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 at start of month: $50,0000
Account Balance at end of month: $49,588.33
Net Gain/Loss for month: $-411.67 (-0.8%)
VZ – 200 shares
T – 200 shares
JNJ – 100 shares
GSK – 200 shares
CVX – 100 shares
Dividend Payouts This Month:
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 be borrowed as well and will be added to this portfolio as well.
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.
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.
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.
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.
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.