Midyear Dividend Portfolio Checkup

Update – I updated this article for 2014. See my updated Dividend Portfolio there.

safeway good dividend stock incomeI know it’s way past midyear, but we are way overdue for a dividend portfolio update post. The last time I took a close look at our dividend portfolio was earlier this year in January. Dividend income is one of the most passive ways to generate passive income and I think everyone should build a dividend stock portfolio. It’s way easier than being a landlord, that’s for sure.

2013 goals

For 2013, my only goal was to generate $9,000 in dividend income. Now that it’s been over 8 months, I think that one goal is not enough. I really should have another goal of at least keeping pace with the S&P500 index. Let’s see how I’ve done so far with our dividend portfolio.

Dividend Income So Far

For 2013, I have received $5,017 in dividends so far. I don’t think we are going to meet the $9,000 dividend income goal this year. There were some churns this year which threw off the dividend income a bit. Safeway went up very quickly and I took a profit. GE and AT&T dropped 10% in one day and set off my trailing stop order. ATVI isn’t really a dividend stock, so I sold it. I picked up Walmart, Kinder Morgan Energy, and Chevron with the proceeds.

For the record, we generated $6,791 in dividend in 2012.

Total Gain so far in 2013

The dividend portfolio started 2013 with $203,100.

Dividend yield = $5,017/$203,100 = 2.47%

Stock price increase = $23,117/$203,100 = 11.38%

Total gain = 13.85%

This looks great by itself, but it doesn’t stand up well when we compare it to the index funds. The Vanguard S&P500 fund gained about 16% so far. We are running behind almost 2%. That’s $4,000 in pizza and beer! On the other hand, we can also look at the Vanguard Dividend Appreciation ETF (VIG.) It gained 14.18% which is comparable to our 13.85%.

Let’s take a look at the numbers

The yellow highlights indicate closed positions.

The red highlights indicate positions I’d like to cut back on.

dividend portfolio midyear income update

Cut some losses?

As you can see, some stocks are underperforming quite a bit. I highlighted these in red.

Shell – I probably will sell some shares when I see an opportunity. I have had these shares for a while and they don’t seem to be going anywhere. If I didn’t have so much invested with Shell, I’d probably be able to beat the Indexes.

Diebold – I still like DBD and will keep it a bit longer.

VWO – Vanguard Emerging Market ETF. This isn’t really a dividend stock and I’ll probably sell when the price recovers a bit more.

URA – Uranium… This isn’t a dividend stock either and it needs to go. I’ll sell this one before the end of the year so I can offset some gains.

Kinder Morgan Energy – As mentioned above, I just acquired KMP so I’ll give it a little longer.

Intel – I know I have way too many Intel stocks. I picked them up at a discount via the employee stock participation plan. I’ll probably sell some shares when the price is around $30. Otherwise, I’m happy to sit on them a while longer. The dividends are great considering the price I paid and I’ll have to pay a ton of tax when I sell.

Future plan

I will keep working on our dividend portfolio for a few more years. If I consistently underperform VFINX and VIG, then it’s probably better to just go with the index funds. It will be even less work and will also eliminate some stress from my life. We also probably should reserve judgment until after 2013 is over. We’ll see how the rest of the year plays out as the dividends come in.

For the next few years, I will keep accumulating dividend growth stocks (companies that increase dividend payout overtime.) I will try my best to avoid churns in the future as well.

Do you have a dividend portfolio? How are you doing compared to the benchmarks?

If you need help keeping track of your finances, try using Personal Capital to manage your stock portfolio and net worth. It can help you keep track of your income, expenses, and net worth, all in one place. Personal Capital is geared for investors and has many great tools. See my review of Personal Capital and how they helped me save $750 in investment fees.

photo credit: Flickr by Chris Harley

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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52 thoughts on “Midyear Dividend Portfolio Checkup”

  1. RB40, I am in a similar situation but am a few years ahead of you. I wouldn’t worry so much about dividends (even though I also have dividend paying stocks.) What matters is total inflation adjusted return and risk. Capital Gains are preferable to dividends because they are more easily managed for tax purposes. Best of Luck! John

    • I like dividend right now because our tax bracket will be 15% for the next few years so we don’t have to pay tax. Thanks for your advice.

