DGI For The DIY: 2017 Review

DGI For The DIY: 2017’s Milestones And Minutiae

What a year! I don’t know about the rest of you, but 2017 was an incredible 365 days for me and my family. It was a year that brought fun life experiences, a change in my career path, and some new milestones for my portfolio and this website.

Eating Birthday Cake
Is There Something On My Face?

It’s hard to believe, but on December 23rd, DGI For The DIY celebrated it’s first birthday as a website.  I still remember the excitement of writing my first post, and it’s been a year of baby steps in learning how to develop content, build a following, and keep up a website that people want to visit.

My daughter also celebrated her first birthday this year, which is an even crazier thing for me to comprehend. Man, time goes by way too fast!

I’ll admit that running a site has been a bigger challenge than I imagined it would be. When I started I had ambitious goals of publishing new content on a weekly basis, but reality set in pretty quickly that I wouldn’t be able to keep up with that pace, and I’ve been on a monthly basis of late.

It’s been a difficult balancing act between focusing on family and work, while also trying to find time to keep fresh content on here as well as on Seeking Alpha.

Overall, I feel the first year was a success, even if it hasn’t quite reached my initial goals. The site has received nearly 30,000 page views to date, and has moved up in the Google search rankings for dividend growth investing related topics.

Google Analytics Data
Page Views To Date

As for marketing efforts, the site now has 95 e-mail subscribers –Thanks!! –, and my social media efforts on Facebook and Twitter are up to 197 and 295 followers.

I’ve discovered that it takes time to build a following, but slowly it seems that I am making progress in doing so. I suppose it is much like my portfolio, in that dividend income grows slowly to start, but as the snowball grows the increases come more quickly. I’m still waiting for a post to “go viral”, but even if that never happens, I am enjoying watching progress being made.

Another reason for developing this site was to further promote my efforts on Seeking Alpha, and I think that has been a big success. To date there’s been nearly 3,000 link clicks to Seeking Alpha, and my follower count there is now approaching 4,000.

This number never ceases to amaze and humble me. I couldn’t have imagined when I started writing in early 2013 that, A: I’d still be writing 5 years later, and B: People would care enough of my thoughts to actually follow me. Thanks again to everyone who has done so!

Portfolio Income Update

Not only has it been a successful year for this site, it’s also been an excellent year for my portfolio. One would expect this during a raging bull market, but with hedge fund “all-stars” like David Einhorn and Bill Ackman massively under-performing the indices, seeing good gains in a portfolio shouldn’t be taken for granted.

However, I don’t run a hedge fund, and I certainly don’t make risky bets shorting cyclical stocks like Caterpillar $CAT, or take large positions in highly leveraged pharmaceutical companies like Valeant $VRX.

No, I invest the old-fashioned way by buying a diversified mix of high quality companies with long track records of growth, and then just holding them and letting the dividends roll in.

As shown in my portfolio updates, the dividend income growth was excellent in 2017, and has been since the portfolio’s start in 2013.

Table of dividend income for the portfolio.
DGI For The DIY: Dividend Income History

Dividend income grew by 22.09%, and reached my target milestone of $2,000 for the year. This marks the third time in four years that the portfolio’s income grew by more than 20%.

I wish I got those kinds of raises at my job!

Three contributing factors drove this income growth: cash deposits into the portfolio, organic dividend increases from companies I own, and the compounding effect of dividend reinvestment buying more shares of those companies.

Here is a breakdown of all the dividends received for the year by the different stocks that I own. I’ve also added a column showing where that increase in income came from with “C” for cash contributions that added to or bought new positions, “O” for organic dividend growth, and “R” for reinvested dividends.

2017 vs. 2016 Dividend Comparison

2017 vs. 2016 Dividend Comparison
2017 vs. 2016 Dividend Comparison

Some of the biggest increases were the result of new purchases, but there were plenty of other big gains that came simply from increased payouts from the companies.

There were six companies: Amgen $AMGN, Gilead Sciences $GILD, Ross Stores $ROST, Starbucks $SBUX, Visa $V, and Watsco $WSO that produced 15%+ income growth for the year and thirteen others than reached the double-digit mark.

I’ll also point out the impact that dividend reinvestment has with the examples of AT&T $T, Chatham Lodging Trust $CLDT and STAG Industrial $STAG. They produced 7.2%, 7.1% and 9.1% income growth despite limited increases to the actual dividend payout.

Considering the higher yield they offer, they can actually grow income by a higher amount than a lower yielder with higher growth.

