Friday, February 3, 2017

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 IncreaseCompanyTickerIncrease
%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 IncreaseCompanyTickerDividend
Yield
NoneEaton 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 IncreaseCompanyTickerDecrease
%Decr
NegativeNuveen AMT-Free Quality Municipal Income FundNEA6.69¢ 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! 

20 comments :

  1. Hej Divgro,

    Nice display of the portfolio performance!

    May I ask how you manage all the data and what you use to make the graphs / tables and present them on the site?

    Thank you and keep up the good work!

    ReplyDelete
    Replies
    1. Thanks, Pursuit2Freedom -- I've been using Google Sheets from the very beginning. You can include data from a sheet directly into a blog article. That's how I do my Portfolio and Dividends pages. As for charts, I sometimes use the charting feature of Google Sheets, but sometime I don't get the flexibility I need, in which case I use Excel's charting feature.

      Hope that helps!

      Delete
  2. Data presentation level over 9000 :) Love seeing graphs and different colors to signify different things. The growth on portfolio is great, onto 2017

    ReplyDelete
    Replies
    1. Why thanks, Dividends 4 Future! For me, tables and charts communicate data most effectively. And as they say, a picture is worth a thousand words!

      Delete
  3. Congrats on the continued improvements in your portfolio as well as the growth in your blog! We have about 15 stocks in common although my positions are much smaller.
    Looking forward to watching DivGro grow some more this year!
    Best wishes,
    -DL

    ReplyDelete
    Replies
    1. Thanks Dividend Life -- sounds like you have a good portfolio... in time, you'll see how those "smaller" positions grow into something really significant. Just hang on and keep investing as much as you can. All the best!

      Delete
  4. This is probably one of the best breakdowns of a blog and portfolio I have seen to date. Thanks for taking the time and effort into writing this up. This is fantastic. Your portfolio is doing quite well too, very well done.

    ReplyDelete
    Replies
    1. Thanks for you kind words! I'm happy with how things are progressing. We'll have to see what 2017 holds in, but hopefully next year's annual report can tell an equally promising story!

      Delete
  5. Congratulations on completing the film. That is awesome that it is nominated for that award.

    Your portfolio seems to be doing great. It has been interesting to watch the transformation of your portfolio as you have been positioning it for options. I hope your portfolio continues such great growth in 2017. Thanks for sharing.

    ReplyDelete
    Replies
    1. Thanks, More Dividends -- it is a fun/cute film and we'll keep our fingers crossed for the win. But even if we don't win, being recognized as one out of five is a great honor.

      I'm almost ready, but not quite yet -- I've got a few more things to do. The options income goal is quite challenging, so I better get to it!

      Delete
  6. Awesome job Ferdi. Keep it up...2017 is going to be great!

    ReplyDelete
    Replies
    1. Thanks Passive Income Dude -- I'm looking forward to collecting more dividend and options income in 2017.

      Delete
  7. Awesome results.

    The great performance of dividend growth investing doesn't surprise me, but the detail with which you report things definitely does.

    Such a useful resource!

    Do you track where your pageviews come from? Are they mostly from Google searchers, or do you get heavy referral traffic from Seeking Alpha or other sites?

    ReplyDelete
    Replies
    1. Thanks, Lyn -- most entries seem to be from google searches, followed by a mirror site of DivGro in Canada. Next is Seeking Alpha, Twitter, and then several dividend growth blogs.

      Hope that helps!

      Delete
  8. Congrats on a fantastic year. I'm so impressed that you saw almost 100% dividend growth. This along with your options premiums adds up to serious money being added to your portfolio on a monthly basis. Nice job Ferdi.

    ReplyDelete
    Replies
    1. Thanks, Investment Hunting -- almost 100% dividend growth is great and options premiums are partly affording the investments that drive dividend growth higher. I'm looking forward to seeing where the portfolio will go this year. Take care and happy investing!

      Delete
  9. Hi ,congrets on awesome yesr , one question whats the point of keeping so many stocks in you portfolio ?
    why not to have low cost ETF for S&P500 and just reinvest dyvidends ?
    It would be much cheaper .

    ReplyDelete
    Replies
    1. Thanks, Anonymous. Which low cost ETF would you suggest? I don't know of S&P 500 tracking ETFs that yield over 4% and have dividend growth north of 8% per year. Also, investing in an ETF does not give you the flexibility to buy at a discount to fair value. You get the mix that the ETF manager chooses.

      Delete
  10. Well, true ,I do not know S&P 500 ETF that offers 4% yield but I know a few that represent S&P500 well and are low cost , point is , index ETF's offer form of passive investment and if you think about writing calls thinks like liquidity , spreads are important if not critical to stay in this game . Your portfolio even if passive is actively managed , 80% of actively managed funds underperform index funds , my question is : what makes you believe that you will outperform S&P 500? will appreciate your insite

    ReplyDelete
    Replies
    1. I don't equate my portfolio with an actively managed fund. My portfolio is relatively small. I buy stocks at a discount to fair value and I choose when to buy and what to buy. That flexibility is not available to fund managers with tens or hundreds of millions of dollars to invest. Their buys can move the market, mine have no impact.

      My focus is dividend growth investing (DGI), not total returns. I measure performance by the dividends earned, the dividend growth rate, and the portfolio's overall yield. Looking at annualized total returns is more a way to identify potentially undervalued stocks. Of course, it alos reveals underperforming stocks, which requires further analysis to understand the reason(s) for the underperformance before taking action.

      With DGI, the main goal is to generate a reliable and growing dividend income stream. My strategy is to buy "safe" DG stocks trading under fair value. My ideal holding period would be forever and as long as I get paid ever-increasing dividends. If the market turns a the bears take over, I'll probably have more opportunities to buy shares under fair value, and I'll continue to collect the same (or higher) dividends during the bear market.

      If I focused on total return, my focus would shift. I'd be concerned with trying to time the market by selling high and buying low. While I would still collect dividends, the amount would vary based on my holdings. I'd have to concern myself with tax consequences, and I would be worried if the bears take over.

      I consider investing exclusively in index funds, ETFs or CEFs as a less flexible way of investing. You buy whatever the fund manager has chosen to invest in, whether the constituents are trading below fair value or not. On the other hand, adding a few of these to a portfolio of individual stocks is an easy way to diversify and so reduce risk.

      Delete

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