  2. This thread actually made me pull out the pen and paper and figure out where I am with my dividend income. Taxable investment account is paying me 1600 monthly (19k annually), while the tax sheltered account is paying 1800 monthly (21k annually). All our savings are now going into the taxable account – once I reach 2k monthly income in this account, and I can prove to my still working wife that this income is dependable, I will be ceasing attendance at my cruddy job. Need about 100k more in the portfolio – by this time next year, I should be there.

  3. Thanks for sharing this with us! I don’t know why you’d sell Shell….they pay a great dividend and when you compare that stock to other oil companies, they’ve all moved in tandem. Plus, Shell has announced a buyback of their shares recently while the price is low. Sure, you would have won over the short run by not having them in the portfolio, but I’m not sure they’re the problem your looking for if you have a longer view.

    • Shell hasn’t been keeping up with EXXON and Chevron. It’s tough to see other companies pulling ahead… I’ll keep the longer view in mind. Thanks.

  4. Joe, its cool to see what you invest in thanks for sharing. If it was my goal to reach 9K in dividends per year, I would just keep reinvesting dividend money / new money into the top 5 dividend earning stocks in your portfolio without regards to the price, because you are doing this long term its best to add shares to those cash cows who are perfoming for you. What do you think?

  5. My dividends will be less than $100 for this year but that will change in 2014. Vanguard is now in Canada and I am investing in a high dividend Canadian ETF with them.

    Canada has a TFSA (tax free savings account) where I keep my stocks and the dividends or gains that I get when I sell are protected from taxation.

    I am going to the bank to open an RRSP (registered retirement savings account) inside my brokerage account so that anything I buy within that account will be a tax deduction for me. I have a mutual fund in my RRSP currently but the ETF has much lower administration costs so I want to start moving everything to different ETFs and other individual stocks.

  6. My portfolio is yielding about 6.2%… seems like higher dividends are easier to come by in Canada for some reason. CPG and its 7% dividend for the win!!!!

  7. Joe,

    Great update!

    I’m with Dividend Growth Investor. As he said above, it’s important not to focus on your performance relative to a benchmark over such a short period of time.

    I try to keep a very long-term perspective, as even great companies can have a year or two of flat operations or worse. For instance, Shell is making huge investments in natural gas and new ways to get the products to market. These decisions have a big impact on CAPEX today, but might not positively affect the bottom line for a couple of years. You know that from Intel and the chip cycles.

    Either way, keep up the great work. You’ve got a sizable portfolio throwing off some pretty big income!

    Best wishes.

    • Thanks for dropping by and sharing your thought.
      That’s why I wrote this so I can get some advice from dividend investors. I’ve been a dividend investor for only a couple of years and it’s a big change. I’ll keep working on it.

  8. Just so that I understand your comparison fully, VFINX also offer dividends (roughly ~2% per year in the past 12 months time frame). When you are considering the gain of VFINX in 2013 with your dividend portfolio (where you considering cumulative stock appreciation + dividend), are you also factoring in the dividends earned on the VFINX in 2013 as well? Thanks for another great analysis + number crunching!

  9. If you’re going to compare yourself to an index, I’d definitely choose a dividend index fund like VIG, DVY, etc. so you’re comparing apples to apples.

    Are you investing via DRIP? I’m guessing not, since you mentioned a stop loss trigger. It’s a bit of a headache to set up, but dramatically reduces your transaction cost friction. Plus, you can gift shares to people looking to get started investing but don’t have a lot of money.

  10. I’d prefer dividend producing stocks in tax sheltered vehicles. I mostly have growth stocks in my portfolio. I do have VWO in my IRA…I was excited about emerging markets…but it has underperformed, but I still think they’ll be okay. I wanted to pick up Intel at $14 back when the financial crisis hit. I also have Activision…I was gonna sell it but it jumped a bit.

