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Thread: Actual Dividend Growth Portfolio

  1. #1
    Member JaxRed's Avatar
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    Actual Dividend Growth Portfolio

    In our stocks/retirement thread we discussed starting a small ROTH investment. One poster suggested a long term plan to get finances in order before starting to invest. I respectfully disagree. I think there in nothing wrong with making small investments in the market as you get your finances in order.

    Reminder: I am a proponent of investing in only Dividend Growth Stocks.

    Along these lines I wanted to get my adult daughter started in the market. So we have set up an actual Dividend Growth Roth IRA account, and I'll share it's progress with you. We are depositing $100 a month.

    https://docs.google.com/spreadsheet/...DU5cEdDekRQR0E

    We just had our first purchase in August. We bought 3 shares of a BDC (Business Development Company) called Main Street Capital. Symbol MAIN. The primary reason I chose MAIN is because it pays a monthly dividend (which is unusual) and I wanted the portfolio to show some dividend growth from compounding immediately. (although the first dividend won't show up till late November).

    The spreadsheet shows 2 figures: One is total dividends per year, the other is 75% of those dividends. I suggest you withdraw only 75% upon retirement so that your income will continue to grow.

    After one month the yearly income is $5.40 and the 75% withdrawal figure is $4.05 a year. So.....enough for 1 person to go to McDonald's once a year and grab a couple items off the value menu. With no compounding, the expected yearly total 30 years from now is $1,458 (at $100 a month).

    I'll share the progress of this account. We'll be buying our September shares this week.

    Notice I do not discuss the total $ value of the portfolio. What's important is the income stream it produces.

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  3. #2
    Viva la Rolen kaldaniels's Avatar
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    Re: Actual Dividend Growth Portfolio

    I would respectfully ask why ignoring portfolio value is ok, especially for a retirement account that I assume won't be touched for many years.

    To me the goal of a retirement account is to hopefully have x dollars on y date, at which income stream can then be addressed.

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    Member JaxRed's Avatar
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    Re: Actual Dividend Growth Portfolio

    That is the traditional model. Build up as much money as possible, then close to retirement switch to conservative investments and live off the stream and or take money out to live on. However that depends on being "lucky" in your retirement income. For example people that retired in early 2008 versus 2009 when the value was 50% less. In addition, stock market folks refer to the last decade as the "lost decade" because after all the ups and downs, people ended up just treading water.

    But not Dividend Growth Investors, they did great over the last decade (they do well every decade). Everyone knows the value of compounding. Essentially, Dividend Growth Investors are going for Double Compounding. Buying stocks that pay dividends and get compounding, and then the stocks are raising their dividends.

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    KungFu Fighter AtomicDumpling's Avatar
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    Re: Actual Dividend Growth Portfolio

    This should be an interesting case study. We will expect an update every month for the next 30 years!

  6. #5
    Little Reds BandWagon Reds Nd2's Avatar
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    Re: Actual Dividend Growth Portfolio

    Did you leave the remaining $11.41 in cash? Are you concerned with the bite that monthly commissions will be taking out of the total return? It looks like the dividends won't even cover the cost of buying the stocks. Are you going to reinvest the dividends?
    "...You just have a wider lens than one game."
    --Former Reds GM Wayne Krivsky, on why he didn't fly Josh Hamilton to Colorado for one game.

    "...its money well-spent. Don't screw around with your freedom."
    --Roy Tucker, on why you need to lawyer up when you find yourself swimming with sharks.

  7. #6
    Member JaxRed's Avatar
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    Re: Actual Dividend Growth Portfolio

    Yes the remaining money is in cash. Yes, I've set up Dividend Reinvesting. Although the commissions are small ($4.50), after 3 months I'll probably let 3 months worth of cash accumulate before investing, to reduce the impact of commissions. But I wanted to "get it started".

  8. #7
    Viva la Rolen kaldaniels's Avatar
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    Re: Actual Dividend Growth Portfolio

    Quote Originally Posted by JaxRed View Post
    That is the traditional model. Build up as much money as possible, then close to retirement switch to conservative investments and live off the stream and or take money out to live on. However that depends on being "lucky" in your retirement income. For example people that retired in early 2008 versus 2009 when the value was 50% less. In addition, stock market folks refer to the last decade as the "lost decade" because after all the ups and downs, people ended up just treading water.