For instance, a $1,000 investment in a stock like Visa at a 1% yield produces $10.00 per year in income. If it grows by 20% it would produce $12.00 the following year.

A company like AT&T that yields 5% produces $50.00 a year in income on a $1,000 investment. If it grows the payout by 2% and dividends are reinvested for another 5%, you are looking at 7% total income growth to $53.50 the following year.

So on an income basis, AT&T is an excellent stock.

However, I like getting capital gains with my portfolio as well, and Visa far outperforms in that respect. I’ve owned AT&T since July of 2014 and have total gains of 24.6%, while I’ve owned Visa since January of 2015 and have gains of 87.9%.

In that respect, I like owning both types of companies because I can get growth from some positions to increase my portfolio value, but while sprinkling in a few 5%+ yielders, I can also keep the overall portfolio at a respectable yield of 2.85%.

Tortoise and hare.
Should You Buy The Tortoise Or The Hare?

I like this approach because I get the best of both worlds. I can pick a handful of growth companies for capital gains in a bull market, but also hold “widow and orphan” stocks that do better in a downturn.

I wrote two articles looking at the yield vs. growth topic on Seeking Alpha, here is my page with the links if you are interested. As you’d suspect, there was some lively debate in the comment threads that followed!

A Big Change For The Portfolio

As mentioned in the open, I’ve had a change in my employment that will have a big impact on this portfolio. In October, the company I’ve worked at for the last 15 years was acquired by a larger, regional engineering firm.

This change was not a big surprise to me as we’ve worked with the company for many years; and for the most part I will be doing the same work that I had previously.

However, it does mark the end of cash contributions going into this portfolio. A new employer mean a new retirement system, and a change from the Simple IRA that this portfolio was to a new 401(k) plan that will start at $0.

This ending of contributions changes my focus a bit and my approach to the portfolio. I will still keep my goal of 10% annual income growth, but with the loss of cash contributions adding to positions, more of that growth will need to come from organic dividend increases going forward.

As a result, I decided to make a few trades before the end of the year, selling out of MDU Resources $MDU, AmerisourceBergen Corp. $ABC, and General Electric Corp. $GE.

I then used the proceeds from those sales, along with remaining cash I had in the account, to buy new positions in Johnson & Johnson $JNJ, NextEra Energy $NEE, MasterCard $MA, 3M Company $MMM, and American Water Works $AWK.

I wrote up an article “Shuffling My Dividend Growth Deck” on Seeking Alpha that explains my thoughts behind the trades. The post has garnered nearly 300 comments to date, and not everyone agreed with my trade decisions.

However, I’m quite comfortable with the moves, and think I did well in upgrading the quality and dividend growth prospects of the stocks involved.

Here is how the portfolio stands after the trades.

My favorite part? Projected income is already up to $2,122 based on current payouts, meaning I’m already over halfway to my goal of 10% income growth for the year.

With dividend increase announcements expected soon from Digital Realty, Johnson & Johnson, 3M Company, Polaris, Church & Dwight, Dr Pepper, and others, that number will keep moving higher in the coming months!

Portfolio Progress

With 2017 now in the books, here is a look at the portfolio’s progression since it was constructed in early 2013.

Portfolio progress char
Portfolio Progress – End 2017

The chart looks like we all hope they will, up and to the right!

At this point I’d just like to point out to readers how quickly you can grow a portfolio if you stick to a plan and stay diligent in funding it.

The listed cash contributions are quarterly numbers; meaning that there was about $350 per month going into the account. I realize this isn’t a trivial amount for people, but it is something that most middle-class earners can do.

I know it can be daunting starting out with investing, and it may seem that you’ll never be able to save enough to matter for your retirement, but this portfolio is proof positive that it can be done.

You don’t need to be a millionaire to invest in the stock market and be successful at it, just get that dividend growth snowball started!

Conclusion

2017 was an excellent year for the portfolio, as it saw 22% income growth and reached the $2,000 milestone in annual income.

2018 is off to a great start as well, as projected income has already surpassed $2,100 and there is a handful of dividend increase announcements coming in the next few weeks.

The overall market also continues higher, as the Dow Jones average smashed through 26,000 last week, and hit yet another all-time high today.

I don’t know what tomorrow, next month, or the next year will bring for stock prices, but I’m quite sure that my dividends will continue to be paid!

How did your investments do in 2017?  I’d love to hear, please leave a comment below.

Happy Investing in 2018!

 

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