGR) on all of my investments (with the high yielding names excluded because that is very difficult to achieve sustainably on that end of the yield spectrum). To achieve that double digit Chowder Number I focused a lot of valuation, waiting on attractive prices and the higher than average yields that come alongside them. In the past, a handful of these companies have posted much higher growth than the 5-10% range that I mentioned. However, I believe that the companies in this list are largely mature and I’ve adjusted my dividend growth expectations accordingly. Of course, if any name on this list produces strong double digit dividend growth I’m not going to complain. However, that’s simply not my expectation here and any outperformance is just a cherry on the top of an already very acceptable sundae.

Core Dividend Growth
Name	Ticker	Cost basis	Current Price	Gain/loss	Weighting
Apple	AAPL)	$101.22	$201.50	99.10%	8.90%
Walt Disney	DIS)	$94.94	$112.97	19%	6.68%
Microsoft	MSFT)	$47.73	$106.28	122.70%	2.70%
Johnson & Johnson	JNJ)	$113.52	$132.64	16.80%	1.92%
Blackrock	BLK)	$421.45	$479.45	13.80%	1.71%
Cisco	CSCO)	$23.80	$41.86	75.90%	1.66%
Qualcomm	QCOM)	$61.60	$64.35	4.50%	1.57%
Honeywell	HON)	$128.65	$156.89	22%	1.49%
Coca-Cola	KO)	$39.78	$46.39	16.60%	1.42%
Pepsico	PEP)	$90.68	$113.61	25.30%	1.40%
Amgen	AMGN)	$130.50	$195.84	50.10%	1.35%
Broadcom	AVGO)	$230.09	$229.42	-0.30%	1.29%
Pfizer	PFE)	$31.94	$40.27	26.10%	1.19%
United Parcel Service	UPS)	$108.54	$119.36	10%	1.13%
Intel	INTC)	$30.55	$48.81	59.80%	1.04%
Novo Nordisk	NVO)	$37.74	$49.63	31.50%	0.96%
Merck	MRK)	$60.04	$65.49	9.10%	0.92%
Medtronic	MDT)	$73.94	$90.24	22%	0.73%
Diageo	DEO)	$107.91	$146.94	36.20%	0.66%
United Technologies	UTX)	$111.84	$134.90	20.60%	0.64%
3M Co.	MMM)	$148.84	$207.05	39.10%	0.64%
Hershey	HSY)	$90.02	$96.53	7.20%	0.60%
Kimberly-Clark	KMB)	$99.82	$112.34	12.50%	0.53%
McCormick	MKC)	$71.43	$117.46	64.40%	0.33%

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Next up, we have the high yielding portion of my portfolio. In general, these investments have underperformed relative to the rest of my holdings. With that said, there are still some great picks in this list and it’s worth noting that I’ve held many of these stocks for years and those high yields really add up and if I was posting total return figures (which I didn’t because it would have required even more spread sheet work) these holdings would shine a bit brighter. I believe all of the yields in this section to be very sustainable. I don’t invest in companies with dubious yields. My dividend growth expectations for the high yielding stocks are low. My hope is that all of these companies grow their dividends at a rate that at least matches inflation. Some of them are known for much higher growth than that though. I’ve written about this before, but even as a young man in the accumulation phase of my dividend growth life cycle, I think it’s important to maintain yield diversity. Sure, I’m not using these high yielders to pay my bills in the present, but they do increase the buying power of my passive income stream in the present and enable me to be more effective when re-balancing my portfolio, organically via re-investment, over time.

High Yield	Ticker	Cost basis	Current Price	Gain/loss	Weighting
AT&T	T)	$37.75	$31.90	-15.50%	4.12%
W.P. Carey	WPC)	$62.70	$65.70	4.80%	1.37%
Altria	MO)	$50.40	$58.08	15.20%	1.32%
Digital Realty	DLR)	$49.87	$121.53	143.70%	0.72%
Dominion Energy	D)	$63.65	$70.32	10.50%	0.72%
Brookfield Infrastructure	BIP)	$41.87	$40.96	-2.20%	0.70%
Store Capital	STOR)	$20.46	$27.41	34%	0.70%
Ventas	VTR)	$52.72	$56.81	7.80%	0.69%
National Retail Properties	NNN)	$37.54	$44.54	18.60%	0.68%
Brookfield Renewable	BEP)	$32.81	$30.55	-6.90%	0.64%
Verizon	VZ)	$44.42	$51.73	16.50%	0.61%
Realty Income	O)	$51.09	$55.98	9.60%	0.53%
Interational Business Machines	IBM)	$180.71	$143.50	-20.60%	0.27%
VEREIT	VER)	$12.04	$7.65	-36.50%	0.24%
Sabra Healthcare	SBRA)	27.18	$21.71	-20.10%	0.01%

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And on the other end of the yield spectrum, we come to the lower yielding, high dividend growth segment. I expect to receive double digit dividend growth from all of these names. My stated goal regarding the portfolio as a whole is to maintain a dividend yield that is higher than the S&P 500’s while also posting dividend growth that is higher than the SPY’s as well. It’s this segment that fuels the second part of that goal. Over time, I suspect that some of these names will transition into the “Core” segment. That’s okay. When the time comes, I will rebalance and add other high growth names. However, I have high growth expectations for all of these names for the foreseeable future and I look forward to seeing their dividend growth announcements over the next couple of years.