    But not Dividend Growth Investors, they did great over the last decade (they do well every decade). Everyone knows the value of compounding. Essentially, Dividend Growth Investors are going for Double Compounding. Buying stocks that pay dividends and get compounding, and then the stocks are raising their dividends.
    I don't doubt that you have all good intentions and are trying to help all of us, so I am not trying to give you too hard of a time. But doesn't putting all of your IRA into one company (semantics aside you are investing in one company) involve hoping for some "luck". Why not go for a dividend stock based ETF?

    I am a novice investor, but 2 things should be addressed by you if you ask me

    1) Dividends are subject to change.

    2) Dividends are "baked" into the stock price

    Reading your posts you almost put off a "this can't go wrong" vibe. Perhaps I am reading into that too much?

    I'm not anti-dividend, as I have a small amount in a dividend based ETF myself, but it just seems you poo-poo any other route of investing, no?

  9. #8
    Waitin til next year bucksfan2's Avatar
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    Re: Actual Dividend Growth Portfolio

    Quote Originally Posted by kaldaniels View Post
    I don't doubt that you have all good intentions and are trying to help all of us, so I am not trying to give you too hard of a time. But doesn't putting all of your IRA into one company (semantics aside you are investing in one company) involve hoping for some "luck". Why not go for a dividend stock based ETF?

    I am a novice investor, but 2 things should be addressed by you if you ask me

    1) Dividends are subject to change.

    2) Dividends are "baked" into the stock price

    Reading your posts you almost put off a "this can't go wrong" vibe. Perhaps I am reading into that too much?

    I'm not anti-dividend, as I have a small amount in a dividend based ETF myself, but it just seems you poo-poo any other route of investing, no?
    1. Dividends are subject to change. Just 4 years or so ago the best dividend stocks were hammered and most of the yields cut or take away. The financial sector had been a great dividend payer for decades but after the financial crisis their dividneds were pretty much done away with. The thing is I am a proponent of staying active. Not buying or selling on a whim but having a strict set of rules and abide by them. If you are looking at dividend growers and they don't grow then it may be time to unload the stock. If the stock cuts its dividend it may be time to cut bait.

    2. This is a common concern/complaint about dividends. In theory I would have to agree with you. There is a theory out there about maximizing your tax implications by buying the day after the dividend ex-date. The theory is the day after the stock has its ex-date it decreases by the amont of the dividend. It sounds good but it doesn't always work that way. Dividend stocks are impacted by the overall market as well. I have seen stocks on their exdate nose dive with the general market as well as rising when it should be falling. What I have noticed is that in a sideways or down market dividends are a very powerful tool. Over the course of a year if you own a dividend payer your going to have that yield regardless of any other market factor. My first stock I ever bought was AEP, after one year the stock was flat but I had an extra 5% as well as a dividend increase over that year.

  10. #9
    Member medford's Avatar
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    Re: Actual Dividend Growth Portfolio

    JaxRed, Is there room (ie would you mind) if we took your suggestions of dividend stocks and "broke it down" a bit. Due to kids/life, my neither my Roth IRA nor my invidivual portfolio has recieved many additional funds. All of my retirement savings have gone into my 401(k) as well as my wife's STARs program. However, we're probably in line to get back to adding money into my Roth as well as starting one up for her in the next year, wouldn't mind the some practice looking into invest prior to the point where I'm adding outside of my work sponsered plans.

  11. #10
    Member JaxRed's Avatar
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    Re: Actual Dividend Growth Portfolio

    Quote Originally Posted by kaldaniels View Post
    I don't doubt that you have all good intentions and are trying to help all of us, so I am not trying to give you too hard of a time. But doesn't putting all of your IRA into one company (semantics aside you are investing in one company) involve hoping for some "luck". Why not go for a dividend stock based ETF?

    I am a novice investor, but 2 things should be addressed by you if you ask me

    1) Dividends are subject to change.

    2) Dividends are "baked" into the stock price

    Reading your posts you almost put off a "this can't go wrong" vibe. Perhaps I am reading into that too much?

    I'm not anti-dividend, as I have a small amount in a dividend based ETF myself, but it just seems you poo-poo any other route of investing, no?
    We only made our 1st $100 purchase. Of course it's only in 1 stock. Eventually I assume we'll end up at around 20 stocks in the portfolio.

    1) Dividends are subject to change.: Absolutely. Which is why you should choose stocks with a long history of raising stocks every year. There are lists out there showing those stocks: Dividend Champions, Dividend Aristocrats, etc, that lists stocks like Coke and Pepsi that have raised their dividend every year for 40 years.

    http://www.dividendgrowthinvestor.co...-for-2012.html

    Those will be the kind of stocks we'll be concentrating on.

