Dividend Growth Investing (DGI) Portfolio Update for June 2015

Dividend Growth Investing (DGI) Portfolio Update for June 2015

This post is a monthly update to track the performance of my DGI portfolio. The goal of this portfolio is to build a steady and growing stream of passive income for achieving financial freedom. The strategy is to buy companies with a healthy balance sheet and a strong growing business. All the dividends are automatically re-invested in the stocks. Reinvested dividends help purchase more shares of the stocks and that helps produce more passive income.

Account Balance
Account Balance at start of month: $50,0000
Account Balance at end of month: $49,588.33
Net Gain/Loss for month: $-411.67 (-0.8%)

Portfolio Holdings:
VZ – 200 shares
T – 200 shares
JNJ – 100 shares
GSK – 200 shares
CVX – 100 shares

Dividend Payouts This Month:
VZ – $0
T – $0
JNJ – $0
GSK – $0
CVX – $0

Total: $0

Funding Status: 50% Funded
I plan to have a starting capital of $100,000 for the DGI Portfolio. I could only deposit $50,000 in the portfolio in the month of June. About $40,000 was borrowed from a credit card promotional loan and $10,000 was liquidated from other investment portfolios. The rest of the funding will come in later.

Summary
As I had mentioned in my previous post, Building My Dividend Growth Investing (DGI) Portfolio for Passive Income, I would like to build a portfolio that produces a stream of growing income. I would look for companies with a healthy balance sheet and that can grow their dividends over the long term. I have learned quite a few lessons in the past from buying high dividend yield traps, such as the once high yielding dividend stocks in my IRA Portfolio. One example of a big mistake is SDRL, which yielded around 20% at the time of my purchase and because of the oil prices collapse, SDRL had to cut their dividends entirely. The stock price also collapsed. I had too much of my IRA portfolio involved with oil and the portfolio suffered when the oil sector got hit. Therefore, it’s important to diversify my holdings, so I do not become get too affected by any one sector.

I learned that it’s better to buy a safer company with a lower yield than risky ones with a higher yield. And buy several companies in different sectors.

I started with a few stocks that are Dividend Aristocrats, which means that they have increased their dividend payouts for 25 consecutive years. They are Johnson & Johnson (NYSE: JNJ), AT&T Inc. (NYSE: T), and Chevron Corporation (NYSE: CVX). They are trading near their 52-week lows and looks undervalued.

I have also added two other classic dividend stocks, Verizon Communications Inc. (NYSE:VZ) and GlaxoSmithKline plc (ADR) (NYSE:GSK). They both have a great history of dividend payments, although Verizon’s dividend payment is more steady. I don’t mind having a wild card in the dividend payments as long as it has a good chance of growing over the long term.

Allocation
For each purchase, I made the initial purchases in increments of 100 and a purchase price of around $10,000. Therefore, I have 200 shares, of VZ, T and GSK and 100 shares of JNJ and CVX.

Diversification
From a diversification perspective, VZ and T are in the Telecommunications Services sector, JNJ and GSK are in the Healthcare sector, and CVX is in the Energy sector. I will keep an eye on avoiding these sectors when I make additional purchases in this portfolio.

Risk
One of the biggest factors that I focus on now is the beta, which measures the volatility of the stock in comparison to the S&P 500 index, because I want to sleep well at night. All of the beta for my picks are less than 1.0, except for CVX. CVX is deeply affected by the current oil price crisis, but I believe it will survive this period of downturn and come out strong.

Dividend Income
VZ – $2.2 annual dividends/share
T – $1.88 annual dividends/share
JNJ – $3 annual dividends/share
GSK – $2.32 annual dividends/share
CVX – $4.28 annual dividends/share

The total annual dividends from these five stocks is $2,008.00, which means the average monthly dividend income is $167.33. My short term goal is to increase this average monthly dividend income to $2,000 by the year 2020, without any additional funding from the initial capital. My long term goal is to build enough passive income for me to achieve financial freedom.

