Actual Dividend Growth Portfolio

[kaldaniels]

I'm definitely not a market timer. You aren't either Jax.

But on several occasions when the broad market drops I have seen a gloat "the market is down but dividends are beautiful..." I'm not going to lie. It rubs me the wrong way. Certainly nothing personal but I could do without it. I mean as you said this thread has lived during a bull market. But you have been hush hush when the markets jump, which of course has been more often than not during a bull. I mean there are pros and cons to anything but with the way you paint the picture it is all roses.

If you are only focused on income stream then yeah, we are chasing different things. I'm focusing on making as much capital as I can, that can later (I know at less yield than if I had bought earlier) be transferred into an income earning stream as I desire.

[kaldaniels]

Could the Dow and Nasdaq fall 30-50 percent in the next 10 years? Of course.

And I know where I will stand with broad market funds....I will be down 30-50 percent. Ouch!

But with your portfolio Jax, have you wondered or investigated what you believe will happen to your handful of companies if the stock market got chopped in half? If we sit at Dow 10000 a year from now what do you believe your income stream would be (rhetorical)? Would people rush into dividend funds...to some extent they would. But in a toxic financial environment could most of your companies sustain a cash flow and profit to find such dividends?

If an individual dividend stock was a baseball prospect I would say it has a higher ceiling and lower floor than a broad market fund. That's all. I like a mix of both.

[JaxRed]

I believe if the market got chopped in half over the next year, my stocks would still be paying the same. And since I would have more of them my income would increase. So, we agree to disagree. And you have many more people on your side. Searching for the ever increasing total figure.

I'll just trudge on my way, searching for ever increasing income. And I'll keep posting the results (for this account) here.

By the way, no longer a handful of stocks. We are up to 10 different securities. so TWO handfuls.

[BuckeyeRed27]

Jax do you reinvest or take the income I forget?

[kaldaniels]

I believe if the market got chopped in half over the next year, my stocks would still be paying the same. And since I would have more of them my income would increase. So, we agree to disagree. And you have many more people on your side. Searching for the ever increasing total figure.

I'll just trudge on my way, searching for ever increasing income. And I'll keep posting the results (for this account) here.

By the way, no longer a handful of stocks. We are up to 10 different securities. so TWO handfuls.

What about someone on their 20's? Let's say over their age 20-29 years they have $2000 a year to invest (for their retirement years). (Of course all situations are different but that's not the exercise here). Would you advise them to invest in an individual dividend stock (or 2) a year that would be a source of an income stream when they retire at 65. Are you really that confident in specific dividends 35-45 years from now. If you are...whoah you are a confident man in this quickly changing, globalizing world. If not and you expect to transfer them into different stocks in the future, then all you are doing is growing capital in the early years.

Edit - I think you are a sharp guy Jax or I'd just ignore your thoughts on the matter instead of asking tough questions.

[JaxRed]

What about someone on their 20's? Let's say over their age 20-29 years they have $2000 a year to invest (for their retirement years). (Of course all situations are different but that's not the exercise here). Would you advise them to invest in an individual dividend stock (or 2) a year that would be a source of an income stream when they retire at 65. Are you really that confident in specific dividends 35-45 years from now. If you are...whoah you are a confident man in this quickly changing, globalizing world. If not and you expect to transfer them into different stocks in the future, then all you are doing is growing capital in the early years.

Edit - I think you are a sharp guy Jax or I'd just ignore your thoughts on the matter instead of asking tough questions.

I've said numerous times, you monitor your stocks for fundamental changes. And if you see that coming you need to change. For my daughters account, she only had Exxon in the oil arena, in my own, I also had COP, and KMI. I got concerned about oil, and got out of them.

One of the reason's I push individual stocks, is that for most people, in their 401ks, that is not an option. Your only choice is usually funds. So I think investing in stocks (for income) is a good counterbalance.

