Portfolio

Here’s my “Income Fund” portfolio which is held in Taxable accounts. I’ve included market data from Yahoo in this table; and highlighted low dividend yields and high P/E values in red. I exclude my retirement 401k / IRA accounts from my Income Fund accounting as my retirement accounts are invested using a total return strategy.

Dividend income portfolio

This is the individual stock component of my Income Fund.

Asset Allocation

I also include some low cost mutual funds from Vanguard in my Income Fund. I am continuing to increase my holdings at Vanguard, which also holds my retirement accounts, to qualify for their Voyager Flagship Service. Asset Allocation targets are described in my Charter.

Growth of $10,000

Here’s the relative performance of my Income Fund vs VTSAX; a passive index fund representing the US stock market and the Vanguard Wellington Fund (VWENX); a 66/33% stock/bond fund that has a similar allocation to my Income Fund.

For this comparison, I represent my Income Fund as a virtual mutual fund. The results will be different to the Vanguard Total Stock Market index since my asset allocation includes bonds and is not 100% stocks.

24 thoughts on “Portfolio”

  1. Great mix of stocks and funds. I like the fact that you are holding bonds as well – although I am perplexed by the fact that you own long term bonds, which provide no incentive these days. Good to hold the cash to take advantage of market corrections as well.

    I like the charts too – looks like Microsoft web app – does it allow you to pull the ex-div dates automatically? I use Google Docs for my tracking and have to look into it to see if I can include that data.

    Best wishes and happy investing
    R2R

    1. Hi R2R,

      Yes you’re right. When I first started out investing for passive income, I took the literature about having a diversified portfolio a little too literally. I plan on selling the long & intermediate term bonds and moving the money into stocks but only when my cash reserves are lower since I’m getting a reasonable monthly income from the bond funds. So now they’re a like a hedge against a large future correction as you mentioned.

      I’m using Excel together with the Yahoo Finance API – there’s a fixed (but fairly large) set of data points for each stock that can be queried, including ex-dividend date, P/E, EPS, market cap etc.
      The web app won’t automatically trigger a macro when the page is viewed, but whenever I update the physical file on my hard-drive, it automatically syncs up with the web app view. So it’s easy to manage.

      I know Google Docs has a built-in stock price query function; I don’t know its other capabilities but I’m sure there’s a method to access the Yahoo API if it’s not built-in.

      Thanks for stopping by; questions are always welcome.
      Best wishes on your FI journey!
      -DL

    1. Hi Diplomats,

      Yes – I’m trying to invest weekly; although my additions are a mix between dividend stocks and funds:

      In my Sharebuilder account I add stocks from the lowest weighted sector each week. This is about a third of the new capital I’m investing each month.

      The remainder goes into the Vanguard fund account twice a month. I buy mostly the High Yield Dividend but also buy Total International and the High Yield Corporate fund. These are timed automatic payments so I just let them do their thing. I’m aiming for $50K in the Corporate Fund by the year end to qualify for a lower expense ratio. Then I’ll switch most new capital to stocks and stock funds.

      I’m not adding to the investment bond funds; I plan on converting them to stocks once my cash reserves draw down. They give pretty good monthly income for the moment so I’m not in a hurry there.

      Thanks for stopping by!
      Best wishes,
      -DL

      1. DL,

        Investing weekly huh? Are you doing large purchases every week? What’s your cost so far that you are incurring – the $4 charge at sharebuilder? I like your tenacity, it’s awesome.

        You can’t go wrong with the High Yield Dividend fund and a high yielding corporate fund. That’ll be nice to hit your $50K target to reduce the overall expense ratio.

        No bonds for this guy here either. All stocks, all dividends, letting it grow!

        Nice portfolio DL, pumped to see the shakes to it that you make!

        -Lanny

        1. Hey Lanny,

          I have an older legacy program at Sharebuilder which charges me $1 per automatic trade; that fee structure is discontinued now after Capital One took over from ING. The fee is paid on my credit card so with a bit of mental accounting I don’t even think of the fee as a real commission.

          This month I’ll be buying a total of $1,493 of stocks in my Sharebuilder account – usually it’s about $350 a week, but additional dividend income increases that amount. I track my income to the penny, so by the middle of the month I know exactly how much I can invest. I also buy $900 in Vanguard funds each month.