Building My Dividend Growth Investing (DGI) Portfolio for Passive Income

Recently, I was talking to a few friends about building Passive Income with rental properties, I thought of several different ideas and one of them that stuck out to me was building a Dividend Portfolio. It must have been all the years of reading Dividend Growth Investing (DGI) articles and have seen them build a new stream of income. I decided to be a DGI investor and construct my own DGI portfolio that will build passive income for life.

Raising Capital
I want to start with a nice even number to keep a clean record of my start position. I decided that the starting portfolio size should be $100,000. I took advantage of several things to help me build up this capital. First I took about a $40,000 loan at 0% APR from my HSBC credit card (link). Then I will come up with the rest of the fund by liquidating all my other investments and transferring all my savings to this Dividend Portfolio.

Increments
Deposits and withdrawals for this portfolio shall be made in increments of $50,000. A nice round number.

Picking Dividend Stocks
I have done research on many dividend stocks and selected the ones that I think are good value today, pay a steady dividend and will have dividend growth and capital appreciation.

The Goal
I have always been big on passive income. I think building a stream or multiple streams of passive income is a good way to achieve financial freedom. My goal for this Dividend Portfolio is to build a stable and steady stream of income for the long term. My goal is to build an average monthly dividend income of $2,000 per month by 2020, assuming there is no additional funds from the initial capital. That’s an aggressive goal but I want to set this high goal because I need to make up the time and money I have lost in bad investments from the past.

Monthly Updates

I have decided to keep track of this Dividend Portfolio publicly on this site and hopefully help others see the power of DGI for passive income. I will also be discussing the different Dividend Stocks that I may buy or sell. Feel free to join the discussions especially if you are already a DGI.
Disclaimer:
This article is all based on my opinions and views of the author. The author does not make recommendations on stocks or raising capital. If you need professional financial advice, please seek your financial adviser.

How to Look for Good Dividend Stocks

Buying good dividend stocks is essential to building a great dividend stocks portfolio, which helps build passive income for the long term. It is important that these companies are stable and will continue to pay you dividends eternally or until you sell them. Below are some guidelines that will help you look for some strong dividend payers.

Good Dividend Stock Guidelines:
– Healthy Balance Sheet
– Positive Cashflow
– Large Company
– Low Payout Ratio
– Good Dividend Yield
– History of Paying Dividends

Healthy balance sheet
A healthy balance sheet indicates that the company is doing well and is not at risk of default or bankrupt, which will not only remove the dividends but will also result in the loss of your entire investment.

Positive Cashflow
A positive cashflow indicates that the company has the money to pay the dividends during every payout.

Large Company
A large company that generates a lot of revenues usually will be able to pay out dividends for the long term.

Low Payout Ratio
A low payout ratio indicates that the company is not exhausting its revenue to pay out the dividends.

Good Dividend Yield
A good dividend yield allows a good income stream while holding the company stock.

History of Paying Dividends
A long history of paying dividends indicates the company wants to do this for the long term and shows confidence that it wants to continue this precedence.

Advantages of a Dividend Portfolio for Passive Income

Advantages of a Dividend Portfolio for Passive Income

A Dividend Portfolio is a great way to build passive income for life. It is easy to set up and manage. The portfolio can grow in size and have favorable taxes on the dividends. Dividends can be set to automatically reinvest themselves for compounded growth. If necessary, the portfolio can be liquidated for a cash-out.

 

Dividend Portfolio Advantages

  • easy to set up
  • low maintenance
  • favorable taxes on dividends
  • reinvest dividends automatically
  • easy to liquidate funds
  • capital appreciation

 

Portfolio Set Up

A dividend portfolio is very easy to set up. Open a brokerage account and make your deposit. Do research on a number of high quality companies that have been consistently paying dividends over the years. Start your research with some popular companies like Procter & Gamble Co (NYSE: PG), The Coca-Cola Co (NYSE: KO), General Electric Company(NYSE:GE), Consolidated Edison, Inc.(NYSE:ED). Understand why these companies are very good and try to pick similar companies. Do research on these employees, especially their fundamentals, such as balance sheets and cash flow statements.

