What a wild ride the last 4 months have been! It’s been a while since I’ve done a dividend stock portfolio update, and I thought this would be a great time to report (i.e. celebrate) my earnings.
To bring you up to speed, in January I did quite a bit of research on what stocks to buy this year and ultimately decided on a combination of companies from the Dogs of the Dow and the Dividend Aristocrats. I came to this conclusion because these were all large companies with the highest dividend paying stocks and potential for strong earnings.
Once I made my decision, I made my purchases and boy did it payoff! In case you haven’t been paying attention, since the beginning of year the Dow Jones Industrial Average has increased at a sensational rate of 12.5% and has reached new record highs!
Fortunately my stock picks have followed suite and grown as well. Since my big purchase in February, here is what my dividend stock portfolio looks like:
My Dividend Stock Portfolio Snapshot:
Here’s my year to date return:
- Dividend payments: 1.1%. That’s just one quarter of payments. By the end of the year, the yield should be closer to 4.4% and total over $1,100 (equal to almost $100 per month). $100 is not a lot of money, but it’s a great start.
- Capital gains: 9.6%. This was a very welcomed surprise! Although I don’t expect this side of the equation to continue to increase much more this year, I’d be pleased if the stocks could at a minimum hold on to their current positions.
The biggest gainer of the portfolio was Verizon Communications (VZ) with an increase of over 19%. On the surface the dividend payout ratio of 508% seemed a little insane. But after taking a closer look, we can see that this is really a strong show of confidence from the company that earnings will be strong for this year.
Preparing for Next Year:
I would love to keep up with the pace that I’m at for adding more stocks to my portfolio every year. As detailed out in my cash flow breakdown, the main source of income for buying more stocks is primarily coming from:
- Current dividend income
- A percentage of the funds we used to contribute to our 403b retirement plan
- Blog income
- Any other significant miscellaneous income that we earn
Having a substantial amount of dividend paying stocks is essential to my early retirement plan. Rather than keeping all our money in tax-sheltered accounts (like a 401k or IRA) where we won’t be able to touch it until age 59-1/2, we’re trying to build up our taxable account of dividend stocks where the money will be readily available. Even though I keep my money with Fidelity, there are lots of other great options such as E*trade sell shares. Discount brokers are definitely the way to go; especially when you use a strategy like I use where you only need to make one large purchase per year.
In a perfect world we’d build up the principal so large that we could live off the dividend payments alone. However, the feasibility of that strategy may not be possible, and we may need to settle for living off of both the dividend income and a small percentage of the principal until our tax-sheltered retirement accounts become accessible.
Readers – How is your dividend stock portfolio doing?
- One Man’s Success With Borrowing Against 401k Funds for a Comeback
- Reader Debate – Would You Borrow Money to Invest in Stocks?
- My Stocks with High Dividends Income Report – December 2012
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