Dividend-Growth Stock Portfolio Overview
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(Additional
Performance Data)
Subscribers will have access to weekly transactions (both purchases and the much-more-rare sales) as well as a list of portfolio holdings and trade confirmations.
This is a model stock portfolio
comprised of real investments ($12.50 per week starting in 2022) and has been featured in my videos which can be found on my YouTube channel.
I originally started the portfolio to show my accounting students that we could use the accounting concepts we were learning and apply them to find companies in which to invest. And I started with a low investment amount of $12.50 per week to demonstrate that a new investor doesn't need a lot of money to build a diversified portfolio.
And to replicate the fact that beginner investors invariably invest more as they advance through their career, once a year we boost the weekly investment by the rate of inflation. For example, in the second year of this portfolio we boosted the weekly investment by 82-cents. In year 3, inflation wasn't as high, so we boosted the weekly investment by only 49-cents.
Each week on Monday, we take the weekly investment, plus any dividends we have received, and invest in the 10 top-rated dividend-growth stocks. Each week the list of top-rated stocks changes, so the stocks we invest in each week varies.
Selling for this portfolio doesn't occur frequently, but when it does, it is usually due to one of the following reasons:
- the company becomes overvalued, or
- the company cuts its dividends, or
- the company's dividend and quality metrics fall out of the top 50%
Besides this real-time tracking portfolio, I'm also investing in these same stocks in my personal accounts, so I do have skin in the game as the saying goes.
This stock portfolio is a diversified portfolio following 2 strategies:
Dividend-Growth Stocks
Approximately 90% of the portfolio is comprised of dividend-growth stocks which must have the following characteristics at time of purchase:
- Have a history of raising dividends substantially
- Have a great potential for continuing to significantly raise dividends in the future
- Are of high-quality (must have a Quality Grade of B- or better at time of purchase)
- Have strong competitive advantages (must have a Competitive Advantage Grade of B- or better at time of purchase)
- Have a strong management team
- Have earnings forecast to increase 5.0% or more over the next 12 months which increases the chance of the dividend being raised
- Are financially sound
- Have recently increased the dividend
- Have a suitable margin of safety based on the company's risk rating
Under-the-Radar Dividend-Payers
Approximately 10% of the portfolio is comprised of dividend-paying stocks that have recently started paying dividends. Studies show that these stocks tend to significantly out-perform the market. Some of these under-the-radar dividend-payers may be small companies which tend to be more volatile, therefore a conservative investor might choose to simply solely invest in the dividend-growth stocks listed above which already comprise the vast majority of the portfolio.
Ways to Potentially Boost This Portfolio's Returns
For investors that like to try experimenting with ways to boost this portfolio's returns, here are some options:
- The Under-the-Radar Dividend-Payers, despite having some incredible performers, haven't performed quite as well as the Dividend-Growers in the portfolio, so skipping the Under-the-Radar Dividend-Payers is an option to try to boost portfolio returns. However, this reduces portfolio diversification.
- Each week we buy 10 different dividend-paying stocks, ranked 1 through 10. On average, the stocks in positions 1-5 outperform the stocks in positions 6-10, therefore buying only the stocks in positions 1-5 is an option to try to boost portfolio returns. As mentioned above, this strategy reduces portfolio diversification.
- Don't limit individual portfolio holdings to 4% of the portfolio's total value. Normally, if a stock's allocation in the portfolio is 4% or greater, I won't purchase more of that stock. This technique reduces the portfolio's risk by ensuring the portfolio doesn't become heavily weighted in one or two stocks. I purposely created this portfolio so it would be very diversified, because the ultimate goal of dividend-investing is to have the dividends cover all of your expenses, plus generate extra income for vacations, travel, etc. I'm a conservative investor and I'm personally investing a lot in these dividend portfolios, so I want to make sure the portfolio is not only well-diversified between sectors, but also between industries and even sub-industries. That way when the inevitable dividend-cut happens, it doesn't affect one's cash flow in a major way. However, an investor who has a higher risk tolerance and therefore doesn't mind a more concentrated portfolio might try removing the 4% limit in an attempt to boost the portfolio's returns (especially if the company is in top 5 of that week's ranking as mentioned in the bullet point above).
- Sell when a stock is fairly valued, even if dividend & quality metrics are excellent. We don't sell often in the portfolio (definitely not weekly), and tend to only sell if the company cuts the dividend, the stock appears to be overvalued, or the company's dividend and quality metrics fall out of the top 50%. In other words, if a stock appears to be fairly valued, but the dividend and quality metrics are still good, we usually won't sell the stock just because it's fairly valued. But if you have your own valuation methodology and it signals that the stock is fairly valued or even over-valued, you might try selling at that time and reinvesting in that week's 10 stocks that we are buying. The downside would be higher turnover, but this could boost your portfolio's returns by not holding onto fairly-valued stocks. If you try this, I would be very interested to hear your results.
As always, keep in mind that
investing in individual stocks or mutual funds involves risk.
Past performance is never a guarantee of future performance.
To see the portfolio's recent transactions, portfolio holdings, and trade confirmations, click the green arrow below or at the top of the page.
Performance
Since Inception1 |
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| Dividend-Growth Stock Portfolio Average Annual Return: |
21.80% |
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| Portfolio Yield Based on Original Investment |
2.40% |
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| Portfolio Yield Based Assuming All Stocks Purchased at Today's Prices |
1.82% |
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