Saturday, April 23, 2016

Quarterly Review, Q1-2016

The past quarter has been a busy one for DivGro, with several buys and a continuation of the portfolio consolidation process I initiated last year. I completed the transfer of my Scottrade holdings to DivGro and I'm proceeding to do the same with two IRA accounts, one traditional and one ROTH. The process is nearly complete and should be finalized later this month.

Starting with this quarterly report, I'll be including performance charts for DivGro positions that are at least one year old, on average. So far, I've created these charts only for annual reviews. The reason I want to do them quarterly is so I can more closely monitor the performance of longer term holdings. If stocks do not perform acceptably, they should be replaced.

Dividend Income

Dividend growth investing is all about dividend income and dividend growth. Dividend income in Q1-2016 totaled $2,163, an increase of 26% over last quarter's total of $1,721. This quarter's dividend income is 62% higher than the total received in the year-ago quarter (Q1-2015).

DivGro's average percentage payback is 8.33%, up from 7.98% at the end of Q4-2015. Percentage payback relates total dividend income to the total amount of capital invested.


This quarter I deposited $7,000 in new capital and $700 of passive income. Additionally, I recognized past investment capital of $58,195 in Q1-2016 as part of the portfolio consolidation process mentioned earlier.

Here is a summary of my buys in Q1-2016:

Ford Motor Company


 26 Jan
 29 Jan
 bought 280 shares at $12.24 per share 
 bought 150 shares at $11.77 per share 
The Walt Disney Company
   3 Feb 
 bought 27 shares at $95.43 per share 
 17 Feb 
 bought 90 shares at $27.58 per share 
Cummins Inc
 17 Feb 
 bought 25 shares at $100.07 per share 
STAG Industrial Inc
 29 Feb 
 bought 100 shares at $17.70 per share 
AbbVie Inc
   9 Mar 
 bought 44 shares at $56.16 per share 
Macquarie Infrastructure Company
 16 Mar 
 bought 40 shares at $65.15 per share 
T. Rowe Price Group Inc
 16 Mar 
 bought 35 shares at $71.39 per share 
Starwood Property Trust, Inc
 17 Mar 
 bought 140 shares at $18.73 per share 
Gilead Sciences, Inc
 18 Mar 
 bought 28 shares at $90.47 per share 
Union Pacific Corporation
 18 Mar 
 bought 30 shares at $85.09 per share 

All of these transactions were additions to existing positions, not new positions.

I sold all my shares of COP after the company cut its quarterly dividend by 66%, taking a net loss of nearly $2,000 in the process. I trimmed my Energy sector exposure in December and this sell continues the trend. Right now, my only remaining Energy sector holdings are Exxon Mobil Corporation (XOM), Chevron Corporation (CVX) and Helmerich & Payne, Inc (HP).
At the end of the quarter, my DivGro portfolio contained 59 different holdings, 56 stocks and 3 closed-end funds (CEFs).

Dividend Adjustments

In Q4-2015, I reported projected annual dividend income (PADI) of $6,676 on investments totaling $182,935, for a projected annual yield of 3.65%. I'm happy to report a solid improvements this quarter. PADI increased by 52% to $10,163, total investments increased by 36% to $248,830 and projected annual yield improved to 4.08%.

A large portion of the PADI increase is due to the consolidation process mentioned earlier. Similarly, the large increase in total investments is really due to recognizing earlier investments.

23 of DivGro's holdings (or 39%!) announced dividend increases in Q1-2016. The following table presents a summary of the dividend increases, and the new yield on cost (YoC) for each holding:

Increase Annual
Reynolds American, Inc
Dr Pepper Snapple Group, Inc
Qualcomm Inc
General Dynamics Corporation
Intel Corporation
Meredith Corporation
Dominion Resources, Inc
Toronto-Dominion Bank
Eversource Energy
The Coca-Cola Company
Kimberly-Clark Corporation
Realty Income Corporation
T. Rowe Price Group, Inc
Avista Corporation
Digital Realty Trust, Inc
The Chubb Corporation
AT&T Inc
Wal-Mart Stores, Inc
Omega Healthcare Investors, Inc
Macquarie Infrastructure Corp
HCP, Inc
W.P. Carey, Inc
STAG Industrial, Inc

Average yield on cost (YoC) is 4.44%, up from 4.10% at the end of Q4-2015.

Market Value

At the end of Q1-2016, DivGro's market value of $276,681 represented a simple gain of 11.12% on $248,830 invested. Of course, this does not take into account the timing and size of cash deposits. DivGro's internal rate of return since inception is 8.48%.

The significant jump in market value is partly due to the stock market recovery in March. The other reason for the jump is recognizing past investments associated with stocks transferred to DivGro.

Longterm Positions

As mentioned earlier, I'll be including various performance charts for DivGro positions that are at least one year old, on average. The reason is that I want to closely monitor the performance of long term positions. In my view, if stocks do not perform acceptably they should be replaced.

While General Dynamics (GD) and Nippon Telegraph & Telephone Corporation (NTT) still lead the pack with total returns of more than 100% each, Reynolds American, Inc (RAI),  Altria Group, Inc (MO) and Digital Realty Trust, Inc (DLR) are outperforming them on an annualized basis:

The Gap, Inc (GPS) is by far the worst performer. The company has struggled to grow earnings and the stock price has been pummeled the last year or so. Unfortunately, things don't seem to get any better for GPS, as March sales have dropped and inventory levels remain high. In the next few weeks, I'll do a thorough analysis of GPS to see if I want to stay invested.

