Dividend growth investing is the strategy of buying shares in companies that have a history of paying reliable and increasing dividends.

I began practicing this investment strategy in early 2013 when I sold out of the mutual funds in my retirement account and used the proceeds to create a collection of 50 dividend growth stocks, which evolved into the DGI For The DIY portfolio.

My goal is to fund a significant part of my future retirement with the increasing dividend income stream that this account produces. I give monthly updates of the portfolio’s dividend growth progress to document my journey and offer an example for others who are interested in taking control of their own retirement accounts by becoming self-directed investors.

Annual Income Growth

August was another successful month for the portfolio, as dividend income grew by 49% over 2016’s totals and by 9.3% over Q2.

This income growth came from a combination of increased payouts from companies I own, reinvestment of dividends that added to my share count, and cash contributions that enabled new purchases in the portfolio.

Here are the dividends collected in August, along with the comparative numbers from 2016:

August was a busy month for the portfolio, as sixteen different companies made dividend payouts into the account. Dividend income increased by 49.3% over 2016, with the growth coming from a variety of sources.

New purchases played a big factor with this month’s update, as shares were added in AbbVie, Abbott Labs, CVS Health, Lowe’s Companies, Omega Healthcare Investors, and Tanger Factory Outlet Centers during the past year.

Deere & Company was the lone sale in the portfolio, as I liquidated the position last August and used the proceeds to buy CVS Health and Lowe’s Companies.

This sale became another painful reminder of why I shouldn’t be a stock trader, as Deere shares have increased in price by 32% since the sale, while the Lowe’s and CVS replacement purchases have returned -0.9% and -18.9%. So I clearly lost out on capital appreciation with the trade.

However, my theory behind the sale has played out as expected, as Deere still has a frozen dividend at $0.60 per quarter, while CVS and Lowe’s have increased their dividends by 17.6% and 17.1% respectively.

Time will tell if the trade was a good one for the portfolio, but the move is a mixed bag at this point.

Looking at the rest of the numbers, Apple, Ameriprise Financial, Realty Income, and Starbucks all produced double-digit income growth for the portfolio, with Starbucks leading the way at 27%.

My favorite REIT, Realty Income $O, did so with just a 6% increase in the dividend payout, as reinvestment of the 4%+ yield made up the rest of the growth. Two other REITs, Chatham Lodging Trust $CLDT and STAG Industrial $STAG produced 6.9% and 7.3% income growth despite minimal dividend growth, as dividend reinvestment of their higher yields grew my share count.

I always find it interesting to see how the income growth is produced, as lower yield companies like Starbucks and Ameriprise require large dividend increases while high-yield REITs like STAG and Chatham can produce income growth despite small dividend increases.

This is why I like to have a diversified mix of holdings, as one strong sector can pick up the slack of others that see weakness, and high yield holdings can grow income regardless of whether or not they pay higher dividends.

Dividend Income History

As mentioned above, my portfolio income in August grew by 49% over 2016’s totals, making it the biggest year-over-year increase to date.

Even more exciting is the fact that I’m on pace to collect over $2,000 in dividend income in 2017, which would be 20%+ annual growth and more than twice my goal of 10%.

The snowball is growing even faster than expected!

Expected Dividend Increases

Looking ahead, I am expecting four increase announcements during the month of September: Lockheed Martin Corp. $LMT, Microsoft Corp. $MSFT, Philip Morris International $PM, and McDonald’s Corp. $MCD.

The first announcement should come by the end of next week from Philip Morris!

I gave my dividend growth predictions for those companies on September 1. In short, I see single-digit growth from all four, but uncertainty exists because none of them offer guidance for target payout ratios. I’m hoping one or more surprise me with a bigger increase than I’m predicting, but my expectations are pretty reserved at this point.

Site Progress

In other news, I finished up an update to the Consumer Discretionary Sector watch list page, and have also started updating the Real Estate Sector page. My intent is to expand information on all the sector pages, and get updates finished on the spreadsheets as well.

Unfortunately, my research & writing time is limited to a few hours a night, so progress has been much slower than I’d like. Hopefully that doesn’t discourage my readers and cause people to lose interest in the site. I have big dreams for DGI For The DIY, and hope that I can make them happen.

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Thanks for reading, and Happy Investing!

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