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Dividend Portfolio Update

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Disclaimer: I am not a finance professional and all materials below are for informational purposes only. I do not endorse any of these companies and you need to do your own research before investing in any stocks.

I’m a buy and hold investor. I am too slow to react to the market news and by the time I decide to sell, I’m usually too late. This approach may not be optimal when the market dropped 8%, but it’s the strategy that I can stick with. Buy and hold works well for me when the stock market goes on a roller coaster ride like it has been doing lately. I knew I could ride it out and didn’t give myself an ulcer. Since I can’t sell at the right time, I will buy when the market is down and average out my price per shares.

I am also slowly moving most of our stock market investments toward dividend stocks. This is going to take a while, but I think now is a great time to pick up some dividend stocks for a great price. We liquidated some investments earlier this year and have been hoarding cash for the 4 plex down payment. The short sale is taking so long that we have extra cash left to buy some stocks.

Eli Lilly

I picked up a few shares of LLY. The yield is very good and the PE is quite a bit lower than their competitors.

Here are the stocks in my dividend portfolio

Stock sector dividend yield
Intel Tech. 4.40%
Eli Lilly & Co. Pharma. 5.60%
AT&T Telecom 6.10%

 

My goal is to build up our dividend income to about $6,000/year to help with my early retirement. $500/month doesn’t sound like a lot of money, but I think it will make a big difference. I’ll probably try to stick with less than 10 stocks/funds because I can’t keep track of the investments if I own more than that. To increase yield, I’ll try writing covered call options soon. For this to be effective, I need to build up some volume first so the transaction fee won’t be a big % of the profit.

This portfolio currently yields about $1,900/year. We’ll have to add quite a bit more dividend stocks to increase the yield to $6,000/year. I think we’ll need to add some utilities, energy, and REIT.

What do you think we should add to the dividend portfolio next? I also like Pfizer and might pick up a few shares if the market drops further. 

 

Disclaimer: This is not a recommendation. My stock picking track record isn’t great so you need to do your own research. This post will help us keep track of the gains and dividends to see if they meet my passive income goal. If you need help with financial planning, consider signing up with Personal Capital. Personal Capital will help you keep track of all your investments in one place and can hook you up with a personal financial adviser as well.

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Disclosure: If you sign up with Personal Capital, we may receive a referral fee depending on the size of your portfolio.

 

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{ 35 comments… add one }

  • SB @ One Cent At A Time August 24, 2011, 6:54 am

    Go with MO, not their product but stock 🙂 Have you ever thought about LLCs?

    • retirebyforty August 24, 2011, 2:09 pm

      Yeah… I think I’ll draw the line at cigarettes. 🙂

  • MoneyCone August 24, 2011, 7:28 am

    Pick stocks from sectors that are depressed at the moment. Oil is one that comes to mind.

    • retirebyforty August 24, 2011, 2:08 pm

      I’ll look at oil more closely. XOM has pretty low dividend @ 2.7% though.

      • Kyle @ The Penny Hoarder August 25, 2011, 8:36 am

        My guess is that if you’re going to invest in oil, you should wait until this winter. If the global economy continues to recedes, it’s likely you can pick up those stocks even cheaper as the demand for oil decreases.

  • Brave New Life August 24, 2011, 7:50 am

    My strategy for my dividend holdings has been to follow the Dogs Of The Dow strategy (Intel is one of the dogs, so you’re on your way). These are boring stocks, but that’s what makes them good buys – no one else wants them, which makes them cheap.

    • retirebyforty August 24, 2011, 2:10 pm

      I like Dogs of the Dow also. AT&T is also on the list for 2011.

      • My dog's better than yours August 28, 2011, 9:27 am

        Over the last 15 years I’ve been in and out of DOW Dogs, both with real money and test money. Been stung – real money – by sudden changes when one or more Dogs is kicked off the DOW (Goodyear), and stunned – test money only – when Citi and GM got destroyed and tossed.

        What I can tell you is that I’ve had fantastic success with the Canadian version, the TSX 60. Maybe because there are more constituents, I don’t know. I tested the Canadian Dogs for a period of 5 years – between 1997 and 2002 – and found myself up 98%. Doubling up with dividend stocks during the tech boom (and bust)!! In 2002 I went in with real money and am now averaging 13% – tripled in 9 years.

        I’m now in the process of “firing” Franklin Templeton for their 1.5% return over 17 years!!

        • retirebyforty August 29, 2011, 9:24 am

          Canadian dogs sounds interesting. Congratulation with your success, I’ll have to check it out.

  • Jeff @ Sustainable life blog August 24, 2011, 9:42 am

    That’s quite the yield off of that portfolio! 1900 a year is nothing to sneer at.

