DGI Portfolio Report for April 2016

By | May 9, 2016

This report provides an update on my holdings, performance, plans and thoughts for my Dividend Growth Investing (DGI) Portfolio. I started this portfolio with an initial funding of $100,000 and hope to use this portfolio to help me achieve financial freedom. I’m running this portfolio like a fund manager who runs a dividend growth fund. I look for stocks that are a great fit for this portfolio, review the portfolio on a regular basis and make adjustments as necessary. Of course, I reserve the right to make any exceptions to buy or sell a stock. The results will be published here on Growing Money every month. I seek companies that have a healthy balance sheet and a competitive business advantage in the market, thereby protecting my principal investment. The dividend growth will help build a stream of growing income for the long term. If the dividends are sustainable and increasing over time, then naturally, the stock prices should follow and the total returns should be wonderful. This is a long term investing plan, which is a marathon and not a sprint, so do not expect any flashy words or colorful signs in these posts. It’s going to be a slow and steady climb to the top of the mountain. The strategy is to buy strong and healthy companies with dividends that are sustainable and increasing over time. All the dividends are automatically re-invested in the same companies. This portfolio will be reviewed on a regularly basis to ensure that the holdings are aligned with the goal of this portfolio.

Investment Objective
The DGI Portfolio seeks to provide, primarily, a growing stream of income over time and, secondarily, long-term capital appreciation and current income.

Investment strategy
The DGI Portfolio invests primarily in stocks that offer current dividends. The portfolio focuses on high-quality companies that have prospects for long-term total returns as a result of their ability to grow earnings and their willingness to increase dividends over time. These stocks typically—but not always— have a low dividend payout and shows a history of increasing dividends. The DGI Portfolio will be diversified across industry sectors.

Account Balance
Beginning Balance: $102,812.20
Ending Balance: $106,390.57
Net Gain/Loss: $3,578.37 (+3.48%)

Portfolio Holdings:

VZ 51.32 0 $0.00 0.565 4.40% $0.00 $0.00
T 39.1 0 $0.00 0.48 4.91% $0.00 $0.00
JNJ 112.75 102.271 $11,531.06 0.8 2.84% $327.27 $27.27
O 59.81 205.146 $12,269.78 0.199 3.99% $489.89 $40.82
OHI 34.05 723.83 $24,646.41 0.58 6.81% $1,679.29 $139.94
IBM 145.27 101.874 $14,799.24 1.4 3.85% $570.49 $47.54
MIC 69.92 308.409 $21,563.96 1.2 6.86% $1,480.36 $123.36
WFC 50.59 200 $10,118.00 0.38 3.00% $304.00 $25.33
Cash $11,522.70
Total $106,451.14 $4,851.30 $404.27

Note: Options balance is not shown in this table.

Dividend Payouts This Month:

4/15/2016 O $40.70

Month Total: $40.70

Lifetime Cumulative Dividends Received: $3,012.74
*This is the total dividends received since the inception of this portfolio in June 2015.

Portfolio Update

During this month, there are quite a few changes to the portfolio. To start, my covered call options for both AT&T and Verizon got called at their strike prices, which are unfortunately lower than the current market price. Subsequently, I sold the remaining partial holdings in AT&T and Verizon stocks to have a clean removal in the portfolio.
I took advantage of the extra cash in the portfolio and bought Wells Fargo (WFC) at around $48. I think WFC is a great long play because of several factors. One, WFC is a well run company with great fundamentals. They survived the financial crisis AMD emerged stronger from it. Two, they are well position for future Fed rate hikes. Three, they pay a steady stream of dividends and have nice dividend growth. Four, Warren Buffet owes around 10% of the company and Buffet likes to buy quality companies. Five, they’re at a good valuation now, trading at near 52 week lows.
Some lessons learned here. Try not to sell calls when the stock price is low or has dropped, because when the stock rebounds sharply you will be put in a difficult situation — to buy back the covered call(s) at a huge loss or to sell at a strike price in which you will incur a huge net loss?

MIC – Macquarie Infrastructure Corp (NYSE:MIC) has rebounded since the last big drop. I hope to see this stock above $70 by the end of May.

IBM – International Business Machines Corp. (NYSE:IBM) has doing well in focusing and executing its turnaround plans. It has been buying back their shares and acquiring new businesses that will help with it’s big plans. The stock dropped after earnings but it has rebounded quickly and nicely after the drop. Also, IBM has announced an increase to their dividend this year. IBM is a great long term stock.

O – Realty Income Corp (NYSE:O) is known as The Monthly Dividend company and it is arguably the safest and most wanted company in the stock market this year. The stock has defied gravity and kept soaring higher, making new all-time highs recently. This stock is now seen as a safe haven. Any signs of a market downturn diverts funds into this stock and only sends its price higher. I want to build a bigger position in this stock, so I do hope this stock drops soon so I can buy the dips, but it doesn’t seem like it will happen anytime soon.

OHI – Omega Healthcare Investors Inc (NYSE:OHI) is a great long term hold for a dividend growth portfolio. They have consistently increase their dividends and has a great business model. The stock has suffered a little lately but I think it’s a great opportunity for new investors to jump in or current investors to add to their positions.

WFC – Wells Fargo & Co (NYSE:WFC) is a new addition to my portfolio. The dividend yield is low at around 3% but I think with their dividend growth rate, the Yield on Cost should be nothing should of spectacular over the long term. I like companies that can grow their dividends at a fast rate over the long term and I think WFC is one such company.

Options Strategy

I have been buying back many of the covered calls, especially when there is a short drop in the stock, because I do not want to cap the gains on the positions and potentially lose out on them. I have lost my positions in AT&T and VZ because of a bad judgement call on selling covered calls on those stocks when the price was low, so I missed out on the run up in the stocks. I think I will be more careful with selling covered calls from now on.

Short Term Goal – Year 2020
My short term goal is to build a $500 monthly dividend income on a prorated basis from this portfolio by the year 2020. I will make adjustments that are necessary to steer towards this direction. Currently, my monthly passive income for this portfolio is at $404.27, so I still have some way to go. These monthly updates will be constant reminders for me to stay focused and work hard on my goal. By making this portfolio opened to the public, I will hold myself accountable and show my thoughts and decisions to everyone. Good luck to me!

Happy investing!! Let’s build passive income for life!


 

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