    • I like dividend in my taxable account because I can use that money if I need to. Dividend is tax advantaged so why not use it.
      Also, I’m planning to be in the 15% tax bracket so dividend should be 0 tax in 2013! We’ll see.
      ATVI languished in my portfolio for quite a long time.

  11. I am about to start a taxable portfolio and the plan is to put some money every month into Vanguard stock, bond and REIT index ETFs. Based on the performance of your hand-picked portfolio (under-performing or closely trending indexes), I think it’s a much easier and less stressful strategy to generate some returns and keep up with the market.

    • If I didn’t try, I’d never know if I can beat the indexes. I’ll give it a few more years and see. If I really can’t beat the indexes, I’d give up and move everything over.

  12. We have no dividend portfolio, but are instead just rocking the index funds and hoping to catch some of the benefits of dividends through that. Still, I’m always intrigued to see different investing strategies so thank you for sharing all the details.

  13. I do like to focus my limited equity holdings on dividend stocks, but I’m embarrassed to admit I don’t analyze performance like you do. (Today’s project!) We own GE, Bank of Nova Scotia, TransCanada, Bristol Myers, Pembina Pipeline, and a few others.

  14. I just discovered your blog via Mr. Money Mustache. I am completely on your wavelength regarding the desire for retirement and being miserable in my job. I believe I am in a good position to retire, but my wife (non-working) is petrified of beginning to draw down savings at this point. I am 54 years old with a net worth (combined with the wife), including the house, of approximately $4 million. I think it’s doable, even though we still pretty much still support our student children. What are your thoughts?

    • It’s tough on the spouse to hear about early retirement. It’s a threat to non working spouse when you have kids…
      I would cut back on expenses a little at a time while keep trying to convince your wife.
      It might take a few years, but keep at it. Great job with your net worth!
      Mrs. RB40 was skeptical too, but she saw how stressed out I was getting. She’d rather have me around longer than making more money.
      If you can show her that your household will be fine after you retire/cut back to part time, I’m sure she’ll get on board.

    • @ 4 million – What an accomplishment! I know we would have NO problem retiring at that level and living comfortably for the rest of our lives. But just like RB40 said, without knowing your expenses no one would be able to tell you if you are ready. Also, you can have an active retirement where you still end up bringing some income doing something that you enjoy doing anyway. Congrats on making it into top 1%!

    • Amazing! Four million? And that’s not enough? First congratulations and second, commiserations. How much is enough? That’s one of the problems that pervades American mentality these days and keeps so many from living ther life of their dreams.

      I have a friend that has worked just shy of 50 years. He is a multimillionaire and obviously loved working. But… he recently had a heart event in his early 70’s. He recently retired as a resut and hoped to travel the world. Now he’s more concerned about his health, so travel overseas is out, concerned about leaving the medical facilities near his home.

      Moral of the story…there is never enough. Money, cars, house, stuff. Whether it’s millions or billions or just thousands. Having been rich and poor, we have a fantastic life style on $2000 a month. At some point…we all die, no matter how much money we make and have saved. Go out and have a ball! Life is short. Eat dessert first and feast on the entree. Four million? Enjoy the fruits and blessings of your labor!

  15. I like your approach, and it is very reassuring to have a solid and reliable dividend income stream. We don’t explicitly invest for dividends since our portfolio is very passive. Out of curiosity, I started keeping track of all dividends paid across all accounts a few years ago.

    In 2011 we received $16000 in divs, at an average yield of 2.6%. In 2012, the dividends increased to $21,000 but the yield dropped to 2.4% (underlying value of holdings went up). I’m optimistic about 2013.

    In our taxable accounts we received around $9000 in 2012 (out of $21000 total), and that will go a long way towards paying our very low living expenses.

    Congrats on getting serious dividend income off “only” $200,000 or so of principal. That is quite an accomplishment!

    • Thanks for the encouragement. Our tax sheltered portfolios are very passive also. On those, I don’t really keep track of dividend and mostly reinvest everything.

    • It’s a common mistake for people to look at the current yield of a company and accept that as your own yield on your investments. YOUR yield did not drop because the company’s value went up, that is not a punishment for you. You should be calculating yield based on YOUR cost when you purchased the investments. Assuming you have purchased generally good dividend growth companies, your yield on cost should be well above the company’s yield over time, assuming you make efforts to buy at good valuations or at least dollar cost average with DRIPs.

