Annual Review, 2016

Welcome to my fourth annual review of DivGro, my portfolio of dividend growth stocks!

Keeping track of DivGro in a public forum helps me to learn and grow as a dividend growth investor. I learn from the research I do while writing articles, but also from interacting with like-minded investors.

In my annual reviews, I look at DivGro's performance as measured by dividend income, dividend increases, annualized returns, and rate of return. I also look at some highlights of the past year and share my outlook for the coming year.

Performance

Dividend Income

The main goal of DivGro is to generate a reliable and growing dividend income stream.

In 2016, DivGro generated a total of $10,700 in dividend income and I recognized past dividend income of $4,691 due to account consolidation. The total of $15,391 is 95% higher than 2015's total dividend income of $7,907.

Projected annual dividend income(PADI) increased by 83% to $12,376, meaning I can expect to earn monthly dividend income averaging at least $1,031 in perpetuity. (PADI one year ago was $6,776).


Here is a chart showing the contribution of each stock position to DivGro's PADI. Larger positions and higher yielding stocks (such as BDC's and REITs) dominate:



Dividend Increases

In dividend growth investing, regular dividend increases are just as important as dividend income. I use selection criteria that favor stocks with a track record of paying higher dividends every year. In 2016, the following DivGro stocks paid or announced higher dividends:

1-Year Increase	Company	Ticker	Increase	%Incr
High (above 9%)	Reynolds American, Inc Valero Energy Corporation Cisco Systems, Inc Nike Inc Northrop Grumman Corporation AbbVie Inc Qualcomm Inc Lockheed Martin General Dynamics Corporation The Walt Disney Company The Travelers Companies, Inc Apple Inc Raytheon Company Gilead Sciences, Inc	RAI VLO CSCO NKE NOC ABBV QCOM LMT GD DIS TRV AAPL RTN GILD	36¢ to 46¢ 50¢ to 60¢ 21¢ to 26¢ 16¢ to 18¢ 80¢ to 90¢ 57¢ to 64¢ 48¢ to 53¢ $1.65 to $1.82 69¢ to 76¢ 71¢ to 78¢ 61¢ to 67¢ 52¢ to 57¢ 67¢ to 73.3¢ 43¢ to 47¢	27.78% 20.00% 23.81% 12.50% 12.50% 12.28% 10.42% 10.30% 10.14% 9.86% 9.84% 9.62% 9.40% 9.30%
Medium (4 – 9%)	Omega Healthcare Investors, Inc Intel Corporation Microsoft Corporation 3M Company Dominion Resources, Inc Altria Group, Inc International Business Machines Corp Target Corporation United Parcel Service, Inc Eversource Energy Johnson & Johnson Pfizer Inc The Coca-Cola Company Realty Income Corporation McDonald's Corporation Cummins Inc AFLAC Incorporated Kimberly-Clark Corporation Walgreens Boots Alliance, Inc	OHI INTC MSFT MMM D MO IBM TGT UPS ES JNJ PFE KO O MCD CMI AFL KMB WBA	56¢ to 61¢ 24¢ to 26¢ 36¢ to 39¢ $1.025 to $1.11 64.75¢ to 70¢ 56.5¢ to 61¢ $1.30 to $1.40 56¢ to 60¢ 73¢ to 78¢ 41.75¢ to 44.5¢ 75¢ to 80¢ 30¢ to 32¢ 33¢ to 35¢ 19.1¢ to 20.25¢ 89¢ to 94¢ 97.5¢ to $1.025 41¢ to 43¢ 88¢ to 92¢ 36¢ to 37.5¢	8.93% 8.33% 8.33% 8.29% 8.19% 7.96% 7.69% 7.14% 6.85% 6.71% 6.67% 6.67% 6.06% 6.02% 5.62% 5.13% 4.88% 4.55% 4.17%
Low (below 4%)	T. Rowe Price Group, Inc Chubb Ltd Main Street Capital Corporation Exxon Mobil Corporation AT&T Inc Wal-Mart Stores, Inc The Procter & Gamble Company STAG Industrial, Inc	TROW CB MAIN XOM T WMT PG STAG	52¢ to 54¢ 67¢ to 69¢ 18¢ to 18.5¢ 73¢ to 75¢ 47¢ to 48¢ 49¢ to 50¢ 66.29¢ to 66.95¢ 11.5833¢ to 11.5¢	3.85% 2.99% 2.78% 2.74% 2.13% 2.04% 1.00% 0.72%

In 2016, fourteen DivGro stocks increased their dividends by more than 9%, while eight stocks had increases below 4%. Nineteen stocks had medium-sized increases (between 4% and 9%). The average of these 41 increases is 8.15%.