In retirement people talk about 3 legged stools etc. One leg is SS, the other is a pension, etc. To me, one leg is 401K investing in funds and the other is a Roth invested in dividend stocks. In the end I think people will like that leg a lot.

[JaxRed]

Jax do you reinvest or take the income I forget?

The account listed here (which is my daughters actual account) is entirely reinvested.

My own personal situation is a little different. I am 65 (as of the 15th). I am retired as of 15 months ago. I have a military retired income. My wife still works. I have NOT started my Social Security yet. Over the last few years I've become quite knowledgeable in Social Security and it's options.

So currently my military retirement and my wife's income is enough for us to "break even" (a little better than break even). That allows me to delay my Social Security, and to NOT tap into my dividend income. So it's about 95% reinvested at this point. I am overweight on a couple stocks so I take them in cash and buy other stocks/CEF's in order to diversify. Just last month I tapped into those dividends for the first time rather than reinvest.

At some point in the next 12-24 months I expect my wife to retire. From that point until I turn age 70 I expect to tap into our dividends and only reinvest maybe 25%. Then at age 70 I will start SS and start reinvesting 100% of dividends again.

Part of my change from the traditional way of thinking as expressed by Kal is because I have now partially been exposed to the nature of a stream of income in retirement. I am so grateful to have an income stream from the Air Force. And ever so glad I didn't take a $275,000 lump sum buyout package that was offered to me in 1992. (that was hard to turn down BTW).

I am so appreciative of the fact that at any moment I can tell the Feds to start sending me checks for SS. You get to the point where you realize if the stream of income is high enough, you don't care whether you have any liquid assets.

For example if someone said to me, we'll give you and your wife $150K a year for the rest if your lives but you have to start at $0 in the bank. I'd be all over that. That's essentially what an annuity is. You give up your assets for an income stream.

To me, (I am against annuities), dividend paying stocks are like having your cake and eat it too. You get an income stream (not guaranteed but pretty stable) and you KEEP your assets!

Long answer for short question

[Redsfaithful]

You'd have about $2.2 million if you'd invested $275k in the S&P 500 in 1992.

What would that throw off? $100k ish a year at 4%? Not sure what your Air Force stream is though.

I think income investing is fine, but you can find opportunities for income and growth both. There's always something attractive, if you have time to pay enough attention.

[JaxRed]

Unfortunately I would have had to cannibalize a lot of that $275K just to survive. But, I certainly do wish I'd been pumping more into investing along the way. By the way, investing for income doesn't mean you are passing up on growth, a lot of dividend stocks do very well in that category. And as you say, you can do both. If you have a 401K, chances are you are "forced" to invest for growth. That means you can invest for income in your IRA's (hopefully Roths).

[Boston Red]

I invested in ADP mostly for income. It's up over 200% (when you include spinoffs) in the time I've been invested in it.

[bucksfan2]

What about someone on their 20's? Let's say over their age 20-29 years they have $2000 a year to invest (for their retirement years). (Of course all situations are different but that's not the exercise here). Would you advise them to invest in an individual dividend stock (or 2) a year that would be a source of an income stream when they retire at 65. Are you really that confident in specific dividends 35-45 years from now. If you are...whoah you are a confident man in this quickly changing, globalizing world. If not and you expect to transfer them into different stocks in the future, then all you are doing is growing capital in the early years.

Edit - I think you are a sharp guy Jax or I'd just ignore your thoughts on the matter instead of asking tough questions.

Absolutely. I look at investing a couple different ways. The first and most important is to put in up to the company match of your 401K, its free money, its tax deferred, and its very difficult to beat that ROI. I am not a huge believer of someone in their 20's to contribute up to the 401K match because of the consequences of touching that money early. I tend to think that the next best area to go into is a roth or a taxable account.

