DGI Portfolio Report for June 2016

This report provides an update on my holdings, performance, plans and thoughts for my Dividend Growth Investing (DGI) Portfolio. I started this portfolio with an initial funding of $100,000 and hope to use this portfolio to help me achieve financial freedom. I’m running this portfolio like a fund manager who runs a dividend growth fund. I look for stocks that are a great fit for this portfolio, review the portfolio on a regular basis and make adjustments as necessary. Of course, I reserve the right to make any exceptions to buy or sell a stock. The results will be published here on Growing Money every month. I seek companies that have a healthy balance sheet and a competitive business advantage in the market, thereby protecting my principal investment. The dividend growth will help build a stream of growing income for the long term. If the dividends are sustainable and increasing over time, then naturally, the stock prices should follow and the total returns should be wonderful. This is a long term investing plan, which is a marathon and not a sprint, so do not expect any flashy words or colorful signs in these posts. It’s going to be a slow and steady climb to the top of the mountain. The strategy is to buy strong and healthy companies with dividends that are sustainable and increasing over time. All the dividends are automatically re-invested in the same companies. This portfolio will be reviewed on a regularly basis to ensure that the holdings are aligned with the goal of this portfolio.

Investment Objective
The DGI Portfolio seeks to provide, primarily, a growing stream of income over time and, secondarily, long-term capital appreciation and current income.

Investment strategy
The DGI Portfolio invests primarily in stocks that offer current dividends. The portfolio focuses on high-quality companies that have prospects for long-term total returns as a result of their ability to grow earnings and their willingness to increase dividends over time. These stocks typically—but not always— have a low dividend payout and shows a history of increasing dividends. The DGI Portfolio will be diversified across industry sectors.

Account Balance
Beginning Balance: $108,631.77
Ending Balance: $110,602.59
Net Gain/Loss: +$1,970.82 (+1.81%)

Portfolio Balance History Chart

Portfolio Holdings:

Note: Options balance is not shown in this table.

Dividend Payouts This Month:

*Cumulative Dividends Received is the total dividends received in this portfolio since inception in June 2015.

Dividends History by Quarter Chart

Portfolio Update

For this month, the DGI portfolio had gone through the BREXIT market chaos. Interestingly, the DGI portfolio not only survived the market downturn, but it also did very well. The DGI portfolio held up very well during the market craziness. In fact, some of the DGI Portfolio holdings rose higher. In contrast, my other more aggressive portfolios took major hits. I may have taken too much risk in my other portfolios and now I have to rethink about my overall investing strategy.

This event allows me to see the power and stability of the DGI portfolio. Some of the holdings, such as JNJ and O, actually hit all time highs during this month while the indices sold off big. Also, having a long term mindset and great companies that I know will know will survive BREXIT, gave me a peace of mind. I was not worried about my DGI portfolio. It did allow me to sleep well at night (SWAN), but unfortunately, I had other portfolios that didn’t let me SWAN.

MIC – Macquarie Infrastructure Corp (NYSE:MIC) has rebounded since the last big drop. Last month, I had hope to see this stock close above $75. It closed above $74, which is very close to the price I was hoping for. It looks like MIC is picking up steam again and it’s very likely to see this stock close above $75 by the end of July.

IBM – International Business Machines Corp. (NYSE:IBM) has doing well in focusing and executing its turnaround plans. It has been buying back shares and acquiring new businesses. The share buy backs reduce the float and help boost up their EPS. Shareholders will own more of the company and eventually when the company turns around, the earnings per share will be compounded with the reduced float. Recently, IBM has announced an increase to their dividend this year. This stock does require some patience, but I think IBM will pay off in the long run. IBM was doing very well this month until the BREXIT news, but it has rebounded quickly. Hopefully, I can see IBM establish a long term bottom of $150.

O – Realty Income Corp (NYSE:O) is known as The Monthly Dividend company and it is arguably the safest and most wanted company in the stock market this year. The stock has defied gravity and kept soaring higher, making new all-time highs recently. This stock is now seen as a safe haven. Any signs of a market downturn diverts funds into this stock and only sends its price higher. I want to build a bigger position in this stock, so I do hope this stock drops soon so I can buy the dips, but it doesn’t seem like it will happen anytime soon. Any time this stock dips, the market sees it as a opportunity and the stock rebounds quickly. O is a stock on steroids, it just keeps getting stronger and stronger. I find it hard to believe but the stock has been defying gravity for some time.

OHI – Omega Healthcare Investors Inc (NYSE:OHI) is a great long term hold for a dividend growth portfolio. They have consistently increase their dividends and has a great business model. The stock has suffered a little lately but I think it’s a great opportunity for new investors to jump in or current investors to add to their positions. I am in this company for the long term, so I will continue to be patient for this stock to find itself. In the meanwhile, I will collect their generous dividends.

WFC – Wells Fargo & Co (NYSE:WFC) is the latest addition to my portfolio. The dividend yield is low at around 3% but I think with their dividend growth rate, the Yield on Cost should be excellent over the long term. I like companies that can grow their dividends at a fast rate over the long term and I think WFC is a such company. Unfortunately the BREXIT news took down all the banks. I took advantage of the drop and added 100 more shares of WFC to my portfolio. Hopefully this will pay out well over the long term. In the mean time, I will continue to collect dividends and DRIP (dividend reinvesting).

Options Strategy

I have been trading options, mostly covered calls, here and there to try to capture more income. It’s a risky move, because sometimes I can lose more than I want to lose. I will try to stick with mainly selling covered calls at the peaks, but even that is hard to time, because some stocks just keep going higher and higher, like JNJ and O. I have sold covered calls for O in the 40s and have been trapped many times buying back the calls for huge losses. This has happened more often than I expected, unfortunately, so it’s a very expensive lesson that I’ve learned. While selling covered calls is good for generating additional income, if you don’t do it right, you can end up losing a lot of your gains and then some. In other words, had I not traded options at all, my current portfolio balance would have been much higher.

Short Term Goal – Year 2020
My short term goal is to build a $500 monthly income stream from dividends in this portfolio by the year 2020. I will make adjustments that are necessary to steer towards this direction. Currently, my average monthly passive income from this portfolio is at $441.98, so I still have some ways to go. These monthly updates will be constant reminders for me to stay focused and work hard on my goal. By making this portfolio opened to the public, I will show all my thoughts and decisions to everyone, and also I will hold myself accountable for my actions. Good luck to me!

Happy investing!! Build passive income for life!