The following table shows DivGro holdings that did not pay higher dividends in 2016:

1-Year Increase	Company	Ticker	Dividend	Yield
None	Eaton Vance Tax-Managed Global Div Equity Income Ford Motor Company AGIC Equity&Convertible Income Fund PennantPark Investment Corp	EXG F NIE PNNT	8.13¢ 15¢ 38¢ 28¢	12.16% 4.95% 8.25% 14.62%

EXG and NIE are closed-end funds. I invested in these funds for income and diversification, not for dividend growth. PNNT announced a dividend cut of 10¢ per share, starting with its first dividend payment in 2017. I'll be closing my PNNT position soon. As for F, I'm boosting the stock's yield with covered calls, so I'm not too concerned about the company's decision not to increase its dividend.

One DivGro holding reduced its dividend in 2016:

1-Year Increase	Company	Ticker	Decrease	%Decr
Negative	Nuveen AMT-Free Quality Municipal Income Fund	NEA	6.69¢ to 6.2¢	7.32%

NEA is a closed-end fund that pays monthly dividends yielding 5.55%. I'm not happy with the reduced dividend and I'm considering closing the position.

I like to see dividend increases of 7.5% or higher. In the following chart, DivGro stocks with increases of at least 7.5% are shown in orange.


I'm very happy about the outstanding increases from RAI, CSO, and VLO! Of course, such increases are not sustainable in the long run, but I'll celebrate them whenever they're offered!

Annualized Returns

Below is a spreadsheet showing the state of DivGro on December 31, 2016. The last column shows Annualized Profit/Loss for stocks I've owned for more than one year, on average.

General Dynamics Corporation (GD) leads the pack with annualized returns of 45%, followed by Reynolds American, Inc (RAI) with 41% and Altria Group, Inc (MO) with 37%:

In this chart, I'm including only stocks that I've owned for longer than a year, on average.

The portfolio's average annualized return recovered nicely from 5.91% at the end of 2015 to 16.99% at the end of 2016. Last year, I reduced my exposure to energy stocks, which in 2015 were to blame for DivGro's poor performance.

Rate of Return

In 2016, I invested $103,919 in new capital or about 31% more than 2015's total of $79,585. Over the four years since founding DivGro, I've invested $286,854. DivGro's ending market value of $354,795 represents a simple return of 23.7% on the total amount invested.

Of course, the simple return does not take into account the timing and size of investments. On 31 December 2016, DivGro's internal rate of return was 11.93%, up significantly from -1.59% at the end of 2015.

Other Statistics

At the end of 2016, DivGro's average YoC was 4.26%, up slightly from 2015's average YoC of 4.10%. Over time, as stocks I own pay higher dividends, DivGro's average YoC will increase. My goal is to achieve and maintain an average YoC of 12%.


Higher yielding stocks currently dominate my YoC chart. I expect this picture to change in time, as dividend growth and the power of compounding from reinvested dividends kick in.

DivGro's payback increased from 7.98% for 2015 to 9.85% for 2016. Payback is the proportion of capital returned as dividends. Payback is an interesting statistic to track and I consider it to be a reasonable measure of portfolio maturity.

MAIN dominates because of its higher yield (currently about 6%) and because it is one of my longest term holdings. 

2016 Highlights

My personal highlight of 2016 was completing Piper, now officially nominated for an Academy Award for Best Animated Short. Creating the effects for Piper has been the most challenging thing I've ever attempted, but we had a wonderful team that worked long and hard to accomplish our visual goals. I feel blessed to have been part of it!