Two business development companies top the YoC chart: Main Street Capital Corporation (MAIN) and PennantPark Investment Corporation (PNNT):

Whereas MAIN is an excellent performer, PNNT is not. Shortly after I bought my shares of PNNT, the company froze its dividend. At the time, I decided to hold onto my shares and to continue collecting the high dividend yield. So far, it has not been a profitable decision and I'm still underwater with PNNT despite the high yield.

Following is a chart showing year-over-year dividend increases of my longterm positions. I prefer to see increases of at least 7%, so I'm happy to see that 12 of these longterm positions have increased their dividends by more than 7% in the last year.

Deere & Company (DE), Helmerich & Payne, Inc (HP), and Chevron Corporation (CVX) have all paid the same dividend for more than a year. As a dividend growth investor, I'd like to see regular dividend increases, so I'll monitor these stocks carefully. PNNT froze its dividend several years ago.

Next up is payback percentage, which relates total dividends received to total capital invested. Stocks with high yields should dominate here, and, indeed, MAIN and PNNT have the largest payback percentages by far. Of course, stocks I bought first will have an advantage over stocks I bought more recently.

I prefer to buy stocks in amounts of $2,500 at a time. With a portfolio containing 56 stocks and 3 CEFs, I'll be adding to existing positions more frequently than opening new positions. In the following chart, which shows the relative weight of each position, an asterisk indicates stocks that I've doubled-up on. The chart illustrates the impact of capital gains (or losses) on relative weight.

It is evident that BBL is a very poor performer. Conversely, NTT, GD, and MO are excellent performers, even outperforming some stocks with a cost basis double their own!

Outlook For Q2-2016

In Q2-2016 I'll complete the process of consolidating my dividend growth stocks into DivGro. With a good amount of cash on hand, I'll be looking for opportunities to add to existing holdings or to open new positions. We're planning a little vacation break in June, so I'm looking forward to the break!

Thanks for reading and take care everybody! 


  1. Wow you have done a great job in summarizing all of your holdings. Great for you to see an overview of your portfolio and also great for someone like me who is new at this to see the impact this strategy will have in the long run. Thanks again for sharing! Quite impressive YOY dividend growth and amazing to see how dividend increases will affect a portfolio.


    1. Hi Dividend Mogul -- thanks for your kind words. I enjoy creating the charts (now that I have the excel spreadsheet properly set up!) and I feel it is really useful to review the performance of individual stocks in this way. Having 12 stocks with YoY increase of better than 7% is great! That's what dividend GROWTH investing is all about!

  2. Very good job,can you do a blog post on transferring shares from one account to another.
    I have a scottrade account and would like to know if its easy to do or not.

    1. Hi srav -- my choice of words ("transferring shares") is unfortunate. As I mentioned in several other posts in which I reported on the consolidation process, I'm not actually transferring the shares from one account to another. Rather, I'm capturing the past transactions in my DivGro blog and adding the holdings to my DivGro portfolio in order to manage all my dividend paying stocks in one place, so to speak.

      I'm doing the same with the holdings in 2 IRA accounts, which definitely have to stay isolated for tax reasons.

      I have no experience with actually transferring shares from one account to another -- my actions are "virtual".

      Hope that helps to clarify what I've done.

      Take care!

  3. Great progress Ferdi. You're looking at forward 2016 dividends of $8,652! And that's not including dividend increases and future stock buys. Nice work sir!!!

    1. Actually, DivGro's projected annual dividend income (what you call forward dividends) is $10,163. My goal is to reach $12,000 by the end of 2016 and I'll definitely be relying on dividend increases and more stock buys to get there...

      Thanks for visiting and commenting!

  4. thanks for the article i like to read and follow you, you have set a goal, and i like to see how it's going it took me awhile to learn the dgi method but i see how it works and thanks to you and others on sa i have learned alot, btw just sold cvx, made a small profit, but am going to redeploy the money somewhere else. got a little worried about the oil sector

    1. Hi Phillip Smith -- thanks for reading my blog and commenting!

      Dividend growth investing is not for everyone, but it certainly is for me... after having traded for many years, I do like the idea of not having to keep my finger on the pulse of the stock market on a daily basis. With the DGI strategy, you buy great dividend growth stocks at or below fair value and you keep them for a long time, collecting ever-increasing dividends.

      I'm still holding on to my CVX shares. Although the crude oil price is putting a lot of pressure on CVX (and other oil majors), I don't see a reason to sell now. I've trimmed my Energy sector stocks enough, for now. We'll see how it goes!

      Take care and best of luck with your portfolio!

  5. Ciao DG,
    Just found your blog, I have to extend my sincerest compliments for the articles, the reports and so on! Great work. I am amazed at the number of holdings that you currently keep, do you manage to follow them all? I'll get reading the other articles, keep up the great work!
    Ciao ciao

    1. Hi there, Stalflare! Nice of you to visit and comment...

      Thanks so much for your kind words. As for the number of holdings, I never thought I'd have that many holdings. It just kind of crept up on me! I get links to articles covering the stocks I own from sites like SeekingAlpha and Morningstar. Usually, I can quickly determine if an article is relevant to my position. Other than that, all I can say is I don't have to track my stocks so frequently -- that's the nice thing about DGI; it's a long-term strategy.


    2. Ciao FerdiS,
      I also try to manage things this way, reading a lot, scavenging resources around the web and of course assessing quarterly reports and numbers (although my analysis there is a bit weak). Anyhow, you are straight into my list of "must reads" so I'll keep coming more often :)
      Ciao ciao

    3. Thanks, Stalflare -- I'll try my best not to disappoint! Take care and all the best with your investments!


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