  16. I always learn so much when you write about investing. When you originally decided to buy your own dividend stocks instead of a fund, what was your thinking? I have a very personal interest in your rationale! (:

    • I couldn’t find a fund I like. Vanguard funds pay around 2% and I figured I could shoot for 3%. I’ll keep trying for a few more years and see if I can improve. 🙂

  17. RB40 – thanks for always sharing the details of your road to retirement. One thing I could not tell is whether the 13.85% was just the average gain based on the columns you had as opposed to the average gain when the values of your holdings were weighted. Obviously the actual weighted value is what matters to your bottom line and just could not tell whether you were using this number for your analysis.

  18. You are making a mistake when you expect your strategy to perform better than its benchmark all the time. You should take a more longer term approach. Focusing on short-term minutia could lead you to make decisions, which might not be the best for your achieving your long term goals.

    In addition, a big chunk of your dividends (over one third) seem to come from INTC and RDS.B. That is adding a lot of risk to your portfolio income.. I guess, if you invest their dividends in other companies, and if you add money to your portfolio, these positions will drop in weight.. You can also trim some of course, which is what you are talking about with RDS/B. ( and I hope you own the B shares, not the A shares)

    On the other hand however, companies could spend years being unappreciated by everyone, until they take off. Chances are everyone else is feeling “stuck” in RDS.B.. So maybe the time is not to sell, unless you think long-term economics of the company are in decline..

    • Thanks for your comment. I’ll just benchmark it and keep track for the next few years. Hopefully, I’ll do better next year.
      You’re right about RDS.B. I do feel a bit stuck and wished I sold some earlier this year. I’ll probably sell half the next time it’s up.
      INTC is tough because I got them at a discount. I won’t buy anymore Intel and probably will sell off a bit at a time. The dividend is good though.

  19. Joe,
    Don’t be hard on yourself about under performing a benchmark for the year. The advantage long term investors have, like us, is that we don’t need to send clients a quarterly statement and justify our actions. Many of the investing legends, and I’m not claiming to be one, have under performed the benchmarks for a year, two, or three, and then caught up. The key is having a strategy and sticking to your circle of competence.

    Keep up the good work.

    • Thanks for the encouragement. I’ll keep working on it. Dividend investing is actually pretty new to me. Hopefully I’ll keep improving.

  20. Underperforming VFINX and VIG by few percents is still a pretty expensive lesson 🙂
    Maybe you could move a big chunk to index to mirror more closely the market performance and play with the rest to try to beat the market. (and I wrote “play” on purpose, I often feel more like I’m gambling than making informed decision)

    I’m also investing in dividend stock but on a much much smaller scale (my dividends are in hundreds not in thousands)

    • My 401k is already in index funds. The dividend portfolio is after tax and I’ll keep working on it for a few more years. Hopefully I’ll improve a bit in the future.

  21. I need to really focus more on earning a little bit more from dividends. You still are doing pretty well even though you may not hit your goal this year. SafeWay was a stock I was thinking of investing in and backed away at the last moment.

    • Safeway was great at the beginning of the year. It seems a bit high now, but they are still doing very well. I should have held on a bit long. 🙂

  22. These are some great numbers! Even if you are not to hit your target of $9,000 generated this year, you will be very close and the best thing is that you’ll make more than last year. You did a great job with Safeway and Activision! Microsoft is pretty low now and they’re planning the launch of the Xbox One by Christmas so their numbers might get a spike at the end of the year/early next year.

    I am not currently having a dividend portfolio but we’re saving up as a family and I hope I’ll be ready to start my adventure on the stock market pretty soon. Living in Romania doesn’t help when you want to buy US stock, but I found a few options already and after playing for the past month on the stock market virtually, I did pretty well (I am still holding on to Activision though for about a month).

    • Thanks for the encouragement. As long as the income dividend keeps increasing every year, it should still be alright.
      I’ll check out MS.


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