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. 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
Image courtesy of FreeDigitalPhotos.net
Glen @ Monster Piggy Bank says
I really need to get back into the market again. Everything seems to be skyrocketing and most of my money is sitting against my mortgage.
It has been a pretty exciting time! I’m just hoping things either stay the same or continue to rise up.
John S @ Frugal Rules says
Looks like you’re doing well MMD. This year has gone really well for me too. Last I checked I was sitting at about a 15-16% gain for the year so far. It’ll be interesting to see where this market goes over the summer months. I’ve got a bit sitting on the sidelines to take advantage of any pullbacks that may happen.
A 15 to 16% gain is pretty impressive. That’s smart to have a little bit of cash ready to go. I need to get my “watch list” going so that I can leap on any good deals I find.
Matt Becker says
Glad to see your investments are doing well! It’s been a great year for the stock market in general so far. Always nice to ride those rising tides.
I’m just hoping things stay this good. The last time the markets were this high, things didn’t go so well …
Laurie @thefrugalfarmer says
Wow, great progress so far!!! We are still in the reseach stage of investing, but are looking seriously at the types of dividend stocks you have in your portfolio.
Look no further than the Dogs of the Dow and Dividend Aristocrats. You’ve got a silver platter of great performing companies with juicy dividend yields.
Pretired Nick says
You’ve got a great pretirement plan going there! If I could go back in time to when I was younger, this is exactly what I’d be doing. As it is, I’m moving your direction by swapping some real estate for dividend stocks (at least that’s the current plan). Well done!
Thanks Nick, and welcome to the site. Yes, I think this whole thing is going to pay off for us royally in a few years when we really start getting over the $1K per month mark. I keep coming back to the decision as to whether I should invest more in my dividends for early retirement or fund my retirement accounts normally.
Canadian Budget Binder says
Well done mate. I enjoy reading posts like this where the outcome is surprising and a positive one! Cheers
I will admit – this was an easy post to write. A combined ~10% gain in 3 months? What’s not to like!
That’s fantastic! I have always been fascinated by dividend paying stocks and I hope to be able to invest in them in the near future.
Thanks Alexa. And you will be able to invest in them. You could do either your IRA or just set aside $1,000 when you have the chance. $1,000 two years ago is what I started with.
[email protected] says
Exactly: that is a great start. Way to keep to small steps; you’re off to great things.
Thanks. However, I’m not sure I have much choice in the matter. I’d love to buy more dividend stocks, but finding the additional thousands of dollars is somewhat holding me back.
[email protected] says
Great job on your picks. What is your plan for the rest of the year? Will you hold the same stocks or exchange for new ones?
Part of my overall strategy is to hold them for at least one year plus one day (so that I pay long term rather than short term capital gains tax), and then re-evaluate each position. Not only will this help me to re-balance, but I can then also swap out the losers for some new ones. I don’t try to time the market or anything like that, so I don’t have a “sell” threshold put in place.
Congrats on a great start so far to the year! Sorry if I missed it… but are you just reinvesting the dividends in the same funds (like a DRIP)? Or “saving” the dividends for a purchase next year? Great work!
Thanks Jon. For now I’m just saving the dividends up with full intentions to buy the next year. I will need to check if Fidelity has a DRIP for my stocks that I can take advantage of.
Financial Samurai says
Fingers crossed the markets cooperate this summer!
Let’s hope so! Although its never fun to lose money, one positive thing I can say for this is that I don’t necessarily need it for a long time. I’m expecting a few rough patches.
Financial Samurai says
I just finished a fun month of trading w/ my IRA. You might get a kick out of it.
Thanks Sam. I will need to check that out.
Nice work on the dividends for the month! I’ve also had a fairly upbeat few months from an increase in prices. More significantly, many of my companies have had fairly robust increases in dividends, many 10% or greater. One of the downsides of this market is its becoming harder to find many pockets of value to make additional investments. I think I was lucky to make some significant investments in early January!
Thanks, but just to clarify these were dividends for the quarter, not the month. Maybe next year …
I do agree that as things progress upward it will be harder to find good opportunities for growth. But as part of my strategy, I’m willing to sacrifice big growth for stability and value.