Management Time

Once a dividend portfolio is set up with all the right dividend stocks in place, there is little to manage. In general, a dividend portfolio is meant to have little maintenance going forward. Income flows in every month or quarter and the total time to manage the portfolio decreases over time. That is the whole point of building passive income for life.

Taxes

Qualified Dividends are taxed at 0% if you are under the 25% marginal tax bracket, 15% if you are at the 25% – 35% marginal tax bracket, and 20% if you are above the 35% marginal tax bracket. For most people, their qualified dividends will be taxed at 15%. Active income such earnings on W-2 will be taxed at the marginal tax bracket. Therefore, a dividend portfolio can help you make more money in the long run.

Dividend Reinvestment

Dividends can be set to automatically reinvest in the same stocks for, typically, no fees. The dividend reinvestment in the stocks produces more ownership in form of more shares of the companies. With more shares of the companies, you receive more dividends. And with more dividends, you buy more shares of the companies the next time dividends are issued. This means, over time, your returns are compounded.

Liquidation of Funds

It is relatively easy to liquidate a dividend portfolio. If necessary, all the stocks in the portfolio can be sold at market rate and have the equities transferred to cash.

Capital Appreciation

A Dividend Portfolio with the right stocks not only produces a nice income stream, but also has capital growth. Capital appreciation usually occurs in a dividend portfolio because good companies tend to grow in value as well.

Conclusion

All these advantages make a Dividend Portfolio a very smart choice for building passive income for life.

 

Assumptions
Assumptions are made based on investments in U.S.

 

Build Passive Income with Dividend Stocks

Build Passive Income with Dividend Stocks

One of the best ways to build passive income is to create a portfolio with solid dividend-paying stocks. Such a portfolio will help generate income and also has potential for stock price appreciation.

I have traded stocks for many years and tried to time the market. I have realized that it is a very difficult thing to do. There are many disadvantages for someone like me to time the market. Firstly, I don’t have the time to watch the market every second as market direction changes very fast. Secondly, I don’t always have access to all the news and resources as a large institution would have. Thirdly, fees add up and become very expensive over time. I can’t believe I’m saying this, but I think it is very difficult for the average person to beat the market. For those who would like to know why, read A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel.

Therefore, it’s much better to build a portfolio that can I don’t need to watch constantly and one that can weather the storms in the stock market. What that means is that I would like to have a portfolio that does not move as volatility as the stock market. It would be a less speculative stock portfolio. I could not expect a 100% return, but at the same time, a more stable portfolio will help mitigate risk and slowly rise in time. It’s akin to a turtle in a race that moves slowly but steadily towards the finish line. My goal is to set up this portfolio to produce passive income for life.

In summary, this portfolio should:

  1. Be stable and not be wildly affected by the daily movements of the stock market
  2. Have companies with strong balance sheet and positive earnings
  3. Produce dividends on a regular basis

 

 

IRA Portfolio Update for May 2015

IRA Portfolio Update for May 2015

Image credit: 401kcalculator.org

 

This post is a monthly update to track the performance of my IRA portfolio. The goal of this portfolio is to build wealth and generate income for retirement. The strategy is to buy companies with strong growth prospects and a high dividend yield. All the dividends are automatically re-invested in the stocks. Dividends help grow income by buying more shares of the company and having more shares of the company help generate more income.

 

Account Balance

Account Balance at start of month: $23,555.45
Account Balance at end of month: $21,623.45
Net Gain/Loss for month: $-1,932.00 (-8.2%)

 

IRA Portfolio Holdings:

ARCP – 747.61 shares
LNCO – 855.07 shares
SDRL – 401.92 shares

 

Dividend Payouts This Month:

ARCP $0
LNCO $88.35 (Reinvested)
SDRL $0

Total: $88.35

 

Summary

Oil prices turn south again in May and my portfolio took a small hit. I don’t think oil prices will drop lower than it was in the beginning of this year but oil prices will take some time to recover to last year’s highs. At this time, I’m still holding on to my stocks and waiting for a rebound in prices.