          I hear you about the all stock approach; I like stocks because of the lower taxes but I must admit I like the yield from the corporate bond fund. I almost don’t want my stocks to go up in value since it limits the yield they pay but that’s kind of a “first world problem” to have.

          Keep up the great work in dividend diplomacy!

          Best wishes,
          -DL

    1. Hi Mati,

      I started out with funds as it was a cheaper way to start investing but I’ve been picking up more stocks for the last couple of years. I still like holding some low cost index funds though, partly for the convenience as I can buy $100 blocks when I have some spare money whereas I only buy stocks in $750 amounts.

      Best wishes,
      -DL

  2. Hello mate, very impressed with your perseverance, the site and of course philosophy which I’ve been practising for about 6 years now. Just a question – which brokerage do you use for your trades and why. Thanks, G

    1. Hi Gareth,

      I use two main brokerages:
      – Vanguard (for ETFs and some stocks)
      – CapitalOneInvesting (formerly Sharebuilder)

      I like CapitalOne because the trades are quite cheap ($6.95) and I originally started with them using their automated investing plan. I don’t use their scheduled plan any more but I still use them for stock purchases. One good thing about them is that they provide access to Morningstar’s stock reports.

      I use Vanguard too – generally for their ETFs which are commission free. They charge $7 a trade. Once my retirement accounts (also at Vanguard) increase in value though I’ll get $2 trades and I’ll switch to them solely at that point.

      In the past I’ve also used Fidelity, Schwab and Scottrade accounts.

      Good question – thanks for stopping by!

      Cheers,
      -DL

  3. DL,

    Great site! I’m 18 mos. from retirement and spending lots of time fine tuning my Dividend Growth portfolio. It’s encouraging to find that time well spent has led me to similar conclusions on sector allocations and stock & fund selections.

    I’m heavier into industrials specifically aerospace and defense. LMT, BA, RTN are some of my favorites. I’ve found limited volatility and strong dividends.

    It appears you’re cool toward REITs. What is your reasoning? Don’t you think they can play a role in the mix?

    PS: Noticed you listed Halyard Health next to the LMT symbol.

    -Almost Retired

    1. Hi Nick,

      Congrats on being so close to retiring with your DGI portfolio! It’s still a longish journey for me and I’ve recently re-estimated how long it’ll take so I’ll be posting that soon.

      I agree with you on the Industrials sector; it’s a good sector for dividend growth with many great companies. I like both LMT and RTN and I plan on adding more this year – governments will never stop spending on defense. I must say I’ve not looked into Boeing; they’re at a 4-year dividend growth history and so haven’t passed my screen yet.

      You have a good point about REITs. My (limited) logic for not holding them is that I have two separate portfolios – the Income portfolio that I blog about (it’s held entirely in Taxable accounts) and I also have a Retirement portfolio in tax-deferred accounts. The challenge I’ve set myself is to reach Financial Independence with the Income portfolio alone.

      So the only reason for avoiding REITs in my income portfolio is that their dividends are taxed higher than the qualified dividends from regular stocks. I realize that’s a bit of a selective argument considering I hold a high yield corporate bond fund that’s similarly taxed in the same account too, and I’m gradually de-emphasizing the bond allocation to around 5-10% over time because of the higher taxes. It’s certainly worth some more consideration if I want to include the real-estate sector for income again though; when I first started investing I held Plum Creek (a timber REIT) but I sold it.

      I’m currently holding REIT index funds in my retirement portfolio instead; they’re 10% of my retirement asset allocation. I plan on taking advantage of them when I retire; ideally in my Roth IRA where their distributions won’t be taxed.

      Thanks for commenting and also for the HYH correction too – I’ve fixed that; it’s supposed to be LMT.

      Best wishes for a great 2016!

      -DL

  4. Hey Dividend Life,

    great visual to share your portfolio. I have the feeling that your portfolio is the type of allocation I will move to over time. I started out with some core assets that have a lower risk and thus lower return. They are my fallback.
    On top of that I am indexing now, but thinking all the time about the great stories dividend investors have to tell…

    AT

    1. Hi Ambertreeleaves,

      I do both indexing and DGI; I don’t know that one has to be 100% committed to one strategy vs another. DGI in a taxable account is harder to justify vs total return unless it’s being done for the income.