I think the most important thing that investing in a self managed account, is learning about investing. Learning about trading and not trading, learning how to create a philosophy and stick to it. Learning about you hits and your swings and misses. I have done that, and will continue to do that, but each passing year I get a better understanding of the financial markets, which in return will benefit me in the future. I remember one of the first months that I had started to invest on my own was in 2010, and it was a rocky market. One day my portfolio was down a weeks worth of my salary, I remember feeling stick to my stomach at that point. But had I stayed with my allocation then, that portfolio would have been worth almost double right now. I didn't because I panicked or fell out of favor with a particular stock (DIS at 50 for a year bothered me at the time.) But I try and look back at what I did and how to improve on that in the future.

[gonelong]

Not looking to pile on. Just adding my $.02. I can completely understand why many folks would simply prefer to invest in index funds. I have tried, I am just not one of those people.

What about someone on their 20's? Let's say over their age 20-29 years they have $2000 a year to invest (for their retirement years). (Of course all situations are different but that's not the exercise here). Would you advise them to invest in an individual dividend stock (or 2) a year that would be a source of an income stream when they retire at 65.

I'd start any novice investor out with index funds as they have no idea what they are doing. If they have some aptitude and interest I would have them start by reading The Single Best Investment by Lowell Miller.

I follow a dividend growth investing (DGI) strategy for many reasons:

1. I can readily estimate how much yearly income I need to retire - I cannot get my head around how big a lump sum is "enough". This is why I DGI and do not index. Some will tell you that DGI will result in a lower ceiling on how much you can accumulate. I prefer to think of it as setting a higher floor. I am much more interested in ensuring I hit my minimum that I am in being "rich".
2. I have dabbled with indexing, growth, speculation, momentum, charting, etc. None of it ever felt right. As soon as I tried on DGI for size I *knew* I was home. I have very high confidence that I can implement and maintain this strategy to reach my goals.
3. Knowing when to buy is difficult, know when to sell is 4x as hard. I have stocks that I am hoping to hold for the very long-term (perpetuity?). I hold nearly all of the stocks I purchased when I started my DGI journey in 2011. Ongoing transaction costs are not eating at my returns.
4. Based on my stock selection I am confident the majority of my stocks will continue to pay their dividends during the next market sell-off. I don't believe I will be tempted to sell as I can watch my income increase as dividends are reinvested at low prices (that alone increases the income, not to mention any raises). - note: I completely avoid financial stocks/banks (S&L, 2007) - not my cup of tea. As dividends get reinvested the cost basis of the shares lowers.
5. ... and more.

Are you really that confident in specific dividends 35-45 years from now. If you are...whoah you are a confident man in this quickly changing, globalizing world. If not and you expect to transfer them into different stocks in the future, then all you are doing is growing capital in the early years.

I would gladly bet you that a larger percentage of stocks in the index you own are out of business in 35-45 years than will be in the ~50 I own. Indexing doesn't protect us from any of that, it just hides it. I disagree with your characterization that selling one dividend stock and investing the proceeds in another is simply raising capital. If I sell one rental and invest in another I am not growing capital I am still investing for income. Same for stocks IMO. Obviously I might sell/trim one holding that has run up in order to purchase more income from another that offers a higher yield.

That said, I am 46 so I am not all that confident that I will be alive in 35-45 years. I do expect the large majority of the stocks I currently own to still be paying dividends over the next 10 years or more. A good number of the stocks I own have been paying dividends for decades and decades without a cut. As long as they continue to grow earnings and FCF (which I monitor) I expect they will keep paying dividends.

GL

[JaxRed]

GoneLong, thanks for that link. I've heard so much about the book and have always meant to read it.

[JaxRed]

June was our purchase month. Bought 15 more shares of PEGI

June results.

As of June 30 - $217.58
One Month Ago - $198.38
One Year Ago - $138.37
Two Years Ago - $108.83
Three Years Ago - $59.96

[JaxRed]

Well, another month, another increase in income. We had one dividend increase this month.

As of July 31 - $219.75
One Month Ago - $217.58
One Year Ago - $139.27
Two Years Ago - $109.61
Three Year Ago - $60.53