    2) Dividends are "baked" into the stock price. If by this your saying the price is inflated by the dividend I'll just say I disagree. Most dividend growth stocks are considered "stodgy". And as far as the price of the stock being reduced by the dividend after ex-dividend... that's the circle of life. Company makes $1.00 profit in a quarter, pays .50c to the shareholder, price goes down .50c.

    Next quarter they make another $1.00, in meantime price has gone back up to reflect the increase in revenue to the company and the impending dividend, and the dividend is declared, stock price is reduced. Lather, rinse, repeat....

    I don't like ETF's because none are specialized as Dividend Growth, and I like to monitor and control the investment.

    "Reading your posts you almost put off a "this can't go wrong" vibe. Perhaps I am reading into that too much?"

    Only a little... not my first rodeo. I've now come to believe this is absolutely the best investment plan for stocks. (not my only investments, for example I own 2 rental homes).

    So.... not trying to convince the naysayers. But I'm hoping that along the way, a few people will notice that this investment technique results in an ever -increasing stream of retirement income and that they will give it a try.

  12. #11
    Member JaxRed's Avatar
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    Re: Actual Dividend Growth Portfolio

    Quote Originally Posted by medford View Post
    JaxRed, Is there room (ie would you mind) if we took your suggestions of dividend stocks and "broke it down" a bit. Due to kids/life, my neither my Roth IRA nor my invidivual portfolio has recieved many additional funds. All of my retirement savings have gone into my 401(k) as well as my wife's STARs program. However, we're probably in line to get back to adding money into my Roth as well as starting one up for her in the next year, wouldn't mind the some practice looking into invest prior to the point where I'm adding outside of my work sponsered plans.
    The spreadsheet you see is the ACTUAL investments that my daughter has set up with my advice, but if you want me to set up a practice account and have an accompanying spreadsheet I'll be more than happy to assist.

    We set up my daughters account with TradeKing (online). They were inexpensive for commissions. I'll see if they have a free sample account system.

  13. #12
    Member medford's Avatar
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    Re: Actual Dividend Growth Portfolio

    No jax,

    what I'm thinking, if I have the time, is to take the stocks you pick, or perhaps suggestions elsewhere in dig into them, see what their returns, dividends, growth, etc... have trended the last 5-10 years. However, what I don't want to do, should the situation arise, is insert doubt into a company that you've picked for your daughter to invest in. I don't mind being told where I'm wrong or why someone sees something a different way, that may rub you wrong on a thread that you've created.

    In otherwords, I don't want to step on your toes, but think there is an opportunity to delve a little deeper to not only educate myself, but others who might be interested. I don't want to pump anything you've picked or myself or others have suggested to keep the thread friendly, I don't want to trash anything either just to prove "I'm" right. Just a look at the facts, concerns, hopes, etc...

  14. #13
    Member JaxRed's Avatar
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    Re: Actual Dividend Growth Portfolio

    I see. If you want education on Dividend Growth Investing I would suggest visiting "Seeking Alpha" http://seekingalpha.com/dashboard/investing_income

    Seeking Alpha is a contributor based Investing web site. Every topic is discussed there. I initially found it while investing in Real Estate.

    The link I gave you takes you specifically to the area where they discuss Dividends and Dividend Growth Investing. They will do in depth analysis of individual stocks also.

    If you are into investing.... it's a fascinating read.

  15. #14
    Member JaxRed's Avatar
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    Re: Actual Dividend Growth Portfolio

    Our Sep $100 purchase was made. 3 more shares of MAIN. I'll probably do the same this month, and then wait till I have 3 months of money in before I next buy anything. It cost me $4.95 in commissions whether it's 3 shares or 9, so might as well reduce overall commissions. Dividends don't show up till mid November.

    But yearly income after 1 month $4.05. After 2 months $8.10

  16. #15
    Waitin til next year bucksfan2's Avatar
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    Re: Actual Dividend Growth Portfolio

    Jax at what point do you start to diversify. I don't know enough about MAIN but at what point do you stat to add another dividend payer?

    Do you look at lower yielding dividend growers or high yielding dividend growers? A company like VFC or IBM are known dividend growers but have yields right now less than 2%. Compare that with a VZ, T, SO, or AEP with yields of 4.5% or higher.


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