High Dividend Growth	Ticker	Cost Basis	Current Price	Gain/loss	Weighting
Boeing	BA)	$126.32	$352.76	179.30%	3.35%
Starbucks	SBUX)	$49.34	$51.93	5.30%	3.11%
NVIDIA	NVDA)	$115.59	$246.47	113.20%	2.99%
Visa	V)	$71.01	$138.25	94.70%	2.63%
Nike	NKE)	$58.75	$77.54	32%	1.79%
Comcast	CMCSA)	$34.49	$35.40	2.60%	1.51%
J.P. Morgan	JPM)	$92.45	$115.66	25.10%	1.29%
FedEx	FDX)	$200.10	$241.10	20.50%	1.20%
Citigroup	C)	$63.28	$71.93	13.70%	1.16%
MasterCard	MA)	$74.15	$201.20	171.30%	1.00%
Bank of America	BAC)	$24.45	$31.25	27.80%	0.59%

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Up next we have the non-dividend payers that I own. These names are mainly high growth tech names, though being the big Buffett fan that I am, it only makes sense to own Berkshire Hathaway. These names don’t contribute to my passive income stream, but I own them because I’m a believer in their long-term growth prospects. Typically, I have a hard time deploying cash when I know that it isn’t going to help me attain my passive income related goals, but I think that every portfolio should have a bit of exposure to these more speculative, growth type investments. It keeps me on my toes as an investor. These names are often in the news and keep me engaged. Sure, they stress me out a bit more than the majority of my other, dividend paying investments, but over time, I wouldn’t be surprised if they help me reach financial freedom ahead of schedule due to long-term secular growth.

Non-Dividend	Ticker	Cost Basis	Current Price	Gain/loss	Weighting
Alphabet	GOOGL)	$741.39	$1,232.99	66.31%	4.39%
Amazon	AMZN)	849.74	$1,797.17	111.47%	1.71%
Berkshire Hathaway	BRK.B)	$121.27	$197.85	63.15%	1.65%
Alibaba	BABA)	$172.31	$185.27	7.52%	1.41%
Facebook	FB)	163.84	$171.65	4.77%	1.35%
Tencent	OTCPK:TCEHY)	$46.68	$45.45	-2.63%	0.75%
JD.com	JD)	40.95	$36.28	-11.40%	0.64%

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And finally, we have an odd basket of stocks. These are essentially trades that I’ve put on. They all pay a dividend, but they haven’t proven themselves enough to make it into the core status. A couple of these names have short dividend growth histories. Bristol Myers is probably familiar to many DGI investors, however because of its very low dividend growth and a relatively low yield, I don’t consider it to be a core part of my passive income stream. Many of these names were bought at values that I found attractive and I’d be happy to sell them if that margin of safety thins out a bit. I’d love it if they proved themselves worthy of being upgraded into the core dividend paying segment, but in the meantime, I monitor their progress with a much shorter leash.

Special Circumstances	Ticker	Cost Basis	Current Price	Gain/loss	Weighting
Bristol Myers Squibb	BMY)	$50.07	$59.62	19.10%	0.79%
General Mills	GIS)	$45.11	$45.08	-0.10%	0.59%
Royal Caribean	RCL)	$105.42	$109.99	4.30%	0.50%
Anheuser-Busch InBev	BUD)	$101.80	$101.16	-0.60%	0.48%
Technology SPDR	XLK)	$50.58	$71.56	41.50%	0.45%
Calavo Growers	CVGW)	$84.13	$92.70	10.20%	0.33%

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Oh, and there’s cash. Right now I’m maintaining a cash position in the ~10% range. This was bigger earlier in the year but I’ve had to dip into it several times to pay for my wife’s graduate school tuition. Thankfully, she only has two semesters left and then we’ll be a two income household once again. When that is the case, we’ll be able to save and really begin boost the accumulation process. Until then, I will continue to dip into the cash portion of the portfolio when needed. I will also be more active in terms of sales within the portfolio because since we’re not adding cash to the savings accounts at the moment, if I want to make a trade I’m going to have to raise that cash organically.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I am/we are long AAPL AMGN AMZN AVGO BA BABA BAC BEP BIP BLK BMY BRK.B BUD C CMCSA CSCO CVGW D DEO DIS DLR FB FDX GIS GOOGL HON HSY IBM INTC JD JNJ JPM KMB KO MA MDT MKC MMM MO MRK MSFT NKE NNN NVDA NVO O PEP PFE QCOM RCL SBRA SBUX STOR T TCEHY UPS UTX V VER VTR VZ WPC XLK. 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.