  • Financial Success for Young Adults August 24, 2011, 10:48 am

    Check out some REITs also. They payout pretty well and you can diversify by getting some that buy real estate all over the world.

    • retirebyforty August 24, 2011, 2:12 pm

      I have some AGNC in my Roth IRA and I think they’ll do pretty well for a few more years. I’m not planning to use the dividend from the Roth IRA though so I don’t count it.

  • Miss T August 24, 2011, 4:22 pm

    I agree with Jeff. 1900 a year is good. I think you have a good strategy in place and I am curious to see how it works out. Best of luck.

    • retirebyforty August 24, 2011, 9:48 pm

      1900/year sounds sooo small.

  • cashflowmantra August 24, 2011, 5:21 pm

    1900 per year means you are almost a third of the way there. I would look at energy as well. Pfizer and Lilly are both drug companies. I would add other sectors before doubling up.

    • retirebyforty August 24, 2011, 9:48 pm

      I think energy is a good sector for my next investment.

  • krantcents August 24, 2011, 6:17 pm

    Excellent goal. Have you thought about Treasury inflation protected securities? My Vanguard fund (VIPSX) YTD is 9.86.

    • retirebyforty August 24, 2011, 9:50 pm

      VIPSX actually looks pretty good right now. I’ll probably add this to my portfolio as I get close to retirement.

  • Money Reasons August 24, 2011, 7:54 pm

    Nice selection (mainly because I bought some T too. I also bought some Merck, it’s doing okay for me also. I have some VZ, but I’m not sure why since I have T… Both have potential though.

    Yeah, I have some AGNC in my roth too. In my normal brokerage account I also have it and NLY. EVEP too. I’m actually a bit dividend stock heavy right now. The funny thing is that I didn’t realize it until lately…

    • retirebyforty August 24, 2011, 9:51 pm

      I’m still underweight on dividend stocks. It’ll take some time to convert everything especially now that they are all down. 🙁

  • Robert @ The College Investor August 24, 2011, 10:48 pm

    I’ve been watching LLY for a while and really like the stock. Pfizer on the other hand has some serious pipeline and legal issues ahead.

    If you like healthcare dividend stocks look at ABT. It is a huge diversified health care company that has consistently paid or increased dividends for over 30 years.

    • retirebyforty August 26, 2011, 9:04 am

      I like ABT and LLY from the sector. Good recommendation!

  • 101 Centavos August 25, 2011, 4:05 am

    Nice picks, RB40. I need to add one or two in the the pharma sector, so Eli Lilly might be a consideration. Why them over others?

    • retirebyforty August 26, 2011, 9:08 am

      The dividend is nice and their PE is lower than their peers.

  • Darwin's Money August 25, 2011, 5:08 am

    If you already own Lilly, I probably wouldn’t add more pharma. Pipelines are dead, growth in western (high margin) markets is flat forever and only revenue growth is in emerging markets at much lower margins.

    You might want to consider tobacco stocks if you can stomach them, or REITs?

  • Freddie @ Invest With Passion August 25, 2011, 1:43 pm

    Seems like you are well on your way. Don’t have any suggestions for you right now, sorry. I am not very big on this market.

  • Buck Inspire August 25, 2011, 10:43 pm

    1900/year is too low? You sure have high standards! Good for you, you’ll retire in no time. Sorry no picks right now as I am trying to learn about dividend investing myself. Maybe we should start an investing club. Good luck!

  • Everyday Tips August 27, 2011, 6:59 am

    What do you think of Abbott?

  • Justin @ MoneyIsTheRoot August 28, 2011, 10:17 am

    Im a buy and hold investor as well! Ill give these stocks a look, thanks! Im always looking for more dividend investments… I have ADP and J&J right now, they have performed well despite the downturn.

  • dipen August 28, 2011, 3:59 pm

    Few stock that come in mind –
    Student Transportation Inc. (TSE:STB)
    Boston Pizza Royalties Income Fund (TSE:BPF.UN)
    Superior Plus Corp. (TSE:SPB)
    Cml Healthcare Inc (TSE:CLC)
    The Data Group Income fund (TSE:DGI.UN)

  • Dividend Stocks October 9, 2011, 8:01 am

    Nice picks. I’ve been very interested in picking up LLY. I’ve had AT&T before. I think they’re one of the best dividend stocks available. I also picked up my bank’s stock (TRST). They’re relatively small, but pay a nice dividend and are expanding this way. Great bank to deal with too after my terrible experience with Bank Of America.

  • Evan January 26, 2012, 7:18 pm

    I didn’t read all the comments but I am a HUGE fan of finding undervalued dividend champions – They won’t yield 4%+ today but the yield on cost will someday be insane (or at least that is my hope).

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