I’m also waiting for ARCP to reinstate its dividends. Once dividends start flowing back to the shareholders again, I think it will signal a turnaround for the company.

 

Chase Bank Promo – Up to $500 (Expires Jul 10, 2015)

 

Chase Bank Promo - Up to 0 (Expires Jul 10, 2015)

Chase recently sent me another make money targeted offer for up to $500 to open new bank accounts with them. This promotional bonus is the largest amount I’ve seen for Chase so far.

Promotion Offer:

  • $300 for a new Chase checking customers who open a Chase Total Checking account and set up direct deposit; and/or
  • $200 for opening a new Chase Savings account, depositing a total of $15,000 or more in new money within 10 business days and maintaining a $15,000 balance for 90 days.*

 

Fees

Chase Total Checking Account – Monthly Service Fee: $12 ($10 in CA, WA and NV)

How to Avoid the Monthly Service Fee During Each Monthly Period:

  • Direct Deposits totaling $500 or more made to this account
  • OR, a $1,500 minimum daily balance in this account
  • OR, an average daily balance of $5,000 or more in any combination of qualifying linked deposits /investments

*Checks are optional with this account. Other fees may apply. See details of terms on the Chase website.

Chase Bank Promo - Up to 0 (Expires Jul 10, 2015)

My Offer for You

This targeted offer is presented in a voucher with a unique one-use promotional code with the expiration date stated above. On eBay, these vouchers with a promotional code are being sold for $20+.

On this site, I would like to offer this voucher to my readers for free. All you have to do is to like us on Facebook and answer a simple question in the comments section below. I will pick a random person in the comments, so please leave your email address so I can contact you. If you would like to make a donation back to this site for making some money, you can contact us and let us know.

The question is:
What will you do with the Chase bonus money?

 

IRA Portfolio Update for Apr 2015

IRA Portfolio Update for Apr 2015

Image credit: 401kcalculator.org

 

This post is a monthly update to track the performance of my IRA portfolio. The goal of this portfolio is to build wealth and generate income for retirement. The strategy is to buy companies with strong growth prospects and a high dividend yield. All the dividends are automatically re-invested in the stocks. Dividends help grow income by buying more shares of the company and having more shares of the company help generate more income.

 

Account Balance

Account Balance at start of month: $20,317.22
Account Balance at end of month: $23,555.45
Net Gain/Loss for month: $3,238.23 (+15.9%)

 

IRA Portfolio Holdings:

ARCP – 747.61 shares
LNCO – 847.90 shares
SDRL – 401.92 shares

 

Dividend Payouts This Month:

ARCP $0
LNCO $87.57 (Reinvested)
SDRL $0

Total: $87.57

 

Summary

Oil prices rebounded in April due to lower rig counts and a slowdown in the fracking sector. This could be a temporary bounce because the Saudi’s are still pumping out oil at record highs which keeps the oil supply at a high level. Also, when  oil prices rise, companies are more attempted to drill which would lead to higher supply and thus drive down the oil prices. It’s a cycle that would just keep going in the foreseeable future, so oil prices will hover around this area.

SDRL rebounded nicely from 9.35 to 13.09, an increase of 40%. SDRL was one of the earliest oil stocks to cut dividends which cause the huge drop from around $40 to the low teens in the second half of 2014. They had to cut costs to keep the company afloat during the oil price collapse. Even though SDRL has rebounded somewhat in April, it’s still far away from their $40 in June of last year. SDRL is still at risk because oil prices have not fully recovered yet.

LNCO is the only company in my portfolio that still pays a dividend. Hopefully management will maintain the dividend payments and continue to grow the company. My dividend payments are automatically reinvested back in the stock, so as long as the stock does not collapse, my dividends are helping me lower my break-even price.

ARCP’s stock price has been stagnant as I predicted last month. Hopefully this is a consolidation until they announce a dividend payment back to the shareholders. Once ARCP reinstate the dividends, the stock should move higher.