As for DivGro highlights, in 2016 projected monthly dividend income moved above $1,000 for the first time and I initiated an options trading strategy to boost dividend income. Dividend income in 2016 topped $15,000, while options income topped $7,700. 

Page Views

DivGro's page views (pv's) increased from just under 370,000 at the beginning of 2016 to just under 660,000 at the end of the year:

	22 December 2015  average since inception: 332 pv's		10 September 2016  average since inception: 408 pv's
	14 February 2016  average since inception: 351 pv's		13 November 2016  average since inception: 425 pv's
	29 April 2016  average since inception: 371 pv's		27 December 2016  average since inception: 447 pv's
	17 July 2016  average since inception: 387 pv's		2 January 2017  average since inception: 452 pv's

Over the time range covered by the table above, I've averaged about 799 pv's per day, or about 24,320 pv's per month in 2016! In comparison, 2015's average was about 17,897 pv's per month.

Popular Posts

In 2016 I wrote 155 articles, including 64 premium articles for Seeking Alpha and 2 articles on The DIV-Net. Here are some the most successful articles in 2016, based on pv's:

Top 2016 DivGro Articles:
   • 03 Nov: Options Update: October 2016 (Part 1) (1,320 pv's)
   • 28 Nov: Options Update: November 2016 (1,259 pv's)
   • 07 Sep: Home Run #6 (1,165 pv's)
   • 13 Jul: DivGro Pulse: November 2016 (1,111 pv's)
   • 25 Dec: Goals For 2017 (1,100 pv's)

Top 2016 Seeking Alpha Articles:

   • 18 Oct: Top Holdings Of Dividend ETFs (26,008 pv's)

   • 19 Nov: 10 Dividend Growth Stocks For November 2016 (10,557 pv's)

   • 24 Jan: 10 Dividend Growth Stocks For January 2016 (9,413 pv's)

   • 17 Apr: 7 Dividend Increases: April 11-15, 2016 (7,262 pv's)

   • 05 Feb: Recent Buy: Ford Motor Company (7,155 pv's)

All-Time Most Popular DivGro Articles:

   • 20 Jun'14: Tracking your DGI Portfolio (8,069 pv's)

   • 24 Feb'14: Popular Dividend Growth Stocks (3,784 pv's)
   • 27 Apr'14: My New Watch List of Dividend Growth Stocks (1,661 pv's)

   • 27 Apr'14: Blogroll Page Reorganized (1,593 pv's)

   • 04 Apr'15: Updated Blogroll Page (1,560 pv's)

   • 21 Oct'13: Recent Buy: VNR (1,500 pv's)
   • 15 Jul'15: Baxter Spins-Off Baxalta (1,380 pv's)
   • 03 Nov'16: Options Update: October 2016 (Part 1) (1,320 pv's)
   • 01 Sep'14: 10 Dividend Growth Stocks For September 2014 (1,301 pv's + 4,254 on SA)
   • 30 Dec'15: The Blogger's Dividend Growth Portfolio, 2015 Edition (1,272 pv's + 825 on SA)

2017 Outlook

I've set some challenging goals for 2017, including a very aggressive goal of earning $8,400 in options income. Much of my activity in the second half of 2016 focused on preparing DivGro for options trading. I have more work to do, including transferring my taxable account from FolioInvesting to Interactive Brokers. Additionally, I'm consolidating our IRAs at FolioInvesting and bringing them into the DivGro fold.

I want to increase PADI to $14,400 and attempt to earn $12,960 in dividend income by 31 December 2017. This will be particularly challenging, as I'm planning to reduce new capital deposits to $1,000 per month. I'll continue to deposit premium article income from Seeking Alpha monthly and any "passive" income earned via Google Adsense biannually.

This year, I'm challenging myself to write 64 premium articles for Seeking Alpha and 6 articles for The DIV-Net. Additionally, I'll continue to publish non-exclusive articles at DivGro.

A special word of thanks to all my readers, especially to those that comment regularly and continue to encourage me! This community is amazing and I really love being part of it!

Thanks for reading!