      I started out similar to you as well by investing more with a higher percentage of fixed income and I’ve gradually been increasing my stock allocation. I did decide recently to limit the amount of individual stocks that I buy because I was getting similar income and income-growth from VHDYX (a dividend stock index) without any of the work in stock-picking.

      Wishing you all the best on your financial journey!

      -DL

        1. VIG is another ETF which targets dividend growth as a characteristic; I prefer VYM / VHDYX as it’s more focused on higher yield and has more holdings (433 vs 179).

          There are many similar ‘DGI’ type ETFs from other investing companies that may be cheaper for you; I’m only familiar with the Vanguard ones.

  5. Hi DL,

    I’m a total Noob, so excuse my naivety. Your site is an amazing wealth information, thanks!

    I currently hold all of my investments (bar cash and property) in Vanguard Index Funds and some commodity ETFs.

    DGI seems like an exciting investment strategy with decent upside vs risk, and the potential to go passive in the mid-to-long run, but for a non-expert (like myself), the learning curve seems pretty steep and the time vs return quite heavy to research stocks and actively manage a portfolio. I assume for many DG investors this time spent is part of the fun, but for me I expect it will be more of a headache.

    My question: In general, how much better can one expect to do with DGI vs passive investing in high dividend yielding funds? And from your experience, if you were to value your time input to actively manage a DGI portfolio, would any upside against a high yielding index fund be significantly reduced to render it negligible.

    In essence, I am asking whether it is worthwhile me investing time to upskill (in something that I’m not sure will provide much joy in the learning and doing) and start a DGI portfolio vs. spending that time on earning more from my business and passively investing in high yielding funds?

    I realize this is a difficult question to answer as you will naturally have a bias towards DGI, but would love to hear your thoughts on the above.

    Thanks!

    Mark

    1. Hi Mark,

      I did a detailed study between my individual stocks, vanguard high dividend yield fund and an S&P total return fund in two older posts – the original performance comparison and an updated dividend growth calculation where I compared using the money I actually spent on individual stocks to the potential results from buying VHDYX or VIFAX.

      My conclusion was that although buying and researching individual stocks is fun, the results didn’t really justify the time I’d spent. So I’m limiting the portion of my portfolio for individual stocks (to 10%) and just going with Vanguard funds for the remaining 90%. Until that time I’d been increasing individual stocks at the expense of indexes.

      I think that over the long-term, a total market index based strategy will give better total returns than an income based approach, especially in a taxable account. And while a high-yield dividend index fund may produce lower income than a DGI portfolio (since the DGI portfolio can choose higher dividend yielding stocks), the fund is likely lower cost (no trading fees) and much easier to manage. My criteria was to look at the typical dividend yield of VHDYX and decide “if it’s enough” and for me, it’s good.

      DGI isn’t a bad strategy though and for managing a portfolio of individual stocks, it’s one of the better ones in my opinion since it encourages a long term buy & hold view and choosing stocks based on underlying fundamental values rather than technical voodoo. Historically some dividend champions have had amazing growth over the last 30 years, but then so have non-dividend paying stocks such as Berkshire Hathaway.

      I hope that answers your question – thanks for stopping by and feel free to ask any questions you have. Please check the post I linked above as it makes the comparison using real numbers.

      Best wishes,
      -DL

  6. Thanks DL, very useful answer and great comparison. I think I’m going to stick with the lazy approach of high dividend yielding index funds for now. I can definitely see how DGI can work and if one is super diligent make better returns, but suspect I would mess it up and end up spending lots of time with very little performance difference. Will continue following you as very interested to see how your journey pans out.
    All the best for now,
    Mark

    1. Hi Tristan,
      I usually pick from the same usual DGI suspects, although I do have a few companies I don’t see mentioned much in the DGI blogs. I am not buying as many individual stocks now though – I like holding stocks and I still buy when I have enough money saved, but the rational part of my brain tells me that I can save time and do just as well by buying an index fund. I chose two high-yield dividend index funds for the majority percentage of my investments (rather than a passive index such as Total Stock Market).
      Best